After working for 23 years on Bay Street, former bank executive Tuula Jalasjaa is tackling financial literacy for female investors by launching the country’s first robo-adviser platform for women.
Smart Money for Her – a digital online portfolio manager – is an investing tool “designed for women, by women,” says Ms. Jalasjaa, who saw the need for such a tool several years ago when she was head of HollisWealth, the Bank of Nova Scotia’s independent investment-advisory firm.
“Women are able to learn investing in a simple fashion because it is index investing,” she said in an interview with The Globe and Mail. “It’s a tool to help women apply their financial knowledge and just get their feet wet when it comes to investing.”
Last March, Ms. Jalasjaa launched the Women’s Collection, a website that provides financial literacy to women through online courses and podcasts, educational webinars and social events across Canada for members. As part of the Women’s Collection, Ms. Jalasjaa wanted to incorporate an online tool where women could explore investing in an easy-to-understand environment, or for those individuals who may only have a small amount of assets to invest.
The platform aims to educate women in their finances and tackle some of the unique circumstances women face in the life cycle of their investing years. Women are more likely to quit work, reduce work hours and forgo promotions to care for children, a spouse or an aging parent. A third of women also stop saving as a direct consequence of those care responsibilities.
The launch of a gender-focused platform comes at a time when female investors are on track to manage more than $4-trillion over the next decade, prompting the financial-services industry to rethink the way investment advisers and wealth-management firms conduct business.
Currently, Canadian women directly control approximately $2.2-trillion of personal financial assets, a number that will increase by more than 70 per cent by 2028, according to a recent report by CIBC World Markets Inc.
In Canada, robo-advice assets under management amounts to more than $5-billion, and while still only a fraction of the larger asset-management market in Canada, robo-advisers are offering alternative investment advice to digital-savvy customers.
These web-based platforms offer clients an online risk-assessment tool that quickly calculates an appropriate asset allocation based on age, financial goals and risk tolerance.
Similar to other robo-adviser platforms, Smart Money prompts investors to answer a series of financial questions to determine what kind of investment portfolio will best suit their needs. But in order to appeal to the female investor, the platform doesn’t focus on investment returns or beating the market; rather, it asks investors which goals they would like to achieve and which goals have higher priorities than others.
“Women typically look at their financial situations in this way, which is why the platform was designed in this manner – it’s an intuitive way of investing that starts with the question: What are you saving for?” Ms. Jalasjaa says.
Smart Money, which was launched in collaboration with Smart Money Capital Management, uses exchange-traded funds in its portfolios, and requires a minimum deposit of $500 to open an account. The platform charges a 0.65 per cent fee for assets under management. While the fee is slightly higher than the industry average of 0.50 per cent, investors gain membership to the Women’s Collection and its financial-education articles and podcasts.
The platform is not exclusive to women, Ms. Jalasjaa says, and is available to anyone looking for goals-based investing.
Investors open an account by first choosing from a list of goals – which includes traditional goals of retirement, travel and home ownership, as well as goals around emergency funds, charitable donations, a dependent account that could be used for caring for an elderly parent, or a custom account for personal savings such as maternity leave. Multiple accounts can be opened at a time, and each goal gets an estimate on how much needs to be contributed, and at what frequency, in order to be successful.
Investor’s goals are assigned a portfolio that is one of five risk levels: income, income growth, balanced, balanced growth and growth. In addition, each account will dedicate part of its equity investment to a gender diversity fund – the Mackenzie Global Leadership Impact ETF – which invests in equity securities of companies that promote gender diversity and women’s leadership.
But a goals-based approach may not be big enough differentiator for a new entrant in the digital online space, says Josh Book, chief executive and founder of ParameterInsights. Tracking progress against goals isn’t high on the priority list for users of digital wealth platforms, ranking only eighth in importance when it comes to consumer satisfaction, according to recent research by ParameterInsight,.
“There are quite a few platforms which already offer this type of service, and eventually they will all have some kind of financial-planning technology built into their systems,” Mr. Book says. “But what does stand out as a powerful offering is the aspect of targeting financial literacy, as that is a hurdle the industry has yet to clear.”
With 15 online portfolio managers already in Canada, Ms. Jalasjaa says she isn’t looking to compete for assets, but rather she has launched the platform as a component of her financial-literacy initiative.
While it may be a first in Canada, a similar platform was launched three years ago in the United States by Sallie Krawcheck, a former CEO of Citi’s and the Bank of America Merrill Lynch’s wealth-management units. While it was initially slow to take off, Ellevest now has US$280-million of assets under management and is growing at approximately 10 per cent a month.
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