After a year-long pilot project, Royal Bank of Canada has officially opened its robo-adviser platform to all investors, making it the second major Canadian bank to build its own online portfolio manager.
RBC InvestEase Inc., a wholly owned subsidiary of RBC, announced on Thursday the national launch of its robo-adviser. Investors with a minimum of $1,000 can open an RBC InvestEase account online. Clients can choose from tax-free savings accounts, registered retirement savings plans and non-registered accounts.
Robo-adviser platforms, also known as online portfolio managers, offer clients an online risk-assessment tool that quickly calculates an appropriate asset allocation based on age, financial goals and risk tolerance. The results provide clients with a recommended investment portfolio predominantly made up of exchange-traded funds – with much lower fees than those usually offered by traditional financial advisers.
“Canadians told us they are looking for a new way to invest that fits into their busy lifestyles. They want a convenient automated advice solution that is available whenever they are ready to get started,” said Stuart Rutledge, senior vice-president, personal savings and investments at RBC, in a statement. “They also told us they want to be hands-off, with experts making decisions for them, and easy access to an expert, if needed.”
Upon completing an investment questionnaire, RBC InvestEase clients will be matched to one of five “risk profiles,” ranging from very conservative to aggressive growth. Each portfolio of ETFs will include between five to seven RBC index funds developed by RBC Global Asset Management. Fees for the RBC InvestEase platform are competitive – charging 0.5 per cent a year in management fees on investment balances (those fees are being waived until October, 2019, for those investors who sign up before March 31). In addition, there will be underlying fees between 0.1 per cent to 0.17 per cent for the ETFs held in a client’s portfolio.
RBC first entered the online portfolio management space in November, 2018, when the bank established an employee pilot program. Several months later, the bank expanded the pilot to include select RBC clients in Ontario, Alberta and Saskatchewan. With 15 robo-advisers already operating in Canada, the banks have been slow to adopt the fast-paced financial technology used by many of the existing players.
“We know there is a big segment of the market that is not being served because they find investing too complicated, or intimidating or they believe they don’t have enough money,” said Rebecca Peacock, senior director of strategy at RBC InvestEase. “But we wanted to take the time to get it right. We wanted to do the research, understand our client base and get feedback along the way and adjust the product so that it fit the target market we want to serve.”
Launching into the online digital space for banks is also a difficult balancing act, as robo-advisers are typically considered an alternative to traditional wealth managers – divisions that are key growth areas within the banks.
“Independent digital wealth advice firms are in many ways better positioned to attract customers because they are more nimble than the banks when it comes to modern marketing practices,” said Josh Book, CEO and founder of ParameterInsights Inc., a financial-services research and consulting firm. “As well, the independents have an opportunity to truly distinguish from what consumers perceive as just another big bank offer that costs money.”
Bank of Montreal was the first Canadian bank to enter the robo-adviser market in 2016, with the launch of BMO SmartFolio, a digital platform that, like RBC, uses only its own proprietary ETFs.
Earlier this year, Toronto-Dominion Bank signed a licensing agreement with Hydrogen Technology Corp., a New York-based fintech company, to enhance its current discount brokerage, TD WebBroker, and announced it has plans to launch a robo-adviser service in late 2019 with its own ETF products.
The majority of the independent online portfolio managers in Canada, such as Wealthsimple Financial Inc., WealthBar Financial Services Inc. and Nest Wealth Asset Management Inc., include a mix of ETF products from various providers.
While the banks have the strength in brand recognition standing behind them, the push of proprietary products on their platform can be viewed as a disadvantage, says Tea Nicola, CEO of WealthBar, which has $275-million in assets under management.
“While the banks entering the industry is certainly a good thing to raise awareness around the model, the banks do not have the true objectivity towards consumers,” Ms. Nicola said in an interview. “That will be seen as a disadvantage by some consumers who prefer to retain services with a portfolio manager that has objectivity, and retains a level of independence.”