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Advisors looking to hand off their clients’ investments to a robo-advisor need to ensure they do their due diligence and partner with a reputable firm, says Iftikhar Mahmood at Createwealth Planning.

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For Grant Stefanowski, partner and certified financial planner (CFP) at Oculus Private Wealth Corp. in Calgary, the best aspect of partnering with a robo-advisor is the ability to save both time and money.

Mr. Stefanowski was the first advisor to run his financial advisory practice through Toronto-based robo-advisor Wealthsimple Inc.’s mutual fund dealer, Wealthsimple Advisor Services Inc., which launched in January and offers passive and active portfolios of exchange-traded funds (ETFs) and mutual funds as well as automates front- and back-office procedures.

“I take advantage of the fact that [Wealthsimple] built such an amazing, paperless system that not only have my administrative costs come down by 75 [per cent] to 80 per cent, but my efficiency has quadrupled because compliance is looked after,” he says. “I don’t send a five-inch stack of paperwork down the hall to my assistant anymore to process and do the trades because everything is just done immediately through Wealthsimple, online.”

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Mr. Stefanowski’s clients have been equally impressed by the robo-advisor service, particularly because of its transparency around fees. For example, they receive a monthly statement explaining the dollar value spent on his services, Wealthsimple and the portfolio manager.

“People don’t feel they’re locked into something they don’t understand or can’t see,” he says. “It really opened up a conversation that has made my job significantly easier to do.”

Joining Wealthsimple Advisor Services was not without its challenges – especially when transferring over certain accounts – but Mr. Stefanowksi is impressed by how adaptive the platform is and the improvements he sees on a monthly basis.

Mr. Stefanowski is part of an increasing number of financial advisors who are partnering with robo-advisors to handle their investment-management capabilities altogether or cut down on administrative work.

That trend is only expected to continue. According to the Investment Funds Institute of Canada’s recent report, Canadian Investment Funds Industry: Recent Developments and Outlook, “hybrid channels that combine the best elements of digital- and advisor-based channels are set to expand at higher rates than those of the conventional advice-based networks and will likely carry all investment funds with them.”

With more advisors shifting to fee-based practices, the report says, they’re viewing robo-advisors less as a competitor and more as a complement to their practices. That’s because advisors can focus on the more value-added components of their businesses.

Case in point: Iftikhar Mahmood, CFP at Createwealth Planning in Markham, Ont., gave up his mutual fund licence last year to partner with Toronto-based Glidepath Portfolio Services Inc., an investment counsel portfolio management firm, which has a robo-advisor service that creates customized portfolios of ETFs exclusively for financial planners.

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“Mutual funds have become a commodity,” he says. “There isn’t a lot of differentiation out there.”

As such, Glidepath now manages Mr. Mahmood’s clients’ ETFs portfolios while he spends more time on comprehensive financial planning, including risk management, estate planning and tax planning. The situation offers the best of both worlds for his clients, he says, as they receive his financial planning expertise while also benefiting from Glidepath’s investing expertise.

But for advisors looking to hand off their clients’ investments to a robo-advisor, they need to ensure they do their due diligence and partner with a reputable robo-advisor firm, Mr. Mahmood says. “It’s sort of like the wild, wild west right now,” he adds, regarding the growth of robo-advisors.

Graham Plumb, founder of Moola Financial Coaches & Advisors Inc. in Victoria, did his due diligence by researching robo-advisors extensively for six months, opening personal accounts with approximately seven different platforms to determine which were the most convenient and complete in their offerings. For example, he says, not all robo-services accept all account types, such as registered disability savings plans.

“That might inhibit you in your practice,” Mr. Plumb says,” because you’re not going to be able to transfer over [clients who use these accounts].”

Mr. Plumb settled on a few different platforms, including Toronto-based Nest Wealth Asset Management Inc.’s advisor-focused service.

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Mr. Plumb proposed his clients make the switch about seven months ago, and all but few have slowly made the transition. The move has expanded his reach considerably. As an advisor who held a licence through the Mutual Fund Dealers Association of Canada (MFDA), he was limited by provincial jurisdictions; as such, it was inconvenient for him, a resident of British Columbia, to help clients in Ontario. But now that he’s given up his MFDA licence and transferred his practice’s investment-management responsibilities to robo-advisors, his business has much more flexibility and 30 per cent of his client base is now in Ontario.

Mr. Plumb recommends making the switch to other advisors who are considering working with a robo-advisor – but says the challenges in doing so may be more psychological than technical. In the case of advisors who give up their MFDA licence, it can be difficult to relinquish control over investment decisions.

However, for advisors who are spending all day on providing comprehensive financial planning, they don’t often have the time to be picking the best mutual fund or stock, Mr. Plumb says.

“You need to realize that’s not where your value comes in,” he adds. “Your value comes from the planning.”

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