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What is Wealth Management?

December 30, 2018 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What is Wealth Management?

You have money to invest, but you’re busy. Maybe you would love to spend your time interpreting stock charts and rebalancing your portfolio as you attempt to maximize your return on investment, but there just aren’t enough hours in the day. Or on the flipside, maybe investing even scares you.

That’s where online wealth management programs come in. They can do all the hard work of figuring out where to invest your money, so you can get back to your actual life–all while you’re working on your investments.

What is automated wealth management? It’s an investment program that automatically invests your money for you. You start by taking a survey about your age, investment preferences, and risk tolerance. Then the program’s algorithm invests your money with a strategy tailored to your needs.

Many online wealth management software programs can rebalance your portfolio routinely in order to keep pace with growth in certain areas of your holdings and ensure that your investments are diversified. In this article, we dive deep into the ways that online wealth management could potentially help you.

How Wealth Management Works

One of the best ways of understanding how wealth management works is to take a look at what it’s not. Online wealth management is not like a financial advisor.

In fact, it’s often much cheaper. When you go to a financial advisor, you often pay either a flat fee or a percentage of your investments to the advisor. The percentage financial advisors charge can be as much as 1% to 3% , whereas online wealth management programs can charge as little as 0.15%.

Many financial advisors also require high minimum investment amounts before you’re able to invest with them. While these can be as low as $10,000, they can also be as high as $1 million or more depending on the financial advisor. That makes financial advisors inaccessible for the vast majority of potential investors.

A financial advisor may also work for a financial company and could be incentivized through additional commissions to recommend certain financial products to you. Those financial products might not be the right fit for your situation or risk tolerance, or they might charge higher fees.

Additionally, some financial advisors may not be able to use computer programs that allow them to react quickly to changes in the stock market and provide routine portfolio rebalancing.

The Benefits of Online Wealth Management

Let’s dive into some of the benefits of online wealth management to see if it is the right fit for your situation.

Cheaper

In contrast to financial advisors, an online wealth management program is often much cheaper. While they do charge a percentage of your portfolio, some allow you to start online investing for free if you are only putting in a small amount.

The percentage that they charge compared to financial advisors is often much smaller. One NerdWallet study reports that a 1% difference in fees could make the difference of $590,000 in investment assets for millennials.

Low Fees

Online wealth management programs often invest in very low fee funds, usually Exchange Traded Funds or ETFs. These are similar to a mutual fund, and allow you to get a mix of different stocks, bonds, and investment classes in one investment. It allows for greater diversification without added cost.

Go big in scope, smart on risk.




Distributor, Foreside Fund Services, LLC

Automatic Rebalancing

The online wealth management software’s algorithm can easily pair your investment preferences with the ETFs available and then continually rebalance your investments.

If one ETF starts generating a significant return that would unbalance your asset diversification and overexpose you to an industry more than your risk tolerance allows, the software automatically sells some of that ETF to buy another one to attenuate your risk over different sectors.

Quick Response

Online wealth management programs are also able to respond to changes in the market and to ensure that your risk tolerance lines up with your investments in accordance to those changes.

Goal planning

Like a financial advisor, online wealth management programs can help with investing goal planning. They help you map out a plan so you can start investing and working actively toward your retirement goals.

Human Advisors

Another benefit of some online wealth management programs is that certain ones also provide in-house consultations with financial advisors. These consultations can be extremely helpful if you have questions or need help honing an investment strategy that works for your unique situation.

Each program charges different amounts for these services and some programs only offer it to those who have a certain amount of money invested. However, there are some companies that also offer this for $0 as part of their regular service. For example, SoFi offers meetings with our financial planners at no charge for all members.

Low or No Minimum Investments

Another benefit of an online wealth management program is that many online offerings have very low or no minimum investment amounts. For those companies that do have minimums, many are under $1,000 or $2,000. That makes it far easier for the average investor to start investing and building their wealth.

Is Wealth Management Right for You?

When it comes to investing, traditionally the choice was to either go it alone or get a financial advisor to help you. But with the advent of online wealth management, there is a third and very compelling choice.

You don’t have to become a market expert and forgo a financial advisor. You can hand over your wealth management responsibilities to a program that will take care of things for you and automatically update your portfolio as you age and the market evolves.

While people with a high net worth might benefit from the expertise and access a financial advisor provides, the average investor might be better off using an online wealth management software and reducing potential investment fees.

If you do feel like you could benefit from talking with a financial advisor, one great option is to choose an online wealth management program that also provides complimentary access to human advisors; just like we do here at SoFi.

When you’re ready to take control of your financial future and start investing, SoFi is here to help. Find out more information about SoFi Invest® today.


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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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