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Traditional Financial Advisors Versus Virtual Financial Advisors

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Financial planning is an intricate web of multiple decisions and strategies that you take over time. It can involve basic steps like saving more and spending less, reducing your credit card use, living frugally and being mindful of your needs and wants, and more. It can also include more specific strategies like retirement planning and picking the right tax saving retirement account for your requirements, estate planning and establishing trusts and directives, education planning and investing in a 529 education savings account, and healthcare planning with opening a health savings account. A financial advisor can assist with all of these aspects of financial planning that are unique for each investor, depending on their goals, preferences, likes and dislikes, etc.

Since every individual is unique and needs a distinct financial plan, their preference for the type of financial advisor can also differ from one another. In today’s world, there are several professional services available to choose from. You can pick a financial advisor depending on their fee structure, professional certifications, investment strategies, and the mode of operation, such as traditional or virtual.

This article talks about the differences between traditional and virtual financial advisors and how you can pick one.

What is a traditional financial advisor?

A traditional financial advisor is an advisor who consults with you on financial matters. Such a professional meets with you frequently to discuss your financial goals, investments, debt liabilities, and more, and recommends ways to improve your financial situation. Traditional financial advisors are generally located close to you, so you can look them up as often as you need. The need for face-to-face interactions is paramount when dealing with a traditional financial advisor.

What is a virtual financial advisor?

The only thing that can set a virtual financial advisor apart from a traditional one is the mode of operation. As is clear from their name, virtual financial advisors work online or via phone or email. These professionals carry out the same duties as traditional advisors, except for the fact that you work with them virtually without having to see them face to face every now and then.

What are the advantages and disadvantages of a traditional financial advisor?

Here are some advantages of a traditional financial advisor:

  • Easy to judge their performance: When you meet someone in person, you get an opportunity to read their body language, make eye contact, study their personality, etc. This, in turn, helps you gauge their credibility. In-person meetings are easier to maneuver. You can be in control all the time. You can observe the financial advisor’s work and call them out if you do not agree with them. In-person meetings may also help the financial advisor understand their clients better. When you meet someone in person you can pick a lot on their likes and dislikes and preference for risk. This can help financial advisors recommend the right investment instruments. Moreover, in times of disagreement, being face to face makes it easier to resolve a dispute or make the other person see your point of view. This helps build confidence in each other and can strengthen the relationship too.

  • Easy to establish accountability: Knowing the physical office address of a professional helps create more trust and reliability. Many people still fear being a victim of an online scam or fraud. But having the option to physically meet the advisors creates accountability. Investors feel more comfortable sharing details of their personal and professional lives and entrusting a person with their hard-earned money and future goals once they have met the financial advisor. There is an added level of professionalism when you meet someone in their office. The ambience and atmosphere can also help calm jittery investors.

  • Easy to share documents: Meeting physically can be easier when you have to share documents or analyze paper work. This can be particularly true in the case of estate planning where multiple documents like the will, trust information, data on assets, etc. is involved. For people who are not comfortable with sharing such information on emails or phones as it may be stored and misused later, meeting in person can be a better option.

  • Helps to create a personalized experience: Little things like being offered a cup of coffee, being greeted by a receptionist, meeting other clients in the lobby, etc. can create a positive impact on investors. A traditional financial advisor can offer a more personalized experience that can appeal to some over others. This can be lacking in virtual financial advisors.

Here are some disadvantages of a traditional financial advisor:

  • Time consuming: It can be extremely time consuming to regularly meet with a traditional financial advisor. You have to take out time from your routine and then fix a meeting. Traffic, road blocks, parking, etc. eat away even more time. All in all, it can be challenging to organize frequent meetings for someone managing a very hectic schedule. Moreover, sometimes you may have to cancel last minute in case of bad weather, etc. which can lead to unnecessary delays. If you end up postponing your meetings often, you may lag behind in your investment schedule. It is important to connect with your financial advisor on a regular basis as this helps them understand your changing mindset, personal and professional life, future goals, current restrictions, etc. This, in turn, helps them come up with a potent financial plan for you.

  • An inadequate choice of good advisors in the vicinity: You may have a limited choice in the area you live in and may have to compromise on quality depending on the financial advisors in your town or city. Sometimes small towns may not have experienced professionals that can be detrimental to your growth. In such a case you have to depend on the limited number of options around you and settle.

