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How to compare robo-advisors

Which robo-advisor is the best option to manage your investments?

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Science-fiction writers have long been predicting that robots will take over the world, and those predictions could soon come true in the lucrative investment-advice market.

Recent years have seen the emergence of digital financial advisers – known as robo-advisors – that take advantage of modern technology to offer low-cost investment management services. In a nutshell, robo-investors automatically manage your investments at a lower cost than a traditional adviser.

In this guide, we explain how robo-advisors work, how you can compare the services offered by different providers and how to open an account with a robo-advisor.

What is robo-investing?

Robo-advisors automate the management of your investment portfolio through the use of complex algorithms and technology to perform many of the same services typically done by a traditional financial adviser. Simply put, they’re digital advisers that automatically build and manage your investment portfolio based on what’s going on in the market.

While they used to be a niche tool for tech-savvy investors, they’ve become mainstream over the past few years with newbie investors and high-net-worth traders alike using robo-advisors to help them with their investing.
Keep in mind, digital advice services are based more on building and maintaining a portfolio than providing strategic advice, so there will always be a place for traditional financial advisers.

While your robo-advisor rebalances your investments automatically, financial advisers provide a hands-on approach to helping you achieve your goals by taking your individual circumstances into account. Ultimately, the two – robo-advisors and real-life advisers – complement each other pretty well.
Humans vs robots: Which adviser is better?

How do robo-advisors work?

Unlike a traditional financial adviser, a robo-advisor isn’t influenced by emotion when making trades – it relies solely on algorithms and mathematical models to determine the right asset allocations for investors. Your robo-advisor can even focus on key priorities like automatic portfolio rebalancing or tax optimization.
They’re also much cheaper, with robo-advice available for as little as 1/10th of the cost of receiving advice the old-fashioned way.

But how does the service match you up with a portfolio?

  • Details. Provide your investment goals, investment time frame and appetite for risk so it can assess which portfolio you’ll be most comfortable with.
  • Review. The robo-advisor generates a recommended investment portfolio, which is usually based on exchange traded funds (ETFs). Review the portfolio and its terms and conditions to ensure you fully understand the risks of investing.
  • Invest. Once you’ve invested, the robo-advisor manages your portfolio and rebalances it whenever necessary to ensure it remains in line with your risk tolerance levels.

Compare robo-investing platforms in Canada

Name Product Minimum deposit to invest Funding methods Management fee Available asset types
Wealthsimple Invest
$1
Direct deposit, Bank transfer
0.40% - 0.50%
Stocks, Bonds, ETFs, Commodities
Get a $50 bonus when you open and fund your first Wealthsimple Invest account with a minimum initial deposit of at least $500. Trade and Cash accounts are not eligible.
CI Direct Investing (formerly WealthBar)
$1,000
Direct deposit, Bank transfer
0.35% - 0.60%
Mutual Funds, ETFs
CI Direct Investing offers access to an exclusive and personalized investment portfolio. Get up to $10,000 managed free for a year when you sign up for your first CI Direct Investing account and fund your account.
Justwealth
$5,000
Direct deposit, Bank transfer, Automatic bank withdrawals
0.50%
ETFs
Receive a cash bonus of $50.00-$500.00 when you open a new Justwealth account. RESP accounts require no minimum deposit to begin investing.
Moka
$0
Automatic bank withdrawals
$3/month
ETFs
The Moka app rounds up every purchase you make to the nearest dollar and invests the spare change into low-cost exchange-traded funds (ETFs).
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Compare up to 4 providers

How to compare robo-advisors

Just like when you’re shopping for a bank account, credit card or personal loan, you have some decisions to make when deciding on the best robo-advisor for your preferences and needs. Here are some factors to consider:

