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Robo-advisors are automated financial services that manage your portfolio based on parameters you set, such as your financial goals, time frame, industry and sector, environmental impact and more.
You don’t have to worry about selecting an individual investment because robo-advisors typically come with pre-built portfolios that hold multiple exchange-traded funds (ETFs), stocks, bonds or cryptocurrencies. This makes robo-advisors worth considering, especially for those who don’t have time to choose investments themselves.
One of the most established robo-advisors on the market, Wealthsimple Invest offers a lot of perks including no minimum deposit requirement, many accounts to choose from, tax-loss harvesting and socially responsible investment options (including Halal investments).
Wealthsimple Invest is a robo-advisor offering access to 3 different account levels: Wealthsimple Basic, Wealthsimple Black and Wealthsimple Generation.
Pros
Wealthsimple Invest claims you can get higher returns than savings accounts and standard investments.
Optional one-on-one support from financial experts
Open a Basic account with as little as $1
Socially responsible investment options
Cons
Fully online, so you can’t visit a branch or get in-person service.
Slightly higher management fees (0.40%–0.50%) than other robo-advisors
Black and Generation accounts, which come with lower management fees and other perks, require at least $100,000 and $500,000.
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.
CI Direct Investing uses a low-risk long-term investment strategy, balancing portfolios with a diverse range of stocks, bonds and real estate to promote long-term growth, reduce losses and generate cashflow.
Pros
If you transfer over $5,000 from an existing account to your CI Direct Investing account, you’ll be reimbursed for any transfer fees charged by your current institution up to a maximum of $150.
Choose between an ETF or Private Investment portfolio, and personalize depending on your investment amount and risk level.
If you don’t have $1,000 to invest, you can contribute small portions to an account. Funds will automatically be invested once you reach $1,000.
Cons
$1,000 minimum deposit
Fully online, so you can’t visit a branch or get in-person service
Fees range from 0.35% - 0.60% depending on your deposit. To get the lowest fees, you’ll need to invest at least $500,000.
Justwealth robo-advisor offers an expansive list of pre-designed portfolios. Once you input detailed information about your savings goals and risk appetite, you’ll be matched with a portfolio that meets your needs and budget.
You’ll also work with a portfolio manager to purchase investments. Every portfolio includes a basket of exchange traded funds (ETFs), which are similar to mutual funds except with lower fees. So, you’ll spend much less to manage your account than if you went with a typical mutual fund broker.
Pros
Many different portfolios including tax-optimized, US currency and income-generating accounts
Request a complimentary portfolio review from a financial professional at any time
RESP accounts require no minimum deposit to begin investing.
Cons
$5,000 minimum deposit
Fully online, so you can’t visit a branch or get in-person service
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).. Take advantage of features including automatic roundups, multipliers, recurring deposits and one-time boosts
Pros
Moka‘s cashback Perks Program for monthly subscribers offers exclusive monthly deals and discounts with brands like UberEats, Apple Music, Footlocker, and more.
Chat with Moka advisors in real time through the app
Access your earnings at no extra cost with free, next-day withdrawals
Cons
Pay a monthly fee of $4.99 plus 0.05% - 0.37% for regular portfolios and 0.20% - 0.60% for SRI portfolios
Fully online, so you can’t visit a branch or get in-person service
Questwealth Portfolios (by Questrade) offers many account types and low fees ranging from 0.20% - 0.25%. Portfolios are actively managed and dynamically rebalanced according to market conditions.
Plus, you can qualify for lower fees by linking your account with accounts held by your close friends and family members.
Pros
Low fee of 0.20% - 0.25%
Professionals are available to adjust your portfolio, which can help reduce risk and maximize gains
As an affiliate you get $25 for every friend who opens an account. Get $50 bonus for every third referral.
Cons
Fully online, so you can’t visit a branch or get in-person service
To find the best robo-advisor for your situation, here’s what to consider:
Fees. Percentage-based fees may be more advantageous for smaller portfolios, while flat fees are more likely to benefit large portfolios.
Human support. Those new to investing may feel uncomfortable leaving their money in the hands of a digital algorithm. If that’s the case, seek a platform that offers human customer support.
Tax-optimization. Some robo-advisors offer tax-loss harvesting, a feature designed to lessen the impact of capital gains tax. But not all advisors are equipped with this feature.
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Are robo-advisors worth it?
If you don’t have the time to research individual companies and don’t want to invest in a single index ETF that tracks a major index like the S&P 500 or Nasdaq, robo-advisors are definitely worth considering. Robo-advising fees are low or on par with single index ETFs, and you don’t have to worry about rebalancing your portfolio.
Some robo-advisors even do the tax-loss harvesting for you, which can be valuable to investors who make more than $40,000 annually.
Who is a robo-advisor best for?
Robo-advisors are best for hands-off investors who want to grow their wealth but don’t want to actively manage their portfolios.
Robo-advisors are also a solid pick for beginners exploring their investment options for the first time. If you’re hesitant to enter the market, a robo-advisor can provide the support and guidance you need to start learning the ropes.
Bottom line
Robo-advisors are financial services that manage your portfolio based on your set parameters.
Once you input your financial goals, risk and other relevant data, a computer algorithm will allocate your funds and constantly rebalance your portfolio.
Most robo-advisors come with an annual fee, typically as a percentage of your portfolio, and have certain investment minimums. Make sure you compare robo-advisors before you invest your funds.
Robo-advisors can be a good idea for investors who don't have the time to research and select individual companies to invest in.
Robo-advisors are easy to set up, some even provide tax-loss harvesting and you don't have to log in daily to make changes. The computer algorithm behind the robo-advisor does all the work for you.
The lack of human interaction and flexibility are the main disadvantages of robo-advisors. You don't get to consult with human professionals — although some robo-advisor companies offer this feature (possibly for a fee) — and you can't swiftly change your investment options as you would with individual stocks.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, 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 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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Kliment Dukovski is a personal finance writer at Finder, specializing in investments and cryptocurrency. He's written more than 700 articles to help readers compare the best trading platforms, understand complex investment terms and find the best credit cards for their needs. His expert commentary has been featured in such digital publications as Fox Business, MSN Money and MediaFeed. He’s also well-versed in money transfers, home loans and more — breaking down these topics into simple concepts anyone can understand. In another life, Kliment ghostwrote guides and articles on foreign exchange, stock market trading and cryptocurrencies.
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