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automated investing: established players

As the established players facing new entrants into the portfolio management space, banks are uniquely placed to observe the evolving landscapeGiovanni Meroni/Getty Images/iStockphoto

Automated investing services, sometimes called robo-advisers, are slowly seeping into the Canadian marketplace. Among them are standalone offerings from new companies and services from more established firms.

Bringing automation to investing can make it easier, but it can just as easily lead to pitfalls. The Globe and Mail reached out to wealth management experts with Canadian banks about their views on these new services. These four responded.

Joanna Rotenberg, head of personal wealth management, Bank of Montreal

Our view of innovation is delivering things in new ways to get people where they want to go. People really want to digitally access their information wherever they want to be, and to get the benefit and comfort of professional portfolio management, and to do that at an affordable cost. We thought the idea of professional portfolio management, but simple digital access at an affordable rate, was really giving them the best of both worlds. Not overburdening them with complexity – that was a really important principle for us. If you put what we have with SmartFolio [the bank's digital portfolio management service] in the context of the broader tools that we offer, we also thought this would give them the broadest range of choice.

We call this robo-advising, but there's no robot. There's a professional portfolio management team. So I think as investors are contemplating their choices, they should be aware there's a living, breathing human team behind your portfolio [with SmartFolio]. I think the whole industry is going to learn so much about how clients' needs are evolving over time.

Andrew Turnbull, managing director and head of investor services, Canadian Imperial Bank of Commerce

I've spent a fair amount of time studying this space. What are our clients looking for? What are they doing, even outside of their financial affairs, that gives us insight into the client experience they're looking for? Our first conclusion was that this is a big, broad space and hard to define by one term. Second was that investors, both novice and experienced ones, are generally looking for a more engaging investing experience that provides more on-demand, real-time digital interaction. This behaviour, this need, transcends the spectrum of those who are advice-seeking to those who are more self-directed. They're looking at how they open their accounts, fund their accounts, check progress against their goals, how they access their accounts for tax documents and vital information – they want that available to them when they want it. They want to be more engaged in the experience of investing. Investors are looking to connect with somebody. There's a great discomfort – is there really just a robot managing this in the background? And they want to, at various points in their lives, based on different circumstances that occur in their lives, they want to be able to turn on that advice layer, and also be able to turn it off, in order to be able to address something that happens in a key moment.

It's about making sure, if you need it, that you've got a financial coach available, and making sure that your investment plan is aligned to your financial plan.

David Agnew, head, Royal Bank of Canada Wealth Management

In Canada, our high-net-worth and ultra-high-net-worth clients continue to tell us they value their wealth manager as the cornerstone of their relationship due to their knowledge of clients, expertise and advice, and ability to offer broader RBC capabilities. We are also investing in digitally enabling wealth managers to enhance their ability to serve clients and exploring our options to offer clients additional ways to invest with us.

Glen Gowland, senior vice-president and head of Canadian wealth management, Bank of Nova Scotia

Automated investing – or really, the rise of a much more digital approach – that's something I think is here to stay. How do you put more technology, convenience and tools at peoples' disposal so they can make better investment decisions? The important thing for an investor is how much advice they need, and when do they need it?

If you're going through a robo-type investment approach, the big thing to be aware of is that an adviser often provides context. You may have an investor who says, "Yes, I'm high-risk and understand volatility." But when you actually drill down and give them a frame of reference – if, over this time, markets dropped by 30 per cent, would you be able to sleep at night? – it depends on the comfort level of the investor. We look at it as a continuum of, "I can do it all myself at low cost," all the way to high-touch advice. Make sure you understand who's on the other side of the investment conversation you're having, whether it's digital or face-to-face. Obviously, the need for cybersecurity is very important. And make sure you're getting all the context for the decisions you're making. As more ways to invest come about, it's a great thing to have choice, but it becomes more important for the investor to choose which type of adviser they use.