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In a financial industry dominated by six big banks, we have to nurture the newcomers to help them grow and thrive as an alternative.

That's the rationale behind The Globe and Mail Guide to Online Advisers, which are also known as robo-advisers. These firms started appearing a little more than a year ago to fill a need for investors who don't have or want a traditional investment adviser but don't feel confident running their own portfolios.

We now have at least nine of these in operation or coming soon, none of them a brand name that investors are likely to recognize.

The online adviser guide explains how these firms work and compares them in areas such as what they do, how much they charge and who owns them. Think of this as a first draft of a guide to an investing service that itself is in a first-draft phase.

Tell me what else you'd like to know about these firms and I'll consider incorporating it into the next version of the guide.

Who owns these firms?

Most are privately held independents with no ties to investment industry giants. Their shareholders tend to be company insiders and employees and, in some cases, venture capital firms. WealthSimple's shareholders include Power Financial, a big player in financial services and investing. Portfolio IQ and ShareOwner are owned by independent brokerage firms.

What exactly do online advisers do?

Two things, basically. One, they build portfolios that are attuned to the client's risk tolerance, goals and personal profile. Two, they provide rebalancing, where your portfolio blend of stocks and bonds is periodically brought back into line with your ideal mix. Some firms are more aggressive than others in that they rebalance whenever your mix is plus or minus 5 percentage points from your target. Others allow a drift of as much as 20 per cent, or rebalance on schedule, say every quarter.

A small number of online advisers offer more comprehensive financial planning, but the forte of these firms is really portfolio building and management.

What size account are they right for?

Many firms have no minimum, while at least $5,000 is usually required for others.

What kind of investments do they use?

Most portfolios are entirely based on exchange-traded funds, which are a low-cost version of mutual funds that trade like a stock. A minority of firms use mutual funds or pooled funds in addition to ETFs. Pooled funds are mutual funds designed for high-net-worth investors.

There are about 11 ETF firms active in the Canadian market, but you'll find a heavy emphasis on funds from Bank of Montreal, BlackRock's iShares lineup and Vanguard. In several categories, these firms are low-cost leaders.

Where mutual funds are used, they're lower-cost F-class funds designed for investors who pay advice fees directly to their adviser or firm (regular funds have adviser compensation embedded in their fees).

What are the fees?

There are three levels of fees to consider – advice fees, ownership cost for the investments held in client portfolios and the stock-trading commissions associated with buying and selling ETFs.

Advice: These fees may start around 0.5 to 0.7 per cent annually for small accounts and decline as your portfolio crosses thresholds like $250,000, $500,000 and $1-million.

Fund fees: You don't pay these directly – they're taken off the top of ETF and mutual fund returns (net returns are what you see reported). The ETF portfolios used by online advisers have average fees in the area of 0.25 per cent for the most part.

Trading commissions: Some firms include these in their advice fees, others charge clients amounts ranging from 1 cent per share to a flat $10 or so.

The total cost of using an online adviser is the advice fee plus fund fees plus trading fees, if any. As a rough estimate, an investor with $50,000 might pay total fees of $375 to $500 per year, or 0.75 to 1 per cent.

How are fees paid?

They're taken from the cash in client accounts on a monthly or quarterly basis. Firms will keep enough cash in client accounts to pay fees.

What do online adviser portfolios look like?

Most keep the number of ETFs and funds down to seven or so. The basic investment categories are investment-grade government and corporate bonds and Canadian, U.S. and international stocks. That's really all you need, but some firms add high-yield and real-return bonds, emerging market stocks and exposure to real estate, often through real estate investment trusts, or REITs.

How are online advisers regulated?

Most firms are registered with provincial securities regulators as a portfolio manager, a recognized designation with specific requirements. For example, people providing advice to clients must have earned a senior investment industry designation such as the Chartered Financial Analyst (CFA) or Chartered Investment Manager (CIM), and have industry experience. Portfolio managers also work to a fiduciary standard, which means the interests of clients come first. Many investment advisers are not fiduciaries.

Do online advisers have relationships with ETF firms?

In a few cases. Example: One of the people advising WealthSimple is Som Seif, CEO of Purpose Investments. Two Purpose ETFs are used in WealthSimple portfolios. Mr. Seif's wife, Kerry Seif, is a director of WealthSimple and an investor in the firm.

What if I receive bad advice that costs me money?

As portfolio managers, online advisers are part of the independent Ombudsman for Banking Services and Investments (OBSI). If an online adviser does not resolve a dispute to your satisfaction, you could ask OBSI to consider your case and see if compensation is warranted.

Where are online advisers available?

A few firms are registered to do business in all provinces and territories, but some are focusing for now on Ontario, Alberta and British Columbia.

How do I interact with an online adviser?

You will interact online for the most part, describing yourself and your risk tolerance by filling out a questionnaire. Your details are then considered by staff who select an appropriate portfolio, usually from a list of pre-fab model portfolios. The low fees of online advisers are based on automation, not a personal touch. Still, it's possible to speak to a human in most cases via some combination of phone, e-mail, online chat or video call like Skype.

Who exactly holds my money?

Most firms don't hold the investments and cash in your account. Instead, your assets sit in an account held at a third-party custodian, typically a brokerage firm. These brokers are members of the Canadian Investment Protection Fund (CIPF), which provides up to $1-million in coverage in case of investment firm insolvency.

To download a printable spreadsheet of The Globe and Mail Guide to Online Advisers, click here.

The Globe and Mail Guide to Online Advisers