Simone Baribeau
"We're not replacing financial advisers. We're dealing with a portion of the market that they weren't dealing with," says Financial Engines Chief Investment Officer Christopher L. Jones.
A few hundred bucks a year for investment advice isn't necessarily small change. But many people have access to such service from Financial Engines or other companies (including Morningstar Associates and Ibbotson Associates, or Invesra), through their retirement plan sponsors or providers. But sometimes -- for those willing to pay for one -- a financial planner can add some common sense to software recommendations. Financial Engines initially recommends that a 28-year-old who has $14,000 in assets, $60,000 in annual income, saves $2,000 for retirement per year, and who wants to retire at 65 on $50,000 a year should up their annual contribution to $18,100 a year. A nice goal perhaps, but probably not feasible for anyone who lives in the real world. Nor is it meant to be. After getting initial advice, users can play with the numbers and find that saving $5,000 a year is likely to get them to their goal. But sometimes, play as you might, you may find you need a little common sense injected into the process. And that's where financial planners come in, says Aaron Coates, founder of NexGen, a community group of young CFPs within the Financial Planning Association. When you're younger, developing the discipline to save matters far more than your rate of return, says Coates. Online financial planning tools can help you do just that. After you rack up a critical mass of assets, or find that the advice given by software doesn't jibe with reality, that's when you turn to a flesh-and-blood financial planner.
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