Wow, we’ve almost made it.
First, we learned why it’s important to invest.
Next, we brushed up on our investing lingo.
Then, we dove into types of retirement investing and how to diversify your portfolio.
Now, here we are at the final step: deciding to whom we want to entrust our sweet, sweet, cash money. (Did you like that use of “to whom”? You better.)
As an individual, you can’t walk up to the New York Stock Exchange, point at a stock, and hand over your money to buy it. You have to go through a brokerage. This is a company that mediates transactions to buy and sells stock. As our world becomes more inundated with tech, we also see technology taking on this role. In recent years, many companies have popped up that allow you to begin investing with the tap of a button. Each approach has its own positives and drawbacks. So what do I do? Brokerage or robo-advisor?
To me, this part is the scariest. I think it’s why I’ve pushed back opening my own IRA for months. I want to make the right decision for me, and I’m not sure what that is or should be. I want to be in control of my money, but I also want to make sure I don’t make any mistakes. I want guidance, but I also want some room to figure things out on my own. Here’s what you need to know about each.
Robo-Advisors
Robo-advisors websites or apps where an individual can open an investment account. Although advisor is in the name, most robo-advisors don’t offer financial advice as much as they offer ease of use. Oftentimes, with robo-advisors there is little human interaction. Robo-advisors use computer algorithms in a lot of the investing process. They also have algorithms that can help first time investors figure out what’s right for them, and often have great options for automation. While there’s some customization, there may be less options overall for the investor when going with a robo-advisor as opposed to a brokerage.
Because there’s less overhead than with a brokerage, robo-advisors tend to have lower fees overall. Their fee set up is often done like a subscription with a certain amount each month. However, depending on the amount in your portfolio, that fee may actually account for a large percentage of your investments.
There are a lot of companies out there, and all of the following provide both retirement and regular investment options. Here are some of the biggest players right now.
Name | Notable Features | Fees | Mins | Pros | Cons |
| Automated strategies for tax savings | 0.25% of balance 0.40% of balance for Premium members | No Minimum for basic account $100,000 for Premium | · One of the oldest players · Offers more than just investment accounts | · Premium plan with high min ($100,000) · Portfolio strategy based on ETFs (only a con if you want a lot of options) |
| For women, by women! | 0.25% of your balance 0.50% of balance for Premium Undisclosed for portfolios of 1M+ | No Minimums for basic account $50,000 for Premium | · Takes into consideration events/goals that often impact women · Free emergency fund | · Can’t choose specific stocks/ investments in portfolio which leaves less control |
| Offers specific financial planning for big life moments (college, travel, home buying) | 0.25% of your balance .06-.13% fund fees** | $500 Minimum | · Ample retirement fund options · Encourages Passive investing | · Can borrow a line of credit from your investment (could also be considered a pro for some) |
M1 Finance and Ally Invest are similar | Offers commission free investing | Fees paid through funds | No Minimum | · Makes it easy to invest in individual stocks, crypto currency, and options · Robinhood Snacks for easy learning | · No specific retirement plans · Very hard to determine fee structure before signing up |
| Free financial education that’s digestible | $1/month for beginner, $3/month for Growth, and $9/month for Stash+ | No Minimum for basic account. Must have at least a Growth account for Retirement investing | · Offers more than just investment accounts · Can invest in shares across a different themes (Stocks Worldwide, Corporate Cannabis, Social Media Mania, etc.) | · Fees can eat into smaller accounts · Advertises A LOT of financial products unrelated to investing (Banking, Insurance, etc.) |
| Gives all customers access to financial advisors | No management fees | $1 Minimum | · Fiduciary advisors (have your best interest in mind · Option for multiple portfolios for different financial goals | · Choose from five different portfolios with automated investing · SoFi offers a LOT of different money products (pro and con) |
*These are accounts I currently have
**All funds will have fees and it’s nice that Wealthfront disclosed so openly
While I was researching, I kept uncovering more and more companies that sounded really cool. With a lower barrier to entry, there are a lot of new companies popping up, and this is by no means an exhaustive list!
Brokerages
Brokerages have been in the game for a long time. Like robo-advisors, brokerages connect their clients to specific accounts. Unlike robo-advisors, brokerages tend to offer a wider array of personalization and options. I want to be careful here and make a distinction between a robo-advisor and an online brokerage. Although some of the following are completely online, they still have the same offerings as a traditional brokerage. In general, the investor still does most of the legwork in choosing their investments.
There are three huge players when it comes to retirement investing: Vanguard, Fidelity, and Schwab. In the FIRE community, Vanguard (and a specific fund VTSAX) is king. Going into my research, I wanted to open an account with Vanguard simply because I heard so much about it, but in the interest of getting the full picture, I want to look at some others.
Name | Notable Features | Fees | Mins | Pros | Cons |
| Works like a co-op aka each investor owns a part of the company | $20 account service fee (can be easily waived), 0.1% average expense ratio, No trading fees for some products | $1,000 for IRA $3,000 for most Mutual Funds ETFs price of one share ranges from $30-$170 | · Tons of investment options · Allows for a lot of customizations · Retirement funds can work as an automated options (at the expense of higher fees) | · Higher barriers to entry (starting mins) · Requires a bit more knowledge of markets |
| Offers planning and advice at lower costs to entry | No trading fees for some products Fees associated with planning/advice (.35-1.05%) | No Minimums for IRAs | · Has a robo-advisor option (Fidelity Go) · Few minimums · Retirement funds can work as an automated options (at the expense of higher fees) | · Requires a bit more knowledge of markets · Offer less target retirement funds |
| Investment options with a trusted banking arm | No trading fees for some products | No minimums for IRAs | · Tons of investment options · Easiest to navigate website | · Requires a bit more knowledge of markets · Has banking component if you want to combine (could also be a pro) |
| Well established online-brokerage known for free trads | Free Trades for most products, .3% for Core portfolios (automated investment like robo-advisor) | $500 minimum for Mutual Fund IRAs, $2,500 for ETFs No account minimums on brokerage accounts | · Straightforward education on site · Good bonus offers at times | · Very hands on (save for pre-built portfolios) |
| Comprehensive education offerings for all levels of knowledge | Free trades for most products, no maintenance fees for retirement accounts | No Minimum for retirement accounts | · Established curriculum for investors · Wide range of investment options | · More hands on approach · Hard to find funds before applying |
| One of the oldest brokerages in America (founded in 1869) | IRAs through HonestBollar by Goldman Sachs .25% management fee | $1,000 Minimum | · Years and years of experience · Take the brainpower out; automated investing | · High barriers to entry, seems like you cannot make an individual account on your own. · Retirement investment options through an acquired company · Investments chosen for investors |
Even though I didn’t include them in this table, while researching I learned that BlackRock has the highest asset management of all the brokerages and they’re making a lot of moves to be more sustainable including selling a TON of coal investments!!!
I want to make a note on fees. Every company is going to have fees associated because the funds cost money to run. A lot of those fees are built into the cost of the funds. When I talk about fees in this table, trading fees are the costs to buy and sell stocks/funds etc. Expense ratios are the costs from the company for the funds. Hope that’s clearer!
Whew, I know this is a TON of information. It took a lot of time to gather, and it’s by no means comprehensive, but it can hopefully give you an idea of what you can look out for when deciding where to invest your money. The great thing is, you’re not stuck if you choose one brokerage over another! It’s possible to transfer your investments over WITHOUT selling them, so hopefully that gives you a little peace of mind. Now, all that’s left is to bite the bullet, choose a place to start, and JUST DO IT.