  • Management fees. These annual fees are what you pay to have your account managed by a robo-advisor and are usually calculated as a percentage of your invested assets. For example, if your fee is 0.20% each year, you’re on the hook for paying $20 on a $10,000 balance. Keep in mind, most Canadian robo-advisors will manage a maximum amount of assets for free, so pay attention to what these limitations are.
  • Expense ratios. These aren’t the same as your management fees. Expense ratios are paid to the investments your robo-advisor is using. ETFs, index funds and mutual funds all come with this charge.
  • Account types. When you do your research, you’ll notice some robo-advisors offer retirement accounts while others offer tax-free savings accounts, high-interest savings accounts and even niche accounts like a business account. Make sure the robo-advisors on your shortlist have the right accounts for you.
  • Account minimum. Keep an eye on the minimum amount you need to keep in your account, especially if you don’t have much to spare for saving and investing. Account maximums are also an important factor if you have a lot of cash for investing. If you’re starting out fresh, some advisers can manage your money with no minimum amount while robo-advisors that manage large investments often come with extra bells and whistles, including a dedicated financial adviser looking after your accounts.
  • Investment approach. Each robo-advisor has its own approach to how it builds and balances its portfolios. Do your homework to make sure it’s using methods that are based on research and that its portfolios are diversified. You can also check that it factors in your individual risk tolerance, time horizon and your overall financial goals.
  • Philosophy. Now that robo-advisors have saturated the market, you can even shop around looking for one that fits your lifestyle and ethos if you’re passionate about a cause. Some robo-advisors offer only socially responsible investment portfolios, and others focus solely on themes like fair labour, clean tech innovation, sustainability, animal welfare, equality and diversity. These are great options if you want to do good while making money.
  • Robot vs human advice. Some people want a robo-advisor doing all of the heavy lifting with their investing while others prefer the real-time wisdom of a live financial adviser. There is a middle ground if you’re looking for a robo-advisor that also provides access to a human adviser when needed either via online chat or email, but you’ll likely pay a bit more for this hybrid service.
  • Types of investment options. Most robo-advisors use ETFs and index funds, but if these don’t fit the bill for you, others provide a more customized approach to building your portfolio.
  • Special perks. Just as credit cards and banks have promotions for opening an account, robo-advisors also offer welcome bonuses and referrals throughout the year. For example, in some cases, you could receive cash for opening an account or your first $10,000 managed for free.
  • Security. In the vast majority of cases, robo-advisors and financial institutions in Canada are protected by the Canada Deposit Insurance Corporation so your investments are safe in case of bankruptcy. Plus, check to make sure your robo-advisor has state-of-the-art online security and up-to-date software encrypting your data.

Robo-advisors in Canada

The rise of robo-advice providers in Canada means that you have a number of options to choose from. Altogether, Canada’s robo-advisors manage around US$5.5 billion in assets (over CAD$7 billion), and the number is expected to grow dramatically over the next decade.

Here’s a quick rundown of the most popular robo-advisors in Canada, including the types of accounts they offer, their fees and strengths:

Wealthsimple

Wealthsimple is an all-Canadian company founded in 2014 and based in Toronto. It puts your money to work using modern portfolio theory, which minimizes risk and maximizes return by diversifying your investments.

  • Types of accounts available: RRSPs, TFSAs, RESPs, RRIFs, LIRAs, non-registered accounts, personal and joint or business savings accounts.
  • Available asset types: Stocks, bonds, ETFs and commodities.
  • Minimum deposit to invest: $1.
  • Management fees: https://www.finder.com/ca/modernadvisor-robo-advisor
  • Pros: Wealthsimple has mobile and desktop dashboards that are user-friendly, so you can track your progress and monitor your portfolio. It’s even won an award for being the world’s best financial website. It also claims you can get higher returns than savings accounts and standard investment options.
  • Cons: It’s online only, so you won’t be able to visit a branch or speak to customer service in person. You’ll also pay slightly higher management fees compared to other robo-advisors.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

CI Direct Investing

Formerly known as WealthBar, CI Direct Investing uses a low-risk long-term investment strategy where portfolios are typically balanced across a diverse range of stocks, bonds and real estate for the long term.

  • Types of accounts available: Individual, RRSPs, TFSAs, RESPs and RRIFs.
  • Available asset types: Mutual funds and ETFs.
  • Minimum deposit to invest: $1,000.
  • Management fees: 0.35% - 0.60%
  • Pros: CI Direct Investing is the only robo-advisor offering access to private investments for all investors. You’ll also gain access to unlimited financial advice, regardless of account size. It also provides socially responsible investing options.
  • Cons: CI Direct Investing operates online only, so you can’t visit a branch or speak to a financial adviser in person. It also comes with a minimum investment deposit of $1,000.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Justwealth

Justwealth was launched in Canada in 2016 by a top-calibre team of investment experts. It offers an expansive list of pre-built portfolios you can choose from to get started.

Types of portfolios offered: 70 different portfolio options, including tax-efficient portfolios, RESP target date portfolios, US dollar portfolios and income-generating portfolios.

