Which is a better investment: buying a home or investing in stocks?
Since 1995, stock prices have outperformed home prices by a factor of four, but which is actually the better investment for building wealth?
One measure of wealth in America is an ongoing relationship with a financial advisor.
Certified financial planners, wealth managers, and their ilk tend to serve clients who have large amounts of assets to manage. These services are commonly associated with high net worth individuals, which typically means having $1 million or more in “investable” assets, excluding your home.
Similarly, many Americans with low assets don’t want to spend money on a financial planner or wealth manager. They may not think their assets are complex enough to hire a professional.
“I think a lot of people feel like they don’t have the money to spend or the assets large enough for a financial planner to manage,” said Kate Ashford, wealth management specialist at NerdWallet.
Fortunately, there are plenty of options for free and low-cost financial advice, from one-time sessions with a financial advisor to online libraries of financial tips and retirement planning calculators.
But before we introduce you to the options, let’s take a step back and think about their limitations.
First, remember the old principle. You get what you pay for.
“Do people expect free medical care, free car repairs, free legal advice? Generally not, and for good reason,” says Monica Dwyer, a certified financial planner in West Chester, Ohio. “The quality of advice tends to be reflected in the cost.”
One of the problems with free, off-the-shelf financial advice is that it’s generally generic rather than tailored to your financial situation.
Another issue: Financial needs change over time. Your session with a financial planner today may not tell you what your finances will look like in a year or two.
Those caveats aside, here are seven options for free or low-cost financial advice.
Talk to your broker or retirement plan administrator
Many online brokerages and 401(k) administrators, including Fidelity, Vanguard, and Charles Schwab, offer free or low-cost assistance to investors and retirement savers.
For example, Fidelity offers free access to licensed financial advisors, but subsequent fees vary depending on the products and services investors choose. Fidelity Go offers money management through a “robo-advisor” (see below) and charges a 0.35% annual fee for balances over $25,000.
Schwab offers its “robo-advisor” Schwab Intelligent Portfolios for free. Schwab also offers a free digital financial plan and a number of free calculators covering retirement savings, college savings, and other topics.
Please check with your bank
Many banks and credit unions offer free financial advice and financial planning resources, often available to everyone.
For example, Bank of America collects financial guidance on its Better Money Habits site. CapitalOne provides a financial success hub. USAA offers a treasure trove of financial preparation and financial advice. Citi offers a library of financial planning tools.
NerdWallet’s Ashford points out that SoFi, an online bank, offers a $10 monthly membership service called SoFi Plus that gives you unlimited access to a financial planner.
ask your employer
Many large companies partner with 401(k) providers to provide free financial advice to employees as part of their benefits packages.
Create a free financial plan
The Financial Planning Association provides free financial planning services to low-income Americans and underserved groups.
Attend a free meeting with a financial advisor
Many financial advisors will schedule an initial session with a potential client for free. It’s a good place to start and you can decide whether to move forward with a full-fledged relationship.
“We offer free initial consultations,” said Jonathan Swanberg, a certified financial planner in Houston. “Like most financial planners I know, I want to help as many people as possible.” “So we’re going to talk to a lot of people who will never pay us.”
But there’s only so much you can accomplish in one meeting. Dwyer, an Ohio CFP, believes it’s a waste of investors’ time to meet with advisors who are “never going to be involved.”
She added, “Financial guidance is not a one-time event. Markets change, tax laws change, life circumstances change. A snapshot of advice, even from a good advisor, is only as useful as the moment it is given.”
Get a “Robo-Advisor”
You may be daunted by the idea of entrusting your finances to an algorithm. However, “robo-advisors” are well-established as financial planning and investment tools.
According to Investopedia, robo-advisors are typically automated services with minimal human oversight. Your advisor may ask you questions about your financial situation and goals and make investment choices on your behalf.
These are generally cheap and open to investors by all means. NerdWallet and Bankrate both offer curated lists of the best robo-advisors.
This service is probably best suited for people with relatively simple investments and goals.
“Robo-advisors are not going to deal with sensitive issues,” Ashford said.
Consider a flat-fee advisor
Your relationship with a financial advisor doesn’t have to be forever. You can pay by the hour or at a flat rate.
If an advisor takes on a one-time project, such as creating a retirement plan, “fees can range from $2,000 to $15,000,” said Ryan Sterling, CEO of financial advisory firm NerdWallet Wealth Partners. Hourly wages can range from $150 to $1,000, he said.
The benefit of paying a flat fee to a financial planner is that you can limit your spending. If you’re looking for basic investment advice, this might be a good fit.
“If all you want to know is, ‘Is this the right mix of stocks and bonds?’ there are probably plenty of paid advisors who can answer that for you,” said Peter Lazaroff, a certified financial planner in St. Louis.
The problem with one-time financial planning meetings, Sterling said, is that financial needs change over time.
“You can charge $5,000 for a one-time plan, and you know with a high degree of certainty that it’s probably going to be phased out in six to 12 months,” he said.
