Robo-advisors are automated investing programs that manage financial assets on behalf of investors. This automated investing is very easy to do; the major concern is where to begin.
Even though the whole process looks like a cloudy mirage, automated algorithms have been managing people’s assets profitably for years now, and today, an increasing number of Canadians are clinging to it.
Factually, your concern should only be geared towards picking a Robo-advisor because you’ve got a whole spectrum of them out there. Here, we have garnered an updated roadmap that highlights the benefits and downsides of popular Canadian Robo-advisors to steer you to the right pick.
What operational techniques do Robo-advisors employ?
First of all — the basics. In simple terms, Robo-advisors are sophisticated technological programs that automate financial assets and base users’ investments decisions on their financial goals and intensity of risk acceptance.
Robo-advisors split investors’ funds between an array of ETFs like Equity Trust Funds and Fixed-income Investments employing suitable modalities and calculated levels of risk acceptance. The investments that are expected to yield much usually absorb larger risks.
Classification of the portfolios Robo-advisor dealings comprises RESPs, and TFSAs, alongside RRSPs, and many more.
What does it take to create an account with a Robo-advisor?
Robo-advisors present seamless conditions for account registration. You only need to respond to certain personal inquiries depending on their risk acceptance intensity. You then add your bank account and affirm the sum you would like to put in.
Once the phase is completed, Robo-advisor then sorts the selection and performs an automated rebalancing of your investment subject to the prevailing situation in the market.
How to benefit from using Robo-advisors?
Small fees are one of the key points. Unlike the conventional fund managers’ yearly fee of 2% to 3%, every Robo-advisor proffers relatively low charges around 0.02% to 1.0% of your full investment, and most times, stock trading doesn’t attract commission.
With Robo-advisors, investors who have inquiries, questions, or concerns have the privilege to reach out to a professional support team without delay seamlessly.
What is the level of security on investments?
Robo-advisors offer strong security for your funds, as with human managers. In Canada, all Robo-advisors are seen as portfolio managers complying with fiduciary standards, which stipulate placing clients’ interests as their topmost priority.
Having joined the Canadian Investors Protection Fund and Organization that regulate investments in Canada, there is a clear expression of risk involvement on investments as well as protection up to $1million in case your Robo-advisor liquidates or files for bankruptcy.
What should I look out for when I decide to try out Canadian Robo-advisors?
Before drawing up your conclusion, endeavor to consider answering the questions outlined below.
- What investment amount are you scheduling to begin with?
- How much are you considering paying as charges?
- Do you prefer some socially responsible investments (SRI) that center on ethical companies and funds with optimistic influence, investment through a flexible account like TFSA, or customized investment such as Registered Retirement Savings Plans or Registered Education Savings Plans?
Familiarizing with these compartmentalized financial assets influences and weak points will fortify you with routes to making the right investment move.
Best Robo-advisors available in 2021
Now — let’s take a look at the options in better detail.
Wealthsimple
Wealthsimple operates three EFT portfolios with consideration of your risk acceptance intensity.
- The first portfolio is called Growth- it houses 75% to 90% for equity and 10% to 25% for fixed income;
- The second portfolio is known as Balanced — it projects a 50% to 65% lodge for equity and 35% to 50% for fixed income;
- The third portfolio is labeled Conservative — it offers 30% to 40% for equity and 60% to 70% for fixed income.
Investment options you can pact with Wealthsimple accounts is Registered Retirement Savings Plans and Registered Retirement Income Funds. There is also room for Tax-Free Savings Accounts, Registered Education Savings Plans, and Locked-In Retirement Accounts.
Wealthsimple has special account plans, business/corporation, personal/individual, and joint/partnership. Another option on Wealthsimple allows customized portfolios employing Socially Responsible and Halal investments
Service charge structure
- 0.5% on initial investment worth $99,999
- 0.4% on investment from $100,000 to $500,000
- 0.4% on any amount higher than $500,000 and right to special bonuses and price cut
All portfolio funds provider initiates a fee labeled Management Expense Ratio (MER).
