Robo-advisors:
Robo-advisors are a new and innovative technology, most being launched around 2014. Banks like BMO are also adopting this technology which suggests that they are here to stay.
Robo-advisors use a robot/algorithm to purchase and maintain a portfolio of ETFs based upon the information you submit to them with some human oversight mixed in. If that sounds scary it’s not, they have strict oversight by their management/compliance team and are regulated the same as other investment management firms. Most firms have experienced advisors employed to make the transition smooth and comfortable for new users. The actual investing strategy most if not all robo-advisors use is identical to the one you will be using if you decide to invest with ETFs on your own. This strategy outperforms human stock pickers more often than not, even the professionals!
The key feature of robo-advisors is that they purchase and rebalance your investments automatically. Tangerine’s funds do this too, but Robo-advisors cost ~0.4% less! You just sign-up, fill out your criteria, transfer your money in and let the robo-advisor do the work for you.
Robo-advisor firms charge you a fee on top of the actual ETF costs, so ensure when researching and comparing different firms you are looking at the total costs not just the management fee charged by the firm. Total annual costs will be around 0.6% to 1% depending on the firm you select and the amount of money you have invested with them.
The robo-advisor firms I suggest you take a look at are Justwealth and Questrade’s Portfolio IQ. Justwealth is one of the cheapest options with a total fee of ~0.7%. Justwealth currently has the largest selection of portfolios at 60+, most other firms have around 5-10. Questrade is a company that has been around much longer than other robo-advisors, but their platform “PortfolioIQ” charges more at ~1%. Questrade also uses a different strategy than other robo-advisor firms, incorporating what’s called “smart-beta” rather than just buying and holding index ETFs. Smart-beta is not fully researched yet to determine whether the extra cost is worth it. I would recommend Justwealth for those who are confident that they will never want to manage their own money. Otherwise PortfolioIQ is my recommendation due to it being super easy to switch to the self directed option at any time to save even more money!
Other robo-advisors worth mentioning: NestWealth, Invisor, ModernAdvisor, Wealthbar
Signing up for Questrade’s Portfolio IQ using this sign up-link will give you one free month of service. Be sure to select the managed option when signing up for Portfolio IQ not self-directed. Self-directed is for those who want to manage ETFs on their own.
Questrade Sign-up: https://login.questrade.com/join_questrade.aspx?refid=gbavvf02
If you decide on Justwealth by using the sign-up link below you will have a 6 month trial period where you are charged only HALF of their management fee. Depending on your assets this could mean savings of hundreds of dollars!
Justwealth Sign-up: https://www.justwealth.com/invest-it-forward
Both of the above sign up links directly support me financially and allow me to InvestItForward by reaching more Canadians.
Summary of Robo-advisors:
-There are many robo-advisor firms to choose from
-Robo-advisors automatically design, purchase, and balance your investment portfolio
-Robo-advisors commonly charge less than 1% overall
-The overall fees charged by robo-advisors are their management fee + ETF fees
-Suggested minimum account size of $5000
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Questrade sign-up link for free month of services →