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.
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.