Wealthsimple’s operation mode does not alter your account with MER deductions but modifies your ETF prices to accommodate the fees. MERs proposition stands around 0.2% of your annual investments.
Pros
Wealthsimple has enormous human and professional experience, selecting investment alternatives, including categories based on your preferred financial thoughts. No restriction on account amount, low fees for the new financier.
Cons
Large investors might witness a rise in service charge, limited portfolio options.
Questwealth Portfolios
Queenwealth portfolio is a Robo-advisor service under the watch of Questrade Wealth Management. The financial institution doubles as a Canadian leading autonomous brokerage establishment. The brand offers dual portfolio management where Robo operates the funding aspect, and professional advisers intervene when there are fluctuations on the stock board.
Questwealth also gives experienced users alternatives to choose individual stocks in its markdown brokerage services.
Portfolio preferences
The available five EFT portfolios on Questwealth are designated using the investor’s level of risk acceptance.
- The foremost collection is called Aggressive — it houses 98% for equity and 2% for fixed income
- The second portfolio is known as Growth — it offers 80% for equity, and 20% for fixed income
- The third set is tagged Income — it postulates 40% for equity and 60% for fixed income
- The fourth portfolio is labeled Conservative — it holds for 20% for equity, and 80% for fixed income
There is also an avenue to customize your selection with Socially Responsible Investments.
The least account size: $1,000
Payment structure
- 0.25% on $99,999;
- 0.20% on an amount higher than $100,000.
Also, MERs stand between 0.11% and 0.23%, and Socially Responsible Investments are likely to surge between 0.21% and 0.35%.
Benefits
Low fees, numerous investment accounts selection, human involvement, Socially Responsible Investments options, and multiple investment alternatives for skilled investors.
Downsides
Least account size of $1,000, human involvement without authorization.
CI Direct investing
CI Direct investing (formerly known as Wealthbar) has been getting accolades from Canadians as far back as 2014. It runs low-fee investments and offers limitless admittance to professional financial guidance.
In 2019, CI Financial Corp took complete ownership of CI Direct investing, giving birth to galore investment opportunities for users. By the end of 2020, CI Direct investing was already hovering over investment over $500 million worth.
CI Direct investing employs a mixed active-passive replica where human portfolio managers do the fund construction and algorithms do the ETFs management. It also introduced distinct EFTs covering real estate to propagate robust investment diversification to its customers.
Portfolio preferences
CI Direct Investing provides five EFT portfolios with concentration to client’s level of risk acceptance:
- The first portfolio is called Aggressive — it allows 64.5% to equity, 25.5% to fixed income, and 10% for real estate;
- The second portfolio is known as Growth — it houses 55.5% for equity, 37% for fixed income, and 7.5% for real estate;
- The third portfolio is labeled Conservative — it postulates 33% for equity, 62% for fixed income, and 5% for real estate;
- The fourth portfolio is tagged Safety — it apportions 20% to equity, 75% to fixed income, and 5% to real estate.
A Socially Responsible Investment known as Cleantech is another investment option available on CI Direct Investing. Additionally, they operate four “private investment portfolios” unconventional investments exclusive to investors with $1million to safeguards your investment value from assumption and dire headlines.
Least account amount: $1,000
Payment structure
Waive payment for investment amount up to $10,000 as the first year special offer:
- 0.60% annually for an amount up to $150,000;
- 0.40% annually for an amount up to $500,000;
- 0.35% annually for an amount above $500,000.
Normal investments with CI Direct Investing are subjected to an MER of 0.16% to 0.26%.
Pros
With Cleantech, you are free to get customized portfolios, numerous investment options with private investment portfolios, and tools for finance schedules.
Cons
It places exorbitant fees on investment than some Robo-advisers, least account size of $1,000.
