How to compare robo-advisors

Which automated 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 — which take advantage of modern technology to offer low-cost investment management services. In this guide we explain how robo-advisors work and how you can compare the services offered by different providers.

Name Product Minimum deposit to invest Funding methods Management fee Available asset types
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).
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-$225.00 when you open a new Justwealth account. RESP accounts require no minimum deposit to begin investing.
Wealthsimple
$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.
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Compare up to 4 providers

What is a robo-advisor?

A robo-advisor uses complex algorithms and technology to perform many of the same services as a traditional financial adviser. These digital advisers can provide financial plans to consumers and automatically manage their investments.

Robo-advisors usually invest in Exchange-Traded Funds (ETFs), which are like mutual funds in that each fund holds a variety of securities spread across a range of businesses interests. However, ETFs trade like stocks on the stock market, rather than being bought and sold in pieces like shares of a mutual fund. Because ETFs exist in large variety and are often created by index-based formulas instead of by manual curation, they provide a relatively easy and inexpensive way to automate the investing process.

Digital advice services are based more on building and maintaining a portfolio than providing strategic advice, so there will still be a place for traditional financial advisers in the future – in fact, the advantages the technology presents could be very useful tools for financial advisers.

Humans vs. robots: Which adviser is better?

How does a robo-advisor 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. They’re also much cheaper, with robo advice available for as little as 1/10 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.

The rise of robo advice

The robo advice revolution has its origins in the US financial crisis of 2008 when the first robo-advising company, Betterment, was launched. However, Betterment didn’t begin receiving money from investors until 2010.

The movement didn’t spread to Canada until 2014 when WealthBar launched as the first full-service robo-advisor in the country. Since then, companies like Wealthsimple, Nest Wealth and JustWealth have enjoyed enormous success.

Canada’s big banks have even started to get in on the action, with BMO launching Smartfolio, a hybrid investment service that makes use of automated processes supervised by professional human advisors. RBC has similarly launched InvestEase, which offers robo-advising services as well as support from accredited portfolio advisors.

Altogether, Canada’s robo-advisors manage around $5.5 billion USD in assets (over $7 billion CAD), and the number is expected to grow dramatically over the next decade. We’ve profiled and compared the established players below to help you find the best investment service for you.

Other services

As mentioned, big banks like BMO and RBC have also moved into the robo advice sector. To align with portfolios that best suit your needs, you’re typically screened with questions about your current financial situation and future goals before being provided with customized advice and assessment.

Robotic hand using a computer mouse

How do I sign up to a robo advice service?

The signup process differs between robo-advisors, but you’ll generally need to follow these steps:

  1. Provide your name, contact details and proof of identity.
  2. Complete a questionnaire regarding your investment time frame and your tolerance for withstanding market fluctuations.
  3. The robo-advisor generates a recommended investment portfolio.
  4. If you’re happy with the portfolio, you can proceed with the recommended strategy.
  5. Provide your bank account details to fund the investment.
  6. The robo-advisor invests your money in the chosen portfolio, monitors the account and then makes adjustments to satisfy your tolerance for risk.

Robo advice may change the face of wealth management around the world by offering a more affordable way for you to look after your investments. However, make sure you compare the benefits and features of the different robo-advisors before choosing the right service for you.

Alternative investment classes

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 comes with a higher risk of losing money rapidly due to leverage. 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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