Virtual Financial Advisors – Good or Bad Idea?

I was browsing new finance articles earlier this week and read about a few new web-based financial “advisor” websites that received high remarks.  I do not believe these websites were developed to replace financial advisors but to a) keep your current advisor honest and make sure they are giving you sound advice b) give you a basic idea of your entire financial picture if you are unable to afford an advisor at this time.

 

Working for a bank we do get the option to meet with advisors from time to time, and I have taken advantage and received a financial plan, so I know the basics but in no way am I an expert in this field.  This is strictly a review of the websites, and as you know, each person’s finances are different, so what might work best for me won’t be best for the next person.

 

SimpliFi!

 

SimpliFi was developed to provide lower and middle-income users with access to financial planning that higher-income users receive from professional financial advisors.  The company is a registered Investment Advisor with the SEC

 

As the title suggests, it is fundamental.  You input your basic finances of the things you own, things you owe, and things that grow.  With this information, it formulates a financial “grade” of A+ to F.  It will give you an I if incomplete and N if you spend more than you earn.  I received a C.  Obviously, not a major surprise as I know my finances need some work.

 

There are five areas “Sophie”, the “advisor” grades you on:  Retirement, Goals, Debt, Life Insurance, & Spending Plan.

 

Retirement – this area tells you how much you are contributing (self + company match) and at what age you plan to retire then what return you would need each year to achieve this retirement goal. It also gives you an asset allocation in order to achieve that percentage.  It does not advise on different types of retirement accounts (Roth or traditional IRA, 401k, etc) that might be best.  But as a general overview of retirement assets, it is very good.

 

Goals – After digging around a bit I found how to add goals to your financial plan. You can add savings for a house, child, marriage, school, vacation, vehicle, etc. For example, you input the annual amount you might need for a vacation then tells you what you will need each month to meet this goal.  However, it does not show you how far along you are towards saving for the vacation or home (at least that I have found). I wish you could input how much you are already putting towards savings for these goals I could see my progress.

 

Debt – Pretty self explanatory.  You list all your debt balances, payment amount, interest rates then it will give you the estimated number of months it will take to pay off using the “debt snowball”.  You can also see how much that will change by paying more towards your debt each month.  They also give the option of consolidating your debts through a home equity line or personal loan and what savings there might be.

 

Life Insurance – This area advises you on how much total life insurance is necessary to cover major expenses (mortgage, education, funeral, childcare) were something to happen to the major breadwinner. One thing I have learned is that you want to make sure your family’s debt obligations are taken care of but also enough insurance to cover the family for years to come since there will be a major loss in income.  As it is just the dog and myself at this point, the long term insurance provided through work is sufficient.

 

Spending Plan – This is your basic income statement which I took directly from Mint.com.  Basically shows you how much extra you have to put towards debt repayment, retirement, savings, etc.  There is nothing fancy here and your budget software programs will be much more helpful.  But in order to give you a financial “grade” this information is necessary.

 

F.I.T & GET Plans

 

FIT (Financial Improvement Tasks)

 

Credit Card Debt – This area tells you your effective interest rate across all credit cards, monthly interest costs, and how many months until you are debt free.

 

Build Emergency Fund – Suggests an emergency fund amount and how much you are over/under and what it would take each month to each this goal over X number of months. It also gives you the interest earned each month.

 

There are also reports on Insurance, Retirement, & goals you set for yourself (vacation savings, house savings, etc.)

 

GET plans (Goal Execution Tasks)– Basically, a summary of your retirement plan and how long it will take at different dollar amounts being put away.

 

So What Did I Think???

 

It is just a basic tool to help you prepare for long term financial planning.  I did not find anything extremely unique about this website, but since it is only the beta edition and looking for user feedback, we shall how the website grows.  As I said, I would like to be able to submit how much I am saving towards a specific goal and see how far along I am.  Or even how major life changes could affect my total financial picture.  It also does not suggest any specific products which I kind of like.  It is not importing specific items from any of your accounts so security is not as much of a concern as with the budgeting websites, and since you are inputting the amounts, you will not need to worry about accounts not linking.  I did really like that it is very user friendly and there are not too many bells and whistles which can often become overwhelming and frustrating.

 

I will be reviewing Plan With Voyant next which does provide many of the “extras” but will these “extras” just make my financial life more complex??