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The logo for the Bank of Montreal is seen at its branch in Toronto. Wealthsimple says that among major financial institutions, Bank of Montreal has the slowest transfer time – 24 days. However, BMO disputes the figure. (Mark Blinch/Reuters)
The logo for the Bank of Montreal is seen at its branch in Toronto. Wealthsimple says that among major financial institutions, Bank of Montreal has the slowest transfer time – 24 days. However, BMO disputes the figure. (Mark Blinch/Reuters)

Transfer times thwart robo-advisers Add to ...

The popularity of robo-advisers is on the rise in Canada, but some companies say slow transfer times are creating an impediment to their business model, which touts efficiency and speed through online methods.

According to Canadian robo-adviser firm Wealthsimple, it takes an average of 18 days for a financial institution to transfer over clients’ funds after receiving the request. There’s also an average transfer fee of $101.

The data, provided by Wealthsimple, looked at 1,667 transfer requests processed by the Toronto-based firm from March, 2016, to the end of July, 2016. It then ranked the relinquishing financial institutions from longest to slowest in terms of days it took for the transfer of funds to be completed.

Read more: Endangered: Why Canada’s investment advisers face a grim future

Read more: Millennials: Here’s how a robo-adviser compares to a traditional one

Read more: Robo-advisers face new rival as the cheapest place to get investing advice

The fact that the amount of time for a transfer takes days and not minutes is an issue in an industry that prides itself on technology and speed, says Jason Goldlist, general manager at Wealthsimple.

“It leads to not delivering the client experience that the fintech is trying to provide,” he says. “They’ve made a decision to trust our company and now’s the time where we want to be extremely efficient with them and yet it’s the relinquishing institution that needs to take action and they’re dragging their feet.”

Wealthsimple says that among major financial institutions, Bank of Montreal has the slowest transfer time – 24 days. However, BMO disputes the figure.

“The data indicating a 24-day transfer time for funds from BMO does not reflect what our internal data and client experience over time tell us,” BMO said in an e-mailed statement, saying their data show transfer times are under 10 business days.

“BMO and the other financial institutions it transacts with together play a role in the timely transfer of funds between our respective institutions – both in the sending and the receiving of the funds – and would require further specifics on the transfers referenced.”

Wealthsimple counters that the banks often start measuring their transfer times from the moment they begin processing a request, not when the original request was made.

According to Wealthsimple’s data, Scotiabank had the second-longest transfer time, 21 days. In a statement, Scotiabank said that during the time period measured, they experienced a temporary slowdown of service.

“Our usual turnaround time is under 10 days. During the period in question, ScotiaMcLeod was undergoing changes to its operating model, which unfortunately resulted in slower than usual turnaround times. We acknowledge that time frame was unacceptably slow, and not an accurate reflection of our desired service level.”

Randy Cass, founder of robo-adviser firm Nest Wealth, says his company has also experienced issues with slow transfer times, but they’ve improved substantially since investing in better internal systems and technology to speed up the process on their end. For them, the average transfer time is 12 days. “We recognized this was an issue a year and a half ago and have spent a lot of time and effort to get it to the point where we feel we are now where transfer times are coming down.”

Mr. Cass says the reason for the lagging transfers is that banks’ systems weren’t built for this sort of disruption. “It has not been a system built to facilitate the quick and rapid movement of money away from a financial institution.”

Mr. Goldlist says the slow transfer times are partly the result of archaic systems. “Banks that you would think are most innovative are doing things like rejecting e-signatures,” he says.

It significantly slows down the process, according to Mr. Goldlist. “What’s the advantage of them functioning quickly? There is no advantage,” he says.

Banks are also attempting to move into the fintech space. Earlier this year, Bank of Montreal launched its own online portfolio manager, known as SmartFolio, becoming the first Canadian bank to launch its own robo-adviser.

Regulations regarding transfer times are cloudy. Members of the Investment Industry Regulatory Organization of Canada (IIROC) are required to transfer assets over within 10 business days from receipt. But for banks and companies regulated by the Mutual Fund Dealers Association of Canada (MFDA), there’s only “a reasonable time frame upon receipt of satisfactory transfer out requests,” and the industry standard is generally within 30 days.

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