Using the Internet to manage finances isn't for everybody. Even the people who provide online financial advice concede as much.
"If you have a complicated life, an online investment program should not be your solution," said John Rekenthaler, president of online advice at Morningstar Associates in Chicago. "Online advice programs are sophisticated, quantitative calculation programs. They're not psychologists. They don't know how to probe and get to the root of issues. They have to take you at face value."
People who have trouble getting motivated, don't express themselves well, need lifestyle advice rather than basic investment advice or who lead atypical lives may find that online services don't meet their needs, experts say.
The computer programs used by online services ask few questions and can't discuss options or address unusual economic challenges, such as raising a disabled child or helping an ill parent.
"Financial planning is a combination of art and science," said Neal Ringquist, executive vice president of MPower, a San Francisco-based service that provides online advice primarily through company 401(k) plans. "When you narrow the focus to planning for retirement--and the advice is limited to the financial assets earmarked for that--it becomes more science, which is something we can do very well.
"But the more you go from retirement planning to financial planning, the more art that's involved. That's where you need a [human] advisor."
Nonetheless, online services can provide some help to most consumers, and at a much lower price than financial planners, who can charge hundreds of dollars to prepare a detailed financial plan. The services can educate consumers about what to expect from different types of investments and help them gauge how much to save for specific goals. They also can provide a valuable "second opinion" on a human planner's advice.
For instance, financial planners who get commissions on the investments they recommend to clients may be tempted to put their own interests ahead of the clients'.
Online services provide a check for anyone with that worry, Rekenthaler said. "If we can be a validator, that's a good role."
For $7.95, Morningstar's Clear Future will run a detailed analysis of a human planner's advice, providing a range of possible outcomes that can be compared with what the planner suggested. The service also will recommend and run comparisons on other investments.
If another investment recommendation looks better, the consumer can go back to the planner and ask why the funds or investments he or she originally recommended are superior to those recommended by the program.
"A lot of folks get second opinions from doctors," said Jeff Maggioncalda, chief executive of Financial Engines, a Palo Alto-based online advice service. "It's not a bad idea for folks to check in with a few different sources for financial advice as well."