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From Brokerages to Robo-Advisors
How to Choose Your Investment Services
Chapter Overview
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As a beginner-level investor, especially if you plan on putting significant sums of your money into investments, you should not try to go it alone. Too many books, blogs, and TV personalities try to convince investors that, thanks to their ironclad advice, the services of a financial advisor are no longer needed. And this message resonates, because people tend to be naturally skeptical of their financial advisor’s usefulness. “Why do I keep paying them?” they may ask. “I would have made more money if I had taken all of my assets and put them in that mining stock I was scoping out last year.” And maybe you would have, but that does not mean that it was a wise or sensible investment at the time.
The financial services industry is brimming with products and services claiming to provide investors with support, advice, and opportunities; and yes, many of these offerings are overpriced and hardly useful. Nevertheless, getting the right help at the right time from the right party could make a world of difference both for your portfolio and for your overall comfort with the market.
It is an interesting time in the financial services industry. Robo-advisors are making a big commotion in the marketplace, offering algorithm-based portfolio rebalancing and other financial management services. Is the financial advisor profession becoming antiquated? Is it time to take my thirty years of industry experience and call it a day? For many reasons—several of which I will share with you in this chapter—I believe the answer is no. Though robo-advisors certainly offer compatible utility for some investors, many others undoubtedly benefit from a human touch. It turns out that certain of the intricacies, uncertainties, and anomalies that go into financial planning cannot be duly serviced by ready-made advice derived from a basic risk tolerance questionnaire.
Your choice of investment services depends on a multitude of factors, including (but not limited to) the following concerns:
The amount of money you want to invest
Whether you are investing to procure shorter or longer-term gains
The frequency with which you wish to make trades and otherwise engage with your investment activities
The level of risk you are comfortable assuming
Your tax situation
In this chapter, we will review some of the avenues available in the pursuit of good quality investment services.