  • Types of accounts available: RRSPs, spousal RRSPs, TFSAs, RESPs, locked-in retirement accounts, RRIFs and life income funds.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $5,000.
  • Management fees: 0.4% – 0.5%.
  • Pros: Justwealth offers up to 70 different portfolio options, including tax-efficient portfolios, RESP target date portfolios, US dollar portfolios and income-generating portfolios. You’ll also be able to request a portfolio review at any time to get a professional assessment of how your portfolio is performing.
  • Cons: You’ll need to have a minimum of $5,000 in your account to start investing. You also won’t be able to move funds around in your portfolio manually since all of Justwealth’s options contain a specific designation of ETFs.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Moka

Moka invests your spare change. Each time you use your debit or credit card, Moka will round up the amount to the nearest dollar and apply the extra change to your investments. Over the course of a year or years, these savings can really add up without you doing any heavy lifting.

  • 
Types of accounts available: Non-registered accounts, RRSPs and TFSAs.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $0.
  • Management fees: $3 a month, no matter how much your investment amount is.
  • Pros: There’s no minimum amount required to start investing with Moka, and you can access your savings with free, next-day withdrawals at no extra cost. There may be a penalty for withdrawing from RRSPs in some cases.
  • Cons: Your money is invested only in a set of predetermined ETFs based on your risk preference, meaning you don’t get to pick the stocks or bonds that go into your portfolio.
  • Minimum age to open account: You need to be at least $3 years old or the age of majority in your province or territory.

BMO Smartfolio

BMO Smartfolio is the digital investment platform operated by the Bank of Montreal. It uses a semi-automated mix of specialized algorithms and expert portfolio managers to help you make sound investment decisions.

  • Types of accounts available: Non-registered accounts, RRSPs, TFSAs, RESPs and RRIFs.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $1,000.
  • Management fees: 0.4%to 0.7%.
  • Pros: BMO Smartfolio is a great example of a hybrid model where you can sit back and relax while a robo-advisor does all the work for you; however, you can liaise with real advisers to make sure your portfolio stays balanced.
  • Cons: Since technology is doing the majority of the investment work, you’ll get less face-to-face time with a real-live adviser. It’s possible that you’ll have to go into a branch to verify your identity before you start investing.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Invisor

Invisor, founded in Oakville, Ont. in 2014, uses a proprietary portfolio construction methodology that takes into account your risk profile and how much you want to invest.

  • Types of accounts available: Non-registered accounts, RRSPs, spousal RRSPs, TFSAs, RESPs, locked-in retirement accounts, RRIFs and life income funds.
  • Available asset types: Low-cost mutual funds and ETFs.
  • Minimum deposit to invest: $1,000.
  • Management fees: A flat 0.5% management fee across the board on all accounts, no matter the account size.
  • Pros: On top of managing your investment portfolio, Invisor also offers a goal-planning tool called InvisorGPS where you can keep track of your investment goals both in the short and long term while also receiving expert analysis along the way.
  • Cons: Invisor is a very small company and there might be a delay in receiving support if you have issues or questions with your portfolio.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Nest Wealth

Nest Wealth’s robo-advisor is designed to make your money work for you by putting your investments into a custom package that’s tailored to fit your unique profile.

  • Types of accounts available: RRSPs, spousal RRSPs, TFSAs, RESPs, locked-in retirement accounts, RRIFs and life income funds.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $0.
  • Management fees: $20 for funds under $75,000, $40 for funds between $75,000 to $150,000 and $80 for $150,000+.
  • Pros: Nest Wealth’s flat fee is a double-edged sword, but it’s most beneficial for people with lots to invest. You’ll pay less in fees than you will with other providers when you have large amounts invested with Nest Wealth.
  • Cons: You’ll pay custodian fees between $7.99 - $9.99 per trade, though these fees are capped at $100 per year.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Questwealth

Questwealth’s robo-advisor is a low-fee alternative to traditional investing. It offers the potential for high returns by combining tech-driven investment recommendations with real-time advice from a team of skilled experts.

  • Types of accounts available: RRSPs, spousal RRSPs, TFSAs, RESPs, locked-in retirement accounts, RRIFs and life income funds.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $1,000.
  • Management fees: 0.20% – 0.25%.
  • Pros: Your account fees could be 50% lower than what you’ll pay with Canada’s big banks. Questwealth’s customer service team consists of over 100 agents who are just a phone call away so you can get real-time advice if needed.
  • Cons: You won’t be able to move funds in your portfolio manually, though you can call Questwealth’s customer service team to get assistance.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

RBC InvestEase

RBC InvestEase is an online investment platform that uses your personal data to help you make sound investment decisions. If you’re happy with the range of ETFs on offer, you can open your account online and transfer the money you want to invest into it.

