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A client of the robo-advisory Nest Wealth with a $500,000 account pays a management cost of about 0.2 per cent annually. By comparison, a private wealth firm might charge 1 per cent a year.Olivier Le Moal/The Globe and Mail

Robo-advisors are often considered a good fit for tech-savvy millennials with small accounts. But whether they are a good fit for high-net-worth investors is open to debate.

On one side, industry professionals, managing high-net-worth clients the traditional way, argue that nothing can replace the high-touch, high-value service a real – ahem, human – wealth advisor can provide.

Yet fintech proponents argue that digital wealth-management platforms provide straightforward, low-fee investment strategies that are good for the bottom lines of wealthy and average investors alike.

Wealth advisor Susan Latremoille, who falls into the former camp, says robo-advisors are really putting a fintech spin on an old idea. "As much as there is all this hoopla behind it, the investment solution robo-advisors offer is not that new," says the director of wealth management at the Latremoille Group with Richardson GMP, based in Toronto.

Digital wealth-management platforms essentially build portfolios based on how clients answer a handful of questions regarding their financial goals and investment risk tolerance. Robos then determine the asset allocation for a basket of ETFs, placing investors' portfolios on an "efficiency frontier, which really means a sweet spot for risk and return."

The industry has been doing this for some time, she says, with "mutual fund wrap-account solutions starting back in the '80s."

Instead of mutual funds, however, robos invest in ETFs, which have much lower fees and use an online platform to provide basic advice rather than the traditional client-advisor model.

But Ms. Latremoille says high-net-worth clients generally require more than efficient, low-cost portfolio management. "Having been in the wealth business for the last 35 years, I can tell you wealth brings complexity, and complexity begs for nuanced advice."

Nonetheless, high-net-worth investors are using robo-advisory services, including Toronto-based Nest Wealth, which caters to more established investors. "Nest Wealth has a customer base with the highest average account size of any digital advisor globally," says its chief executive officer, Randy Cass.

While the company's average client account is about $175,000, several of its investors do have accounts of $1-million or more.

"We are 100 per cent in the camp that digital advisor platforms are as applicable if not even more applicable for high-net-worth individuals of an older demographic than simply being for millennials," Mr. Cass says.

That's because robos' low-fee structure ensures that management costs make up an increasingly small percentage of total assets as a portfolio grows. "We charge a fixed monthly fee, so people who hold million-dollar accounts are charged $80 a month and will never get charged more regardless of how large their account gets."

Yet traditional wealth managers say the advice they provide for high-net-worth individuals extends beyond portfolio management to areas such as taxes, estate planning and philanthropy. And they point out that buying a property, for instance, or rebalancing a portfolio can have an impact on other aspects of their financial lives.

"All of the pieces of the spaghetti on the plate touch each other, so to speak," says Tom McCullough, chairman and CEO of Northwood Family Office in Toronto, which works with Canadian families of $10-million of net worth or more.

"Some needs can indeed be met with fintech tools, but the judgment and insight from knowing what other families have done – and the pros and cons of each – require the counsel of an experienced wealth professional."

Even Mr. Cass of Nest Wealth concedes that robo-advisories fall short regarding estate and tax planning, but he argues they aren't designed for those roles. Rather, robos are primarily built to offer efficient, low-fee portfolio management. Investors can then seek out and pay for tax and estate planning advice elsewhere, and in turn have a better understanding of what they are paying for each service rather than paying one flat fee for many services – and possibly paying too much.

"High-net-worth Canadians are wrestling with this right now," he adds. "They are asking, 'What value am I getting from wealth management services?' and 'How much should I be paying for them?' "

With robos, they know exactly what they are paying. For example, a Nest Wealth client with a $500,000 account pays a management cost of about 0.2 per cent annually. By comparison, a private wealth firm might charge 1 per cent a year.

Yet that higher fee generally buys more than just portfolio management, Ms. Latremoille says. "It would cover everything they could ever need or want when it comes to their wealth." Among the services, for example, are financial planning and co-ordinating tax and estate planning with other professionals, she adds.

Still, even traditional wealth-management firms are increasingly automating their practices with robo-like innovations, Mr. McCullough says. "Anything we can do that saves us time to spend more of it serving clients at the other end is positive."

While fintech can manage statement updating and reporting, and even automatically rebalance portfolios, "there's still a need for a human being at the front end in the client relationship," he adds.

As digital advisory services continue to evolve, however, many traditional firms charging high-net-worth clients thousands, if not tens of thousands, of dollars annually in fees will be increasingly called upon to show where they add value.

"If you're an advisor who can demonstrate that, then you're fine," Mr. Cass says. "But if you're an advisor who has gotten by, hiding behind the opaqueness of a fee structure, those days are coming to an end."