The more heavily funded LearnVest offers "unlimited email check-ins and a few phone check-ins each year" after a diagnostic call with one of its affiliated CFPs, von Tobel says. LearnVest's planning fees range from $229 to $349.
Perhaps more threatening to traditional independent investment advisors is Personal Capital. Also set up as an RIA, it charges no upfront fees, instead charging clients an annual fee of 1% of assets under management. In return, it offers a wide range of tax tips, easy-to-follow charts on the status of customers' investments and access to a designated personal financial advisor. Its main appeal may be the graphical ease and simplicity that its online organizer provides.
Harris says Personal Capital is the "culmination" of his vision - previously only partly realized, he says, at Intuit and PayPal - of creating a complete, secure investment mechanism for affluent American households.
Winterberg believes, however, that for now the appeal of these sites is "mostly for 20-somethings." He adds, "At this moment it's companies like Schwab and Fidelity that should be looking over their shoulders" because these sites supplant much of the role that these companies have carved out for themselves as the principal intermediaries for middle-income investors.
Betterment's CEO, Jon Stein, agrees, saying that his company "sees ING Direct as a role model. It's a great online savings account that can help you manage your money."
DOUBLE-EDGED SWORD
That these sites represent a double-edged sword for planners is indicated in their interest in hiring advisors, whether as employees or contractors, in many regions across the country.
LearnVest's site includes smiling photos of attractive young advisors, along with lively descriptions of their investing approaches and abbreviated bios listing their credentials. Von Tobel says the advisors' remuneration is not based on commissions but rather on their customer ratings as calculated from client surveys. The standards that the online firms use to select their advisors vary. Murguia emphasizes that the designated advisors assigned by these firms "are not necessarily CFPs."
Smetters says Veritat seeks investment advisors who have passed their Series 65 exams and have at least two years of experience - except in states where this is not required. In those locales, he says his company considers trust and estate lawyers, adding that it does criminal background checks, looks at educational background and conducts interviews.
It remains to be seen whether that's sufficient vetting to reassure investors who may have vague and undefined fears about the security of websites that aggregate their financial information and may also provide the means to get direct access to a client's money.
LIMITED SERVICE
The discount advisors are not yet providing many services that independent advisors can offer. LearnVest and Veritat, for instance, do not have the means to put their customers into insurance plans or to arrange for writing wills. They do, however, give advice on these and many other subjects. And offering these services may not be inconceivable in the future.
As Murguia notes, these sites already provide customers with a means to a clear, easily updated financial snapshot. Additionally, over time, their easy accessibility may drive even affluent customers to engage in conscious or unconscious comparison-shopping with respect to financial advice. In that case, well-heeled customers may come to think that planners who charge hundreds of dollars in hourly rates are pricey.
Such a trend could lead to "margin compression." This was the fate that befell the large brokerage houses when they were forced to compete with the discount brokers that have over time taken even many of their larger individual accounts away.
In the years to come, the lower-asset and younger customers discount advisors are hunting may prosper, in due course, to become the kinds of clients that planners now depend on. It is likely that providing competing online tools and information will soon be a necessity, Murguia says.
Jonathan Leaf is a New York writer who's contributed to The Weekly Standard and National Review. He has also done corporate writing and editing for Citibank, DLJdirect and Bear Stearns.