  • Types of accounts available: Non-registered and registered accounts.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $100.
  • Management fees:0.5%.
  • Pros: You can pass your funds over and relax knowing that the RBC InvestEase will find the right investments for you. The investment process is monitored by real people, so you can feel safe knowing your account won’t slip through the cracks.
  • Cons: You’ll pay a large fee ($135+) if you want to transfer your money from your RBC InvestEase account to an investment account at another institution.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

ModernAdvisor

Based out of Vancouver, BC, ModernAdvisor’s portfolios are all tailored based on a person’s assessed risk tolerance and are put together by certified financial analysts (CFA), one of the highest designations in the investment industry.

  • Types of accounts available: Non-registered and registered accounts.
  • Available asset types: ETFs.
  • Minimum deposit to invest: $0.
  • Management fees: 0.35% - 0.50%.
  • Pros: There’s no pressure to sign up for an investment account with ModernAdvisor since you can try out the platform for free with $10,000 in “play money.”
  • Cons: ModernAdvisor is still relatively new to the robo-advisor scene and does not have the same established reputation as some of the other bigger players.
  • Minimum age to open account: You need to be at least 18 years old or the age of majority in your province or territory.

Pros and cons of robo-investing

Robo-advisors are an innovative way to invest your money, but like all new technologies, they come with their fair share of risks and advantages. Here’s a look at the pros and cons you need to be aware of when deciding on which robo-advice provider to use:

Benefits of robo-advisors

  • Low fees and minimum balances. Before the rise of robo-advisors, consumers relied solely on financial advisers and had to pay a pretty penny for this specialty advice. Investing was often synonymous with high-income earners but robo-advisors have changed the game, making it affordable for people to get into investing. Most robo-advisors charge a low annual fee – usually 1/10th the cost of receiving advice the old-fashioned way – and will even manage accounts as small as $1,000.
  • Easy to use. Banking has made major strides in the digital field, and robo-advisors are no exception. Robo-advice platforms offer a great user experience, making it easy for you to track your progress on an app or on your desktop, monitor your portfolio and even make changes to your accounts.
  • Creates a diversified portfolio based on your preferences. The vast majority of robo-advisors operate on the same premise: they’ll ask you about your investment goals, your appetite for risk and the time frame you have to work with. Based on your answers, they’ll build a portfolio that’s tailored to your needs.
  • Automatic rebalancing. If you prefer a hands-off approach to investing, robo-advisors are a great fit. You don’t have to do any monitoring because your robo-advisor will manage your portfolio and rebalance it whenever necessary to make sure it aligns with your risk tolerance levels.
  • Variety of accounts. Whether you’re setting aside savings for retirement, for your child’s education or for other short- and long-term financial goals, your account options are varied with robo-advisors. You can choose from non-registered accounts to a string of registered accounts, including RRSPs, RESPs, spousal RRSPs, LIRAs and RRIFs.
  • Niche investing. If you’re interested in ethical investing, robo-advisor platforms are also carving out niche areas like socially responsible investment portfolios focused on themes like fair labour, clean tech innovation, sustainability, animal welfare, equality and diversity.

What to watch out for

  • Your personal circumstances. While robo-advisors work based on complex algorithms, they’re missing a key component to the equation: your individual life circumstances. For example, you could be laid off at work or you could be trying to grow your family. Robo-advisors can’t add that personal touch and insight the way a financial adviser can.
  • Making changes to your account. While you can monitor your portfolio’s progress, in the majority of cases, you won’t be able to move funds manually. Instead, you may have to contact your robo-advisor via phone, email or chat to ask for adjustments.
  • Additional fees. From annual fees paid to your robo-advisor to expense ratios paid to cover ETF maintenance, additional charges can crop up. For example, you’ll have to pay a large fee upwards of $100 if you want to transfer your money from one financial institution to another robo-advisor platform.

Bottom line

Robo-advice is changing the face of wealth management and how it’s done around the world. It is a much more affordable and user-friendly way for you to look after your investments and to get into the investment game.

However, it’s your job to make sure you compare the features of different robo-advisors in Canada before choosing the right service for you. Ultimately, they’re a great tool to put your savings to work to earn you more money. Good luck!

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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