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Fund giant Invesco Canada finds way into robo-adviser space

A Bay Street sign, a symbol of Canada's economic markets and where main financial institutions are located, is seen in Toronto, May 1, 2013.

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Invesco Canada Ltd., one of the country's largest mutual-fund providers is keeping with the times in launching a robo-adviser tool that will help wealth-management firms and their advisers bring digital advice to Canadian investors.

"The wealth-management industry is undergoing massive change due to new technologies and proposed regulations, and one of our global priorities as an organization is to help advisers navigate this rapidly changing environment," Peter Intraligi, president of Invesco Canada, said in a statement.

Robo-advisers – also known as online portfolio managers or digital advisers – have recently gained traction in the Canadian financial landscape. Over the past five years, the total number of providers has jumped from only a handful in 2012 to more than 15 registered platforms today.

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The new platform, titled advisorDUO, has similar capabilities to a traditional robo-adviser, where clients are able to sign up for accounts digitally and receive a recommended portfolio based on risk tolerance and investment goals.

Unlike other platforms, Invesco's offering is only being rolled out to mutual-fund dealers to use exclusively with their financial advisers. Investment firms must sign an agreement with Invesco in order for their advisers to gain access to the platform. The platform doesn't deal directly with individual investors. Already, there are seven mutual-fund firms signed up to pilot the platform, including Sterling Mutuals Inc., an investment firm in Windsor, Ont., that has over 250 advisers.

"AdvisorDUO has the potential to be a game changer for us," said Nelson Cheng, chief executive of Sterling Mutuals. "It has the capacity to increase the reach and productivity of our advisers while enabling us to benefit from how an ever-increasing number of investors prefer to work with a financial adviser."

The platform will allow Invesco to strengthen its relationships with mutual-fund firms – and their financial advisers – during a time when competition continues to emerge for asset managers, leaving many independent dealers having to think outside the box for distribution access.

"Investors and their advisers are looking for solutions that meet their evolving needs – enriching the client experience while improving the adviser's practice efficiency," said Andrew Manning, head of marketing for Invesco Canada. "Built and designed using Invesco's in-house digital expertise, advisorDUO maintains the adviser-investor link, with the intent of increasing the competitiveness of financial advisory firms and allowing advisers to serve clients in the way they wish to be serviced."

Another difference with conventional robo-advisers is that Invesco's platform provides investors access to exchange-traded fund products through five mutual fund "fund-of-fund" portfolios. The majority of robo-advisers recommend portfolios that are predominately made up of individual ETFs.

Invesco is well known on the Street for both its mutual fund and ETF lineups, with assets under management of $40-billion. The company was one of the first mutual-fund companies to enter the ETF industry in 2009, and now has $8.6-billion invested in its PowerShares ETF products, as of Oct. 31.

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The platform recommends one of five fund-of-fund Invesco Target Risk Portfolios. Each portfolio provides investors exposure to Invesco's Powershare ETFs, as well as ETFs from rivals Vanguard and BlackRock Canada. Portfolio management fees for fee-based accounts range from 0.41 per cent to 0.51 per cent, while the adviser series ranges from 1.41 per cent to 1.51 per cent. These fees include all underlying ETF fees, and are competitive compared with stand-alone mutual funds, which can have fees ranging from 1.5 per cent to 2.5 per cent.

Many traditional robo-adviser platforms are starting to partner with investment firms, offering hybrid models, discounted pricing for adviser accounts or licensing agreements of their proprietary technology.

For firms, digital partnerships are enticing as they eliminate burdensome paperwork during account openings and minimizes administrative costs.

But the ability to maintain client assets in house and under their administration was a big draw for Sterling's Mr. Cheng.

"With other digital platforms we looked at, we would have to sign a referral agreement and then the assets are 'off book' and the client no longer belongs to the dealer," says Mr. Cheng. "The other firm can do whatever they want and the dealer can't do anything about it. That was not a route we wanted to take."

While some industry watchers say yes, there’s growing evidence that investors still want that human touch – even while adopting more digital tools.
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