In recent years, working with an online (virtual) financial advisor has become more common, especially for retirees who are seeking expert advice without having to leave the comfort of their home.

While the convenience of virtual meetings and digital communication is appealing, many people still feel hesitant.

There's a natural inclination to wonder:
 

"I really like what this advisor is saying, but am I nuts for even thinking about handing my life savings to someone I've never met face-to-face, someone who's far away—on the internet?"
 

That hesitation is completely understandable.

After all, when it comes to your hard-earned savings, caution is crucial. You’re used to the traditional, local advisor model, where you meet in person, shake hands, and build trust through face-to-face interactions.

However, before dismissing the idea outright, let's explore the ins and outs of working with a virtual financial advisor and how to do so safely.
 

1. The Role of Custodians: Protecting Your Money
 

One of the most significant concerns when considering any financial advisor—virtual or otherwise—is the safety of your assets. Here's the good news: A credible virtual advisor will never have physical access to your money.
 

In fact, when you work with a financial advisor—whether virtual or local—the process of transferring and managing your money should always involve a custodial transfer. This means that, while the advisor can make recommendations and provide guidance, the custodian is the institution that actually holds and manages your funds.
 

So, what exactly is a custodian?
 

A custodian is a trusted, regulated financial institution, such as a large brokerage house (e.g., Schwab, Fidelity) or an insurance company (e.g., North American Insurance, Nationwide, Prudential, AIG/Corebridge, etc), which is responsible for securely holding and overseeing your assets. Importantly, custodians are regulated by the IRS and must meet stringent standards for security and accountability.
 

For example, when you roll over a 401(k) or transfer an IRA, you are not sending your funds directly to the advisor. Instead, the transfer occurs between custodians. This is important because the advisor never physically handles your money—a custodian does. This structure prevents any conflicts of interest and protects you from fraudulent activities.
 

To illustrate the importance of custodians, let’s revisit the infamous case of Bernie Madoff. Madoff's investors were duped because there was no third-party custodian involved in the management of their assets. Investors made the mistake of sending their money directly to Madoff, often by writing checks made out to Bernard L. Madoff himself.

Without a custodian overseeing the transactions, Madoff was able to fabricate returns and manipulate the system. Had those investors used a legitimate custodian—an independent institution to hold their assets—they would have been protected.

 

2. Advantages of Working with a Virtual Advisor
 

Now that we've established that your assets are safe with a reputable custodian, it's worth exploring the advantages of working with a virtual advisor—especially in today's digital world.
 

While it might feel more comforting to work with someone local, limiting yourself to just the advisors within a 30-mile radius can significantly reduce your options. Not all financial advisors are the same, and not all advisors have access to the same strategies and resources.
 

In fact, much like how patients seek out top medical specialists from across the country for specialized treatments, retirees are increasingly seeking out virtual financial advisors who offer unique expertise. Maybe you’re interested in specific tax planning strategies, complex retirement income planning, or other specialized areas of financial planning that might not be readily available in your local area.

With virtual advisors, you can access a wider pool of experts and find someone who offers the specific expertise that best fits your needs.
 

The ability to connect with advisors across the country opens the door to more personalized advice, without limiting yourself to what's available in your immediate geographic area. In other words, just as you would travel for specialized medical care, why not consider working with a virtual advisor who offers a broader set of strategies and planning tools?

 

3. A Crucial Rule: Never Send Money Directly to the Advisor
 

This is the most important takeaway of all: Don’t ever send money directly to the advisor—no matter how much you like them or trust them.
 

This doesn’t mean that you should avoid paying planning fees. Some financial advisors charge fees for comprehensive financial plans, which are perfectly legitimate. But never roll over your IRA, 401(k), or other investment accounts directly to an advisor. If an advisor tells you that they will “personally” be the custodian of your money or that you should send funds directly to them, that is a major red flag.
 

Your money should only be sent to a reputable, IRS-registered custodian—not the advisor themselves. Advisors should never take physical possession of your assets. Their role is to provide expert recommendations and strategies, while the custodian handles the security and management of your funds.
 

To reiterate, custodians are the institutions that protect your money. They are responsible for overseeing your accounts, making sure your funds are properly managed, and ensuring that your transactions are handled according to IRS regulations.

Reputable custodians include large financial institutions like Schwab, Fidelity, or other established names in the industry. If an advisor suggests that you send funds directly to them or manage the assets themselves, you should be extremely cautious.
 

As long as you follow this rule and make sure your funds are always being held by credible institutions, you can feel confident doing business with a virtual advisor who offers better strategies or more tailored advice than you might find locally.

 

4. Tips for Staying Safe
 

When working with a virtual financial advisor, just as with a local advisor, it’s crucial to perform proper due diligence. Here are a few tips for ensuring your safety:
 

1. Verify the Advisor’s Credentials
    

   • Ask for their current licenses and certifications. Any reputable advisor will readily provide proof of their qualifications and registrations.
      

   • Request a background check. Ensure there are no disciplinary or regulatory issues in their history.
      

   • Ask for references from existing clients. A good advisor will have a track record of satisfied clients who can vouch for their services.
      

2. Vet the Custodians
    

   • Confirm that the advisor is recommending reputable custodians—A-rated insurance companies, large brokerages like Schwab or Fidelity, or other well-established names. Always ensure the custodian is a registered institution with the IRS.
      

3. Understand the Fee Structure
    

   • Make sure you are clear on how the advisor is compensated—whether through flat fees, hourly rates, or asset-based management fees. Transparent pricing ensures you won’t face unexpected charges.
      

4. Ask About Security Measures
    

   • Since your interactions will be online, inquire about the security protocols the advisor uses to protect your sensitive financial information. Reputable virtual advisors will employ encryption, secure communication channels, and two-factor authentication.
      

The Bottom Line: Is It Safe?
 

In conclusion, working with a virtual financial advisor can be just as safe as working with a local advisor, provided you take the necessary precautions. The most important rule to follow is never send money directly to the advisor. Always ensure that your assets are held by a trusted custodian, and take the time to vet both the advisor and the custodian thoroughly.
 

In today’s digital world, don’t limit yourself to the advisors within a 30-mile radius. Just as people travel across the country for specialized medical care, working with a virtual financial advisor may open doors to better planning strategies and more tailored advice.
 

Remember: The advisor’s role is to provide expertise and guidance, while the custodian manages and protects your assets. If you follow this rule, do your research, and take it slow, working with a virtual financial advisor can be a smart, safe, and rewarding decision for your retirement planning.