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Factors to assess when thinking about automated advisories.

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What do online advisers do?

An online investment adviser, or robo-adviser, is a model of investing that automates portfolio management. It's not a robot, per se, but a model of investing that translates such things as your age, goals, appetite for risk and the amount of liquidity required into decision-making algorithms that dictate the investing strategy. They also provide automatic rebalancing, where your portfolio's blend of stocks and bonds is periodically brought back into line with your ideal mix.

How do they know what to invest in for me?

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Based on an individual risk assessment, which regulations require all advisers to administer, they invest clients' money into products that will allow them "to sleep at night," says Kyle Prevost, the owner of Youngandthrifty.ca, a financial blog for millennials. Often, automated advisories use model portfolios, depending on clients' risk profiles.

What kind of investments do they use?

Online advisers mainly use a passive investing approach, which consists of low-cost, broadly diversified exchange-traded funds. So a portfolio might include a Canadian equities ETF, an American equities ETF, an international equities ETF and investment-grade government and corporate bonds. Some may include exposure to real estate, often through real estate investment trusts, or REITs. "With the automated investing service it sticks to your plan thick and thin," says Robb Engen, co-founder of the Boomer and Echo financial blog and a fee-only financial planner. "So if I put in $200 it will allocate it to the four funds on its own and stick to the exact allocation that you decided upon early on. … I don't think the average investor would appreciate how much of a benefit that is. Take away the human emotion and decision and just go by the facts that you stated."

What are the fees?

Some robo-advisers charge between 0.3 and 0.7 per cent as a management or advisory fee (depending on portfolio size), while some of the larger companies charge a set fee in addition to the management cost. The fees are subtracted from any returns, often on a monthly basis, while trading commissions are a mixed bag. Some advisers include them in their management fees, while others charge anywhere from 1 cent per share to a flat fee of about $10.

Is my money safe?

Most of the major Canadian robo-advisers hold investments with a partner brokerage or bank, which are members of the Canadian Investor Protection Fund (CIPF). This fund provides protection for the investor in case the investment firm goes under.

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How do I interact with an online adviser?

Most interaction, such as filling out your initial profile, is online. Most companies also offer some human interaction. "They'll talk to you on your terms and maybe that's over Skype or a text message or through an app or a desktop platform," says Mr. Engen. This appeals to those investors who feel comfortable with technology and prefer not take the time to meet with an adviser face to face.

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