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Why financial planner Shannon Lee Simmons is using a robo-adviser to invest her money

Shannon Lee Simmons is the author of the book Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life.

Shannon Lee Simmons is the owner of a Toronto financial-planning business that provides advice to a range of clients, especially women and millennials. She is recognizable to many Canadians as a personal-finance expert thanks to her regular appearances in the media, which include the CBC News Network (On the Money), the Cityline TV talk show, the Toronto Star (Money Makeover), BBC Capital and Coral TV (Money Awesomeness). She recently wrote the book Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life.

We asked Ms. Simmons how she invests and manages her own money.

How do you invest?

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I currently use a robo-advisory service. I don't have a lot of time to spend on do-it-yourself stock picking, and my investable assets don't qualify me as a high-net-worth client that a professional would be interested in taking on. So, a robo-adviser works for me. It lets me grow my nest egg with a low-fee, well-diversified portfolio that doesn't require much time to administer.

How does it work?

When I first set up the account online, I answered a survey that determined my appetite for risk. Then software algorithms suggested a number of exchange-traded funds [ETFs] to create a portfolio consistent with my target asset allocation, which is 25 per cent in fixed-income securities and 75 per cent in stocks.

What ETFs do you have?

In the fixed-income portion, I have ETFs tracking government, corporate, high-yield and other classes of bonds. In the equity portion, I have the [iShares S&P/TSX Capped Composite Index Fund for Canada], Vanguard Total Stock Market ETF for the United States and ETFs for other countries.

What happens after the portfolio is set up?

Once I set up monthly contributions from my bank, everything happens on its own. The contributions are spread over my ETFs. Dividends are reinvested. And my portfolio is automatically rebalanced by selling some units in ETFs that have performed well and become overweight, then using the proceeds to buy units in other ETFs that are underweight: this keeps the asset mix at my chosen risk level and takes the emotion out of investing.

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What about triggering capital-gains taxes when you rebalance?

Since I'm only invested in tax-sheltered accounts like TFSAs and RRSPs, I don't have to worry about the tax consequences of automatic rebalancing. If I had a non-registered account, I wouldn't use a robo-adviser at all so that I could control the tax-loss selling and rebalancing.

What are the costs of your robo-adviser?

The fees are really low, which I love. I pay the MER [management expense ratio] on the ETF holdings, which can range anywhere between 0.05 per cent to 0.55 per cent, and then an additional 0.5 per cent on top of that for the administration and rebalancing services.

What was your best move?

Not buying a house I can't afford. I long to own a home in Toronto, but I'd likely end up with a massive mortgage that would force me to live right at the financial edge. We rent still and it's allowed us to save money, even while paying thousands [of dollars] in child care. Hopefully, one day we can buy a home.

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Besides renting, how are you saving on living costs?

Right now, the biggest expenditure is child care. Since I run my own business, I don't have maternity leave, so I'm back at work part-time with a nine-month-old. Child care is so expensive, but we've managed to save a bit by sharing our caregiver with a neighbour. It's worked really well for both families.

Your recently published book, Worry-Free Money, had some advice for controlling spending – what were some of the main ideas?

Stop using traditional budgets. We feel like a failure every time we overspend in one category and end up "borrowing" from another. The only budget you actually need is something I call your hard limit: a line in the sand between the money you can and cannot spend each pay period.

The future of work for many of us is unknown. If you are overextended, you may be setting yourself up for a career filled with stress and anxiety. Keep lean.

After the bills are paid, there is only so much money left over. Save some of it and spend the rest on things that give you a high emotional "return on investment." Otherwise, you will always feel there is something missing and want to keep spending.

This interview has been edited and condensed.

Larry MacDonald is an economist, author and financial writer.

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