Different people have different desires when it comes to financial planning. Some folks want a person to talk to regularly. Many are happy with quality online services, which is increasingly the case.
Human money managers (after much small talk) will ask you your age, risk tolerance, and how much you want to invest. After that, they plug you in to a pre-set portfolio called the “Cap M” model. The industry is largely standardized around this pre-set model, and a computer can do this all for you in a few seconds. You typically only start receiving custom solutions from money managers once you have over ~US $5 million to invest. The thing with humans is that they need to get paid, which comes out of your pocket. The typically charge a significant percentage of assets or returns (1% or more annually), which can secretly add up to hundreds of thousands of dollars over the course of your lifetime. Even worse, money managers may place you into underperforming funds from which they receive commissions. According to Bloomberg Business News, a new working paper by business school professors at the University of Chicago and University of Michigan found that corrupt practices among money managers are endemic. “Corruption is everywhere, not just small firms. It is pervasive,” said Amit Seru, a finance professor at the University of Chicago. “This is eye-opening and suggests not only that some firms have a high tolerance for misconduct on the part of their employees, but that their very business model is to attract the broker who can generate high revenue at the cost of repetitive disciplinary violations.” This includes some of the world’s largest and most established money managers. Whether you look to humans or the internet, there is broad consensus is that you should hold the Cap M model: the market portfolio, with a split of stocks and bonds based on your age and risk tolerance. Online advisers like OpenInvest can do this for you at the lowest cost, with systems you can trust; and that difference in fees is what really adds up to outperformance over the long-term. OpenInvest adds customization and ethical strategy recommendations for further enhancements and peace of mind.