NEW YORK (MainStreet) — Online investment firms are cropping up frequently, giving investors more options on how they can allocate their income for retirement.

Sifting through the different offerings of established firms as well as dozens of new startups that offer algorithm-based advice, low-cost online managed accounts and 401(k) advice can be overwhelming. Choosing a firm depends on the investor’s needs and his willingness to manage investments on his own.

New startups and major players like Charles Schwab are now offering greater online transparency on their pricing and fees and have invested in offering user-friendly websites and mobile apps. Even traditional brokerage service companies such as Schwab are now joining the sector and have unveiled a new low-cost online managed account dubbed “Intelligent Portfolios,” while TradeKing, the discount brokerage firm rolled out a new managed account service dubbed “TradeKing Advisors.”

Robo advisors, or firms that offer algorithm-based buy and sell advice, are a good fit for consumers who have a more complex portfolio spread across multiple accounts such has owning a self-directed brokerage account, a spouse's IRA and a managed account. These firms offer an investment advice model which uses read-only aggregation of outside accounts and proprietary algorithms to provide automated portfolio recommendations, said Grant Easterbrook, an analyst who tracks financial startups at Corporate Insight, a New York-based financial services research and consulting firm.

“These algorithm-based advice firms give specific buy/sell/hold recommendations for each of the client’s holdings, recommend that they sell funds that are high-cost, poor performing and/or not in line with the user’s investment goals,” he said. “Then they suggest alternative products to buy to improve the portfolio, such as buying a REIT fund to add exposure to real estate.” Some of the firms which give users automated buy and sell recommendations, include Financial Guard, Jemstep and FutureAdvisor.

Jemstep helps individuals take more control of their retirement, since it shows the investor a view of his projected future earnings and where he is losing money to excess fees, said Simon Roy, president of Jemstep. Investors can also easily see what mutual funds they are holding and the levels of their allocation among their stocks, bonds, commodities and cash.

"The service is designed to help people lock in more money for their retirement," he said. "It brings all the accounts together. This gives you a full picture."

A recent survey conducted by Jemstep and Harris Interactive with over 2,300 participants examined the current attitudes of consumers about investing for retirement and found that 50% of investors manage their own money currently while 9% obtain advice from a family member. The survey also showed that 70% of people do not have confidence in financial planners and want to manage their own money. Many investors are weary of the high fees charged by financial advisors in addition to the fees charged by companies selling the mutual funds, Roy said.Low-cost online managed accounts are an option for consumers who choose to invest a lump sum of money in a diversified portfolio and have their investments managed for them. Some of the firms in this group are Betterment, Invessence, MarketRiders, Wealthfront and WiseBanyan. The large hybrid brokerage firms such as Fidelity, Charles Schwab, E*TRADE or TD Ameritrade all offer a more traditional managed account solution that are relatively more expensive. Investors can also consider a low-cost target date fund, said Easterbrook.

Online 401(k) advisors can benefit employees whose money is locked up in their company-sponsored retirement plan, where they often can only choose from a limited selection of funds. Employees who want specific advice to the funds in their company retirement plan include CoPiloted, Kivalia, 401K GPS and blooom. Investors should check first with their employer to make sure that do not have access already to guidance from firms like Financial Engines or the Morningstar Retirement Income Manager, he said.

Another group of companies gives investors the option of having an ongoing one-on-one relationship with a human financial advisor while maintaining their portfolio by communicating on the phone, email and/or video chat. This option is good for investors who want to work with a human advisor but do not feel the need to meet their advisor in person on a regular basis. The minimums and fees from these companies are generally lower than their in-person peers, Easterbrook said. Personal Capital, RebalanceIRA and Vanguard’s advisor service are firms who provide this service.

A hybrid model gives investors the ability to compare fees and services, said Asheesh Advani, CEO of Covestor, an online marketplace where investors can invest online completely, but also speak with advisors by phone or even via Skype. Over 140 of the portfolios on Covestor’s marketplace are actively managed by experienced investors.

“People are gravitating to companies like Covestor, which offers actively-managed portfolios and alternative strategies that are less expensive than hedge funds with transparent holdings, verified track records, full liquidity and low minimums,” he said. “Services like Covestor are leading the trend to transparency and also putting pressure on traditional advisers to justify their fees. These are major wins for investors.”

--Written by Ellen Chang for MainStreet