  • Costs more money: Hiring a traditional financial advisor can be more expensive. You do not just pay the professional for their services but also have to spend on other items, such as gas, parking, etc. You may need to hire a babysitter for the duration of the meeting or take leave from work to accommodate the financial advisor’s schedule. While this may not seem much at first, it can add up to a lot over time. Managing and running an office is also expensive for the financial advisor. The professional has to pay for electricity, water, rent, office staff, supplies, etc. Hence, this can be a drawback for both the parties involved.

What are the advantages and disadvantages of a virtual financial advisor?

Here are some advantages of a virtual financial advisor:

  • Saves time: You can save a lot of time if you hire a virtual financial advisor. The time spent in traffic is eliminated and the time taken to get ready to go to the advisor’s office is reduced. You no longer have to drive to the professional and back and can instead use the extra time to discuss important matters. Just make sure to fix a time as per your convenience and log into your computer or keep your phone ready five minutes before the scheduled time to avoid delays. Once the meeting is over you can continue doing the rest of your work and go about the day as usual.

  • Find a good advisor anywhere: A virtual financial advisor can operate from anywhere in the world. You could be sitting in opposite parts of the world and still be in constant touch with each other. Technology has simplified lives so much that regardless of the place you reside in, you can always get the help you require. Living in a remote area should not limit your chances of bettering your financial situation or achieving your financial goals. And a virtual financial advisor can help you improve your financial standing.

  • Saves money: Virtual financial advisors make for a more cost-effective choice than traditional financial advisors as all associated costs, such as gas, parking, etc. are removed. You do not need to spend on anything other than a phone or internet connection that is pretty much a necessity in today’s lives anyhow and not an added expenditure anymore. The virtual professional can also save many thousands of dollars as they can operate from home and do not have to run an office and pay for rent, electricity, supplies, staff, etc. This can be a win-win situation for the client and the professional.

  • Connect from anywhere: You can talk to a virtual financial advisor from anywhere. For instance, you can use your lunch break to catch up on your investments. You can also talk to them over the phone while you commute to work or wait for your kids outside their school. Small pockets of time in between activities can be well utilized here, making it a lot easier for people with hectic routines to not compromise on their financial growth. However, keep in mind that even though you can talk to your virtual financial advisor anywhere, anytime, you must be fully present and not distracted by others around you.

Here are some disadvantages of a virtual financial advisor:

  • Lacks the personal touch: Virtual financial advisors may lack the personal touch as they do not ever meet you. This can be hard for some clients as they are not able to get to know the professional well enough to trust them with their personal decisions or changing life stages. A lack of personalization can also result in a lack of interest in financial planning leading to cancelled meetings, a disregard for the professional’s suggestions, and not following up on their advice.

  • Technology may be hard for some investors: Older generations are still wary of technology and prefer not to be dependent on it for their daily use. Even though a shift towards a virtual world seems inevitable, some people continue to prefer traditional forms of communication and find emails and video calls dry and hard to keep up with.

  • Hard to establish accountability: With so many unverified financial advisors and online frauds, it can be difficult to fully trust the financial advisor. However, a way out here can be to read online reviews and hire financial advisors from verified financial advisory firms only. Some advisors also offer the option to meet them in person before starting a virtual model of communication. This can help create more accountability.

How should you choose between a traditional and virtual financial advisor?

A traditional or virtual financial advisor can both offer advantages and disadvantages. So, the choice would depend on what you like and dislike about each. Other factors that can affect your choice can be your location, age, financial goals, etc. For instance, if you do not have any good financial advisors around you, you have no choice but to look for a virtual advisor on the web. A virtual financial advisor can also be a good choice for parents, business owners, people working more than one job, etc. as their routines can be packed, making it nearly impossible to take out time. However, for those who still prefer the old school way of meeting in person, a traditional financial advisor can be a good choice. While you may spend more time and money, you will be mentally relieved and more at peace with your decision.

To sum it up

While the two types of financial advisors have their own share of pros and cons, you must not forget that given the advancement in technology and the recent events, such as partial and complete lockdowns, virtual financial advisors could be the future of financial planning. They also make it simpler for people to connect. For instance, an investor from Alaska can hire a professional in New York. Therefore, irrespective of what you choose today, try to keep an open mind about the change that is bound to come sooner rather than later.

To get started, you can use our free tool to be matched with upto 3 vetted financial advisors to find one that best meets your needs.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.