For some people, investing is a joy. It’s a thrill ride, a puzzle, and a test of their mental toughness and predictive powers.
For others, it’s a job. It eats up time better spent, is an unwelcome addition to their daily concerns, and can lead to serial second-guessing.
Which best describes you? Doesn’t matter. Unless you plan to inherit a fortune or win the lottery, the surest way to secure your financial future is to come up with goals and set up the saving and investing strategies that will help get you there. And whether you’re fearless or scared to death about that prospect, you probably could use some assistance in figuring out how to build a great portfolio.
Trying to DIY it can be challenging and time-consuming. The math and jargon alone can be daunting, much less the consequences of making a mistake. So why not let someone else figure it out and worry about the day-to-day follow-through?
Money, that’s why. Every dollar you spend on financial services—whether it’s through a broker, an advisor, or an automated advisor—is going to take away from the funds you’re trying to grow. Nobody wants to pay more in fees than they have to.
So before you get help, you should learn as much as you can about what a firm or individual is offering, how their investment advisor fees are structured, and if that all matches up to your needs when it comes to both cost and comfort level.
Different Types of Investment Services & Management Fees
As with most things, the best answer for many people is the middle-ground. Let’s start with the different types of investment services you might find out there, and how to pay for them.
Traditional Full-Service Stock Brokers
Traditional full-service stockbrokers are becoming rarer these days, but there are still some firms out there that are more into the buying and selling part of investing than long-term planning. Brokers will determine the suitability of various investments, then make general recommendations; you take it from there in deciding what you want to do.
They’re paid by commission, so whether you do well on those investments or not, they’re compensated. If you invest with a full-service brokerage firm, you’ll likely pay fees based on the number of shares you’re trading or, sometimes, the value of the transaction, so costs can add up quickly. And you likely won’t get much hand-holding when it comes to risk tolerance and long-term planning.
Online brokers usually offer a more self-directed approach with a menu of investments that could include individual stocks, bonds, mutual funds, exchange-traded funds (ETFs) and other options. The commission you pay will vary depending on the type of investment, so you should be clear about what tools you’ll need to reach your objectives.
There also could be a required portfolio minimum, which can range from zero to $500 or more. An online brokerage may provide some educational videos, but most don’t offer much in the way of planning or emotional support. The price per transaction is typically lower than a full-service broker, but the cost still can add up if you trade a lot.
Full-Service Financial Advisors
Full-service financial advisors have different pay structures , so make sure you ask. Most firms present their advisory fee structure somewhere on their website.
Some firms are “fee-only,” and that could be a yearly fee, an hourly fee or an annual assets under management fee (a flat fee or a percentage—1%, for example) that’s determined by how much money you’ve entrusted with them. According to AdvisoryHQ, average hourly fees currently range from $120 to $300 an hour, and average financial planning retainer rates range from $6,000 to $11,000 a year.
Fee-only advisors don’t take a commission and are required to look out for your best interests. But some advisors are “fee-based,” and may charge both management fees and commissions based on the products they sell, so the fiduciary relationship will change with the services they’re providing. Both fee-only and fee-based advisors’ rates vary depending on experience, where you live, and the complexity of the work they’re performing.
Automated advisors, or online asset managers, typically require a much lower minimum account size, usually because you aren’t getting the same customized approach that a full-service firm has to offer. Automated advisors use a computer algorithm to determine automated moves that are right for your portfolio based on information you provide—so your risk tolerance and other factors are part of the prep.
They’re ideal for savers who don’t want to deal with the details of investing, and for experienced investors, who want to avoid the not-so-fun stuff, like rebalancing. Automation doesn’t mean you won’t have access; you can log into your account on your laptop or phone any time to track your progress or make the necessary adjustments to keep you on course when circumstances change. You just won’t have to do the heavy-lifting anymore.
SoFi Invest® – A Mix of Both
Remember that middle ground mentioned earlier? If you venn diagrammed all this information, SoFi Invest would fall into that center spot. That’s because SoFi is a hybrid automated investing service with human financial advisors on standby to help you manage your investment plan. So you can save money, have easy access to your account and get human assistance if you need it.
Let’s say that right now you have a haphazard collection of savings and investments that has no connection to your short or long-term objectives. With your input, SoFi advisors will put together a portfolio designed to limit risk and help you grow your money.
SoFi Invest uses Modern Portfolio Theory
to create and manage your asset allocation. This isn’t just a “set it and forget it” financial service; SoFi Invest will monitor the markets and make adjustments as needed.
SoFi advisors don’t work on commission, by the way. They’re paid a salary, and their job is to help your money work for you. They choose from a broad mix of ETFs, which are much like traditional mutual funds but generally offer lower fees and taxes.
If this is all about value for you, the price doesn’t get much better than $0, which is what you’ll pay for SoFi’s management fees. You’ll also have access to other SoFi perks, such as career advice and community get-togethers.
Choose how you want to invest.
SoFi can’t guarantee future financial performance, and past performance is no guarantee.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Advisory services offered through SoFi Wealth LLC, a registered investment advisor.