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A woman with a seven-figure portfolio has a problem with her financial planner, who works for one of the big banks. “I’ve reached my limit with his communication skills,” she wrote. “Every time I try to contact him by e-mail, I get a reply from an associate. I’m tired of his dismissive attitude.”

Her question: “Do you think it is smart to invest a large amount portfolio with a robo-adviser?”

My answer is yes, if you understand the following:

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  • Robo-advisers build and manage portfolios for clients, but they don’t typically provide financial planning that delves into matters like debt-management, whether retirement savings are sufficient and estate planning.
  • It’s possible to buy financial planning from a fee-for-service planner; in fact, robo-advisers and fee-for-service financial planning are natural partners. Check out my Saturday column for more on fee-for-service planning.
  • Robos all have people you can talk to by phone or Skype in some cases, but only some offer a dedicated account rep to talk to.
  • Robos apply a reasonable advice fee of 0.5 per cent on top of the fees associated with the exchange-traded funds used in client portfolios; the total cost is more than doing it yourself, but could easily be half or less the cost of using a conventional adviser.
  • A robo-adviser portfolio is likely to be quite simple – as few as six ETFs in some cases.
  • Some robo-advisers are better than others at cutting costs for high-net-worth accounts; the Globe and Mail robo-adviser guide will help sort this out.

Robo-advisers do not replace a quality human adviser who manages investments and offers comprehensive financial planning. But they could easily be the answer if you have an adviser you never hear from.

Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Rob’s personal finance reading list…

The case for early RRSP withdrawals

People often ask me for help in deciding when to start withdrawing money from their registered retirement savings plans. Here, a financial planner lists five reasons to consider early RRSP withdrawals.

Tips for the soon-to-be retired

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Five solid ideas for someone who will be retiring in three to five years. Now for some retirement tips from a credit-counselling agency. Lots of sensible ideas, like setting up an emergency fund for unexpected health issues and major purchases.

Glaring omissions and questionable advice

A tough-minded look at the advice in three popular personal-finance books by U.S. authors that are followed by plenty of people around the world. Some good in these books, but also some flaws.

How big should your house down payment be?

The pros and cons of putting down the minimum 5 per cent and 20 per cent, which means you don’t have to pay for mortgage default insurance.

Ask Rob

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Q: A wealth-management company in Toronto states that they use artificial intelligence to determine when it’s time to adjust their ETF portfolio holdings. This makes sense to me. Do you have thoughts about this approach?

A: Money managers have always used math and data to screen for stocks and decide what companies and sectors are in and out of favour. Slapping an AI label on this sounds like a marketing move. Ask to see the firm’s short- and long-term portfolio returns after fees compared to simply holding some basic low-cost ETFs.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Charity Intelligence Canada’s 2019 list of the Top 100 charities based on factors like impact and the percentage of donor funds used on causes as opposed to administration and overhead.

In case you missed these Globe and Mail personal finance-related stories

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  • Five vital year-end tax strategies for sophisticated investors
  • When should this couple nearing retirement age start collecting OAS and CPP?
  • Markets could be in for another rough ride in 2020. Here are three things to look out for (for Globe Unlimited subscribers)

More Carrick and money coverage For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group. Send us an e-mail to let us know what you think of my newsletter. Want to subscribe? Click here to sign up.

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