Bucks Blog: LearnVest Dips Its Toes Into Investment Advice

3:12 p.m. Updated / To add details about LearnVest

LearnVest.com, which started out in 2009 as a budgeting and money management site aimed at young women, is dipping its toes into the world of investment advice and has spiffed up its online tools to appeal to a broader audience.

LearnVest announced Tuesday that it had become a registered investment adviser, or R.I.A., which means that its certified financial planners — who give advice to the site’s users over the phone and by e-mail — can go beyond telling you to save more and pay off your credit card debt and suggest what sort of investments you should use for your retirement money.

However, while LearnVest aims to offer unbiased financial advice at a reasonable price to people who aren’t millionaires, its offering for now stops short of what many investors may truly want and need. Unlike other sites aimed at smaller investors, such as Betterment, LearnVest doesn’t offer advice about specific investments or fund families, and doesn’t actually execute trades or move money.

Rather, the site’s investment advice focuses on educating clients about asset class and allocation in general, not recommendations for specific investments, said Alexa von Tobel, the site’s founder and chief executive. For instance, planners will focus on what proportion of your portfolio should be in large company stocks, foreign stocks, bonds, real estate, cash, etc.  Ms. von Tobel said LearnVest wanted its clients to “feel empowered to select their own investments,” preferably low-cost exchange-traded funds and mutual funds, which she noted were available from a number of providers.

Although the advice may get more specific in the future as client demands evolve, she said, “For now, we’re not going to say, ‘go with this stock versus this stock.’”

In a follow-up e-mail, she said the site was “not offering implementation at this time because we’re focused on helping our clients get a solid footing in the investing space by understanding risk, portfolio allocation and how to minimize fees,” so they can successfully choose investments on their own.

Clients also are on their own in terms of re-balancing investments in retirement accounts and purchasing actual investments. A sample “Portfolio Builder” plan provided by LearnVest, which includes the investment advice component, simply contrasts a fictional client’s existing asset allocation with a recommended distribution. It also advises clients on how to vet a brokerage firm, before suggesting that they “take a look at Betterment, Vanguard, Scottrade, Charles Schwab, Fidelity and E*Trade.”

LearnVest’s basic tools — its budgeting and money-management features, where you can view all your accounts in one place — are available free. If users want to gain access to a planner, they pay according to the level of service. Previously, the highest level was $349 a year, which included development of a five-year financial plan. Now, the highest level is  the “Portfolio Builder” option at $599 a year, which includes a financial plan as well as “personalized guidance” on your investments from a certified financial planner over the phone and by e-mail. The plan includes not only an analysis of your investments, but also a review of financial aspects like estate planning and insurance analysis.

The annual fee includes an introductory diagnostic call and three subsequent calls with your adviser, along with unlimited e-mail access. You don’t get to pick your adviser, but you’ll speak with the same one each time. That flat fee is all you pay; LearnVest doesn’t charge an additional fee based on the total amount of assets under management.

A question now for LearnVest is whether the site’s financial planners can provide quality service to the volume of clients interested in their services. Ms. von Tobel says LearnVest will have 50 certified financial planners on staff by the end of the year, although she’s unsure how many of them will be full time.

A traditional financial planner might handle between 250 and 350 clients on average, she said, although that number varies greatly depending on the clients’ wealth and the complexity of their financial situations. Since she says LearnVest’s planners operate more efficiently, she expects they will be able to handle “a good amount” over that range, although she can’t yet say just how many that might be.

LearnVest has at least 300,000 users, according to numbers the company released six months ago.

As an R.I.A., LearnVest’s planners will have a fiduciary responsibility to act in the best interests of their clients, Ms. von Tobel said. The full-time planners will be salaried and will get bonuses based on customer satisfaction, she said; neither they nor LearnVest as a company receive commissions for selling investments to clients. LearnVest said in its announcement that its planners would “remain completely unbiased, with no product recommendations throughout the client’s experience.” (Part-time planners must work at least 12 hours a week and will be paid a per-client rate, and also will be evaluated based on customer satisfaction).

Certified financial planners must undergo specific training, pass an exam and have at least three years of experience before earning the designation. In addition, Ms. von Tobel described a detailed hiring process that includes having candidates create a video explaining a financial issue and developing a complex financial plan before they are interviewed. The planners will work from locations around the country, she said.

Along with the addition of the R.I.A. designation, LearnVest has added more features to its Web site, such as the ability for a client’s financial planner to log onto a Web page while they are talking to view the client’s finances at the same time that the client is seeing it. Ms. von Tobel said clients had suggested the idea, which helps streamline interactions between the adviser and the customer. (Planners don’t have access to the information unless they are online with the client, she said.)

What do you think of LearnVest’s approach? Would you pay $599 for its level of investment advice?

Article source: http://bucks.blogs.nytimes.com/2012/09/11/learnvest-dips-its-toes-into-investment-advice/?partner=rss&emc=rss