Can Apps Like Robinhood Lead You to Financial Success?

Unlike apps, traditional wealth advisors offer experience and personalized advice

Over the past few years, financial advising has become more and more sought out. In specific, robo-advisors vs. the traditional advisor you meet with in person. Apps have the benefit of offering accessibility from the palm of your hand. Still, there are quite a few things you can't get from apps or online platforms that are only available when working with a wealth advisor/financial planner.

Apps like Robinhood have become trendy among many interested in investing and stocks because they believe they don't have the time, expertise, or money to pay for services. Robinhood, like other apps, allows users to trade, exchange cryptocurrency and traded funds without fees or paying commission to someone outside the app. Investment apps, which monitor portfolios with computer algorithms, don't provide customized financial plans or personalized investment advice. Robinhood, in specific, is a commission-free trading platform. Now, if your dividends are over $10, or you sell a stock or bitcoin within a filing year as a Robinhood client, you'll have to file taxes on this income. If you're interested in more details, Forbes covers the specific tax implications you could face when using Robinhood in this article. https://www.forbes.com/sites/shaharziv/2021/04/30/using-robinhood-could-costs-you-thousands-in-taxes-heres-why/?sh=23e4987014be

You can hire financial advisors for short-term, long-term, or even a la carte services. Financial advisors assist with addressing the big questions like buying a home, figuring out your retirement, and the economic changes that come with having kids and saving for their college funds, among other significant life changes and plans. When you visit with a financial advisor in person, you can together manage your portfolio and investments, discuss your personal financial goals, or plan big purchases.

There are many payment structures when it comes to the cost charged for a financial advisor's expertise. Options include:

·       Fee-based advisors who charge a fee but may accept commissions;

·       Fee-only advisors who don't receive commissions but can charge additional flat fees for services; and

·       Commission-only advisors who earn their income on investments that are bought and sold on your behalf.

Many financial advisors charge a set amount and an annual fee (around 1%) based on the value of the client's portfolio. Numerous financial institutions offer hourly rates for the time you spend working with an advisor. In this situation, you usually get guidance on a financial plan set up but no ongoing oversight from an advisor unless requested.

When it comes to your financial planning needs and deciding what path to take, weighing the pros and cons of both avenues based on your specific needs is the best option. If your preference is to have someone walk you through what you need to do and help guide you in achieving those goals for a fee or charge, a financial advisor may be your best option. If you are not looking for advisement but instead want to focus on investment management, apps like Robinhood will consider your risk tolerance, time frame, and goal with a low-to-no account minimum.