It was quite some time ago that the airline industry deregulated it's prices - you'll notice every time you check on a flight the price changes as the number crunchers working for the industry create their complex algorithms to try and get every last penny off of you. The personal finance industry has followed suit and to some extent creating a system better adept at separating you from your investments than it has at providing true and appropriate financial guidance. But much like the airline industry technology has changed the playing field. While sites like expedia and travelocity let users get the best possible prices, so too do online discount brokerages, such as Questrade.
Presented below are the 5 strongest reasons you should consider moving your money to an online brokerage rather than an expensive investment advisor or financial planner.
1. Online investing is much cheaper than having a financial advisor
This may seem obvious, but when it comes to managing your personal finances what is not obvious is how much you can save by investing by yourself. First and foremost let's look at what would happen if you were to put your money in a standard index fund - basically a mutual fund that mimics the stock market. In this case, the financial advisor is going to take an additional 1% of your assets above and beyond what an online discount brokerage would take. 1% may not seem like a lot to manage your money, but remember you're investing over the long term.
If you to invest $50k today at 5% growth vs. 4% growth (what you would get after an Advisor gets paid), after 25 years you would have $37,000 LESS if you went with the Advisor. That's a difference of $170k vs. $133k, and the differences get larger as you invest more money.
2. Online investing provides you tools to help you plan properly
While financial advisors have access to sophisticated tools to properly manage your money, so do you. In fact, while many online discount brokerages are improving their tools and research options to give the public access to more and more information, larger firms continue to rely on advisor "gut instinct" (hey, it's their business to know, right?), particularly those that have been doing this for 20 years. But the end result is that you now have human error competing against some of the best information and analytical tools out there; both of which are vying to manage your personal finances. You can guess who usually wins. There has been no conclusive study to demonstrate that financial advisors consistently beat the market, so why pay them to do what you can do yourself.
3. Online investing has 24 hour support
Remember when the crisis hit and your advisor was on vacation? Perhaps conveniently timed, or perhaps they too had no idea what was about to happen. When it comes to personal finance, you need to know your money is safe and your investments are being looked after - that's the advantage of managing your money online. A financial advisor is human and is willing to put their needs ahead of yours. If you disagree, try calling them on their 10 year anniversary because you are a little worried about bond markets in
4. Online investing gives you access to your money at all times
While you may be penalized if you try and withdraw all of your money from certain mutual funds immediately after purchasing them, the money online is always at the ready to be put back into your bank account. Unlike with a financial advisor where if you want money you're going to have to call them up and get them to sell whatever it is you want them to sell, then haggle with them about whether it's a good decision, then have them call someone else to place the order for you. Everything is done quickly and efficiently in the online world, and you can track your progress at every step.
5. Online investing let's you track your results, change your strategy and measure your performance
By investing through an online discount brokerage such as Questrade, you can actually track how well you are performing, whether or not your strategy makes sense and you have the ability to modify it. Even if you know nothing about investing there are tools to help you learn and walk you through it without having to make an appointment and drive all the way downtown and be patronized by a guy in a suit.
With online investing you truly take your financial future in your own hands in a way that is both safer, much cheaper, and provides the long term benefits of having you actually know what you're doing. Don't spend your whole life being financially ignorant; take charge of your future today.