Banks are doing it, and so are big names in the insurance business.
Bank of Montreal, HSBC Canada and Royal Bank of Canada are in the robo-adviser business, and National Bank of Canada is an investor in Nest Wealth. Companies in the insurance business that have invested in robos include Power Financial, through a stake in Wealthsimple, and Industrial Alliance Insurance & Financial Services Inc., which has Invisor as a subsidiary.
These financial giants are investing in robo-advisers because they recognize there’s a need for a low-cost advisory service that helps investors build and manage their portfolios online. Investing’s a multi-channel universe and robo-advisers are as much a legitimate part of it as human advisers and financial planners, online brokers and bank branches selling mutual funds over the counter.
The Globe and Mail robo-adviser guide is designed to show what’s available in the robo-world – the firms, the fees, the investment approaches and more. This year’s roster of robos include Mylo and Planswell, which are financial apps that offer a robo-adviser as part of their overall services. RBC InvestEase was invited to participate, but declined because it had not yet launched fully across Canada.
A robo-adviser is an online service that helps you develop a personalized portfolio mix of stocks and bonds and then builds it for you with low-cost exchange-traded funds. Robos charge a fee to build and maintain your portfolio, but it’s much less than you’d pay if you owned mutual funds or had a human adviser managing your portfolio.
A few common features of the robos in the Globe guide:
-All are licensed as portfolio managers, except HSBC Wealth Compass; portfolio managers are a category of investment advice provider who work to a fiduciary standard, which means they must put client interests first)
-All offer paperless account opening with e-signature, so there’s no need to fill out paper forms and send them in
-Almost all offer pre-set ETF portfolios that match your investing profile; the exception is Nest Wealth, which provides unique portfolios for each client
-All rebalance your portfolio periodically – selling hot ETFs and buying cold ones – to bring you back to your target mix of stocks and bonds
-Commissions for buying and selling ETFs are included in the advice fee, except at Nest Wealth (you pay for the first 10 trades per year at $9.99 a pop) and Smart Money Capital Management (1 cent per share with a $4 minimum per trade).
-Assets are generally held at held by third-party or related investment dealers that are members of the Canada Investor Protection Fund, which protects account assets for up to $1-million against dealer insolvency.
-You can interact with your robo firm via its website, by phone and, often, through some combination of secure e-mail, live online chat and skype; you may also be able to drop into a robo-adviser’s office or associated bank or credit union branches
Data management for the robo-adviser guide was provided by Audrey Carleton