What’s the Difference?
There are three primary differences between the Online and Local brokers which are fees, service, and accountability.
Fees – It is commonly promoted and marketed that the online brokers are less expensive and the unfortunate reality is that comparing the two options from a pure fee perspective is inaccurate and misleading. If you start with the plan design there is a difference between a user directed online form and a specialist driven consultation to determine plan design. Secondarily there are many share class options available to the advisor that can and do compete directly from a fee perspective and immediately makes the personal consultation more valuable. Lastly, the ongoing services of an advisor who provides follow-up plan review and investment updates that tie into a personally developed plan is by far a valuable resource that you will not find with online brokers.
Service – As mentioned many times in the Fee discussion the service is in our opinion a very important factor in not only the decision but also the results of your plan over time. If we just face the fact that you can find free calculators and plan design tools online then you can tell that there isn’t much value to the setup of a basic plan. The ongoing service of updating the plan, refining it, and adjusting it to life circumstances and economic conditions is where most high quality plans go off track. Now, as much as we will promote the ongoing services, it’s also important that we mention that not all advisors are as able to provide these ongoing services so it’s important to get these kind of service commitments agreed to before you commit to any account transfers.
Accountability – This is the most difficult part of any conversation about service specialists because it involves some personal introspection. It is important to understand that beyond all the marketing, promises, and sales pitches the decisions and the consequences of the results to your portfolio and plan fall on your shoulders. The online broker and the local specialist are available to you in order to give you access to resources and options that would otherwise be unavailable to the average consumer. The online broker is only accountable for providing you access and some basic tools for your use in development and management of your plan. The local specialists take on a whole different role in the fact that they guide your decision making and remind you to update the plan to account for personal and economic changes that have affected the original assumptions.
Close – No matter what decision you make it’s important to weigh all the variables and consequences of going it alone vs. using a trusted advisor. Fees ultimately are the least important factor when you are considering the choice between a highly ethical and service oriented advisor and online calculators to help make your decisions.