BMO SmartFolio
Canada’s foremost financial establishment blueprinted BMO SmartFolio, the Bank of Montreal (BMO). Although BMO is modeled to accommodate all interested Canadian investors, as things stand, most of its investors are customers of BMO.
SmartfFolio offers top-notch hybrid ETFs through the help of professional BMO fund managers. BMO professionals do personal rebalancing your investments up to four times annually with responsive live chat, email, or phone lines to address your questions, concerns, and complaints anytime.
Available investment options
BMO SmartFolio provides investors with a variety of five investments centered on the level of risk acceptance.
- The first group is called Equity Growth — it houses 90% for equity and 10% for fixed income;
- The second group is labeled Long Term growth — it apportions 70% to equity and 30% to fixed income;
- The third group is tagged Balanced — it assigns 50% to equity, 50% to fixed income;
- The fourth group is branded as Income — it rations 30% to equity and 70% to fixed income;
- The fifth group is Capital Preservation — allots10% to equity and 90% to fixed income.
SmartFolio deals with the following accounts-TFSAs, RRSPs, RESPs, RRIFs, and joint accounts. Also, it operates a platform with hassle-free funds accessibility and limitless contribution for a non-registered account.
Least account size — $1,000
Payment structure
0.7% on initial investment of $100,000, 0.6% on subsequent amount up to $150,000, 0.5% on subsequent investment of $250,000, 0.4% on investments above $500,000. In addition, it charges an MER of 0.2% to 0.35% is levied on portfolios on SmartFolio.
Pros
The Robo-adviser is under the umbrella of one of Canada’s foremost financial establishments with accessible proficient portfolio managers and financial advisers.
Cons
High service charge, the least amount is $1,000. You can still hit on low MERs with several competitors for similar portfolio management, and lastly, account options do not include Socially Responsible Investing.
RBC InvestEase
InvestEase is wheeled by the Royal Bank of Canada and happens to be Canada’s most recent Robo-advisor. It came on board in 2018 and merged with BlackRock assets Management Canada Limited in 2020 to launch RBC iShares. RBC iShares helms the management of most EFTs in Canada at 150.
InvestEase offers a seamless platform for users and leverage human portfolio advisers to give investors needed assistance.
Investment preferences
You can opt between standard and SR ETFs portfolios consisting of five options subject to your level of risk acceptance:
- The foremost portfolio is called Aggressive — it apportions 100% to equity;
- The second portfolio is labeled Growth — it distributes 70% to equity and 30% to fixed income;
- The third portfolio is tagged Balanced — it allocates 55% to equity and 45% to fixed income;
- The fourth portfolio is known as Conservative — it shares out 35% to equity and 65% to fixed income;
- The fifth portfolio is called Very Conservative — it apportions 20% for equity and 80% for fixed income.
RBC InvestEase holds the following account; TFSAs, RRSPs, and non-registered accounts.
The least account amount — $0, although the least amount for investment is $100.
Service charge structure
The two “Standard and Responsible” portfolios attract a flat fee of 0.5%
Also, MERs on InvestEase ETFs is between 0.18% and 0.30%
Benefits
Low service charge and MERs, Gets support from the largest bank in Canada, robust selection of ETFs investments, engagement of professional advisers.
Downsides
No price cut for larger investments, restricted account options (RESPs or LIRAs are not available)
How can a beginner get profit with Robo-advisors?
The above-listed Robo-advisors turn out to be a fraction of several others at the disposal of investors, endeavor to make findings of the rest, watch out for any concealed fees, and check users’ reviews to know the quality of their service and possible hiccups.
After evaluating the eminent options, new and experienced investors in Canada may go with Wealthsimple due to its enticing fee structure, variety of account options, low fee for lesser portfolios, and zero minimum balance requirements. It is even possible to test-run with a trivial amount to know the whole process works before major commitment.
Here is a special offer for MoneyWise readers with investments management of up to $10,000 without charges for a year. With little entry hurdles, autopilot investing is worth a try.