Subscription-based Couch Potato investing is here

A new service delivers savings to those wanting a middle ground between pricey advisers and DIY investing.

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From the June 2014 issue of the magazine.

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Illustration by Sébastien Thibault

Illustration by Sébastien Thibault

Hard to believe Canadian regulators think more research is needed before “cracking down” on Canada’s notoriously high mutual fund fees. Almost 10 years have passed since Peter Tufano’s controversial Harvard study uncovered the ugly truth of Canada’s world-beating (not!) fund MERs. Just a few weeks ago, Tom Bradley, president of Steadyhand Investment Funds, called his industry out for being “stuck in the dark ages,” noting savvy investors are taking matters into their own hands.

Many are switching from high-fee funds or wraps to low-cost index funds or ETFs, either via fee-based advisers (charging maybe 1% of assets) or directly through discount brokerages. But what about those who want a middle ground between paying high-priced advisers and doing it all on their own? They could consider a new Netflix-like subscription-based wealth management system called NestWealth.com.

Similar online services in the U.S. (like Wealthfront.com) have been dubbed “robo-advisers” for automating ETF portfolios at low cost. Nest Wealth may be the first such service in Canada: founder Randy Cass hopes to roll it out nationally later this year.

700%

Growth for American robo-adviser service Wealthfront since the start of 2013

 

Meanwhile, Ontario investors aged 40 and older can pay $80/month ($40 for those under 40) for a portfolio service that assembles and rebalances ETFs from iShares and Vanguard. Money resides at National Bank Custodial Services, with asset mix matched to Investment Policy Statements customized for clients through an online questionnaire, followed by a telephone conversation with a portfolio manager.

Apart from underlying ETF MERs, the only other fees are the monthly subscription (charged to each spouse) and $20/month for each extra account (such as TFSAs or RRSPs). But unlike retail mutual funds, Nest Wealth won’t cost more as wealth rises. The sweet spot is the mass-affluent demographic above $100,000 but the more you invest, the bigger the savings.

One early adopter on Bay Street I talked to says Canadian retail investors “are just starting to figure out” how much they can save with such services.

10 comments on “Subscription-based Couch Potato investing is here

  1. Meanwhile, Ontario investors aged 40 and older can pay $80/month ($40 for those under 40) for a portfolio service that assembles and rebalances ETFs from iShares and Vanguard.

    why is there a difference in the cost based on age

    Reply

  2. Canada’s financial advisors dole out advice based on how much it is going to fatten their wallet. Have you ever seen an advisor driving an old car or not taking vacations in some exotic land? How do you think they can afford that? Simple…it is your money and mine. The day I see an advisor sitting in a modest office and dressed in shabby clothes and driving an old clunker – that is the guy who I will entrust my hard earned money to.
    But, in the final analysis – Education, education and education is the key. no one will look after your money as you can. Therefore the more you can learn, the more educated your investment decisions will be. So..go out and enroll in a Canadian Securities Course. It will prove to be the best investment in the long run. I did. And I don’t regret it.

    Reply

    • W.S. – Maybe I was hiding under a rock all my life, but I just only discovered the Canadian securities course. Which course would you recommend us taking? There’s a lot in there

      Reply

  3. Good grief! It’s not cheap though. I think I’d just get out my spreadsheet and re-balance myself!

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  4. I agree with the other comments here. If you have both an rrsp and a tfsa its $100.00 a month. The equivelent of a 1.2% mer on $100k? If you have a diverse basket of etfs the mer total would be close to 0.5%. You add the two together and you have a 1,75% mer.
    Are all financial people cut from the same cloth? Just messing with numbers and saying how great the latest retread is? Jonathan I expect more from you. Why do you think we subscribe to moneysense?

    Have a look at “Motif” investing for example. Now a Canadian version with that pricing structure is more like it.

    Reply

    • Your math sucks pal… $100 on $100,000 is 0.1% NOT 1% ! Nestwealth is offering a very cheap alternative. Worth exploring I think.

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      • Actually Robert, your math sucks and Paul is correct! The fees are $100 per MONTH not per year.

        $100/mo x 12mo = $1200 / $100,000 = 1.2% MER

        Reply

  5. Why would you propose Next Wealth when it does not have a working website and there is very little information about it available. Is this article not premature?

    Reply

  6. Fee of $960 per year is ridiculous considering it is a computer program that does the allocations. moneygeek does the same thing for $45/year.

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  7. The general idea of such services seems promising but as usual the devil is in the details. Unfortunately NestWealth provides almost none. Which specific ETFs are used? What questions establish the asset allocation – risk attitude, risk capacity, risk need? Is each investor slotted into one of five, six, eight model portfolios? Are there differences when the account is RRSP or TFSA or taxable? What is rebalancing policy? Why not reveal these details, as many of the US services do? The value added potential in such a service is possibly twofold: 1) low fees, which isn’t very much the case, as another commenter points out; 2) investment strategy sophistication.

    Reply

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