A behavioral finance expert says the best investing apps have 2 things in common

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  • Before choosing an investing app, look to see whether the app you're interested in is listed as an adviser or a broker, and whether or not your app will offer education beyond trading advice. 
  • Advisers are required to act in their clients' best interests, while brokers are not necessarily required to do so. 
  • A good investing app will help you undertand things like how your investing profits will be taxed, and which account to use for your goals.
  • Start investing today with SoFi »

If you're considering starting to invest with an app, there's a lot to consider before signing up. Investing apps have grown in popularity over the past few years, but they're all quite different. 

Dan Egan is the director of behavioral finance and investing at Betterment, and has spent his career studying how people make financial decisions. He says there are two things people should be looking for in the best investment apps. 

Look for an app that's going to help you make smart decisions, not just allow you to trade

Egan says that a good investing app will help you see the bigger picture of investing. He says that a good app should go one step further than just allowing you to invest — it should show you how.

As an example, he compares investment accounts to a tool like a shovel. "I don't want somebody who's just selling me a shovel. I want somebody who's going to help me figure out how to use the shovel effectively for my area," he says. 

Investing can be complicated, and it's unlikely that you'll know all the right moves right away, especially if you're a beginner. Egan says that you should look for an app that can help you make smart choices on things beyond what to purchase.

"You want someone who gives advice, not just on stock picking, but on financial planning, taxes, and helps you understand which accounts to use," he says. 

Look for an app that is an adviser rather than a broker

While most investing apps work toward a similar goal, they don't all provide the same service. Some apps are regulated as advisers, while others are regulated as brokers — and there's a big difference between the two.

Advisers are required to help you make the best possible decisions and only take actions in your best interest, also known as fiduciary duty. Brokers generally aren't held to this. "Ideally, you want somebody who is regulated as an adviser," says Egan.

Generally, you can find out how the company or app you're considering is registered and regulated by the Securities and Exchange Commission, or SEC. One way is to search the SEC's online adviser public disclosure database, which shows how a company is regulated.

Choosing an investment company that's regulated as an adviser can help you be sure you're getting the most help possible in your investing process. Stash, Acorns, Ellevest, and Betterment are all examples of investing platforms that are registered as advisers. 

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