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Advisor Mutual Funds Three reasons for advisors to work hand-in-hand with robos

'The robo can jump to tasks right away, so there’s less time discovering, more time acting. A request for a withdrawal, an address change and so on, these are all sorted as ‘tasks,’ so the advisor can go through them quickly and easily,' Jean-Francois Courville, Wealthsimple for Advisors CEO, says.

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When clients click on their financial advisor’s website to get information about their portfolios, chances are good that they have reached a robo-advisor.

Robo-advisors don’t necessarily replace human advisors, though. Far from it; there are advantages to having the two work together.

Wealthsimple Inc., which began operating in 2016, has developed an all-in-one wealth-management platform for financial planners, investment advisors, portfolio managers and dealers that enables them to work seamlessly with a robo-advisor. This helps advisors optimize and scale their business, saving time and benefiting clients.

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1) Cost savings

Jean-Francois Courville, Wealthsimple for Advisors CEO, says there are three good reasons for advisors to work hand-in-hand with robos.

“The first one is cost savings. Fees can be reduced while maintaining or even increasing margins,” Mr. Courville says.

“The average mutual fund in Canada charges more than 2 per cent. When we offer our services with advisors, the fee goes down to between 1.35 and 1.95 per cent. Right off the bat, it's a significant savings,” he says.

Wealthsimple charges clients a management fee of up to 0.35 per cent. Advisors can set up additional fees of up to 1.15 per cent, as agreed between the advisor and the client.

This means that advisors and clients determine their fees without the advisor having to turn over a portion of the negotiated fees to Wealthsimple. “The advisor’s book value doesn’t change, and should grow,” Mr. Courville says.

Robo-advisors invest primarily in exchange-traded funds (ETFs), which tend to have lower fees than other funds for both management and trading. Robos also often don’t demand a minimum balance from clients, making the barrier for becoming a client and investing low or even nonexistent.

2) More transparent fees

An additional benefit for advisors working with robos is that it’s easier to be transparent with clients about their fees, says Nathan Wood, advisor with Up Wealth Management in Calgary, whose firm has been working with Wealthsimple’s robo-advisor for about six months.

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“People should know what they pay, who they pay it to, when the fees are paid and, most importantly, what services they’re getting for their fees. Robo-advisors make this very clear,” Mr. Wood says.

Mr. Courville says that the second major benefit to working with a robo-advisor is that it’s streamlined. For example, working with a robo simplifies onboarding – signing up clients and getting them started.

“Everything from authenticating the client, to funding the account, to transferring and monitoring the status of the client – is automated and streamlined. Ordinarily, these tasks are typically manual and time-consuming,” he says.

“Traditionally this required a huge pile of paperwork. Now it’s something we can do with the client on a laptop, or with the clients at their own screens,” Mr. Wood says.

Mr. Courville says this helps advisors take care of day-to-day work more quickly, so they can spend more time researching and advising and less on simple tasks.

“The robo can jump to tasks right away, so there’s less time discovering, more time acting. A request for a withdrawal, an address change and so on, these are all sorted as ‘tasks,’ so the advisor can go through them quickly and easily,” Mr. Courville says.

Record keeping is easier too, and it’s precise, he adds. “All the actions an advisor does on behalf of the client are logged automatically. That means advisors don’t have to take notes, and for a client, there’s a paper trail of any action an advisor takes on their behalf. In the case of an audit, advisors can easily download the logged information they need,” he says.

When it comes time to report to the client, “it’s easier. There’s no waiting for mail, and any information needed to produce statements is easily available,” Mr. Courville says.

Client will appreciate this, Mr. Wood says. “They don’t have to wait or chase and try to hunt down tax documents,” he explains.

3) Time savings

The third reason that working with a robo-advisor improves client service is that it saves time for both the advisor and the client.

“It’s typical that for the first five or six hours an advisor spends with a new client working manually, 30 to 50 per cent of the time is spent on administration. That's time that isn't being spent on developing the relationship and providing valuable advice,” Mr. Courville says.

Mr. Wood agrees. “The old way would usually take an hour with the client and then another hour back at the office. It takes a half hour to 45 minutes working with a robo-advisor,” he says.

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By cutting administration time with technology, clients can fill out their account details on their own time. “So their time with their advisor is really focused on advice,” Mr. Courville says.

By the end of October, 2018, Wealthsimple had signed up more than 300 advisors in Canada, he adds.

Mr. Wood, whose firm has been working with Wealthsimple’s robo-advisor for about six months, admits that there’s a learning curve for both the robos and the humans. For example, some old-fashioned mutual funds are still learning to interact with robos and do things such as recognize an electronic signature, and this requires startup time for the human advisor.

“As we figure these issues out, I anticipate that working with robos will eliminate a lot of unnecessary administrative burdens, so we can improve clients’ experience,” Mr. Wood says.

“Within two to three years, we see the entire financial industry working on online platforms. We’re happy to be on the initial wave of this.”

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