A guide to the best robo-advisors in Canada for 2020
Find out which robo-advisor is right for you.
Find out which robo-advisor is right for you.
The robos are everywhere. What was once a little-known investing tool for tech-savvy investors is now commonplace, with everyone from newbie savers to retired boomers using robo-advisors to help manage their money.
While advisors and traditional fund companies still manage the majority of money in Canada, with people paying more attention to fees and with interest in exchange-traded funds (ETFs) increasing, robo-advisors will only see their assets under management rise from here. According to the research aggregator Statista, Canadian robos will hold an estimated US$8.1 billion in assets under management in 2020, which, it predicts, will rise to US$16.6 billion by 2023, for a 26.7% compound annual growth rate.
As time goes on, these companies are also getting more sophisticated in their offerings. Some robos now offer chequing accounts, others let you pick stocks or buy insurance or offer real-life financial advice. You can invest in all kinds of accounts too, including Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plan (RRSPs), Registered Retirement Income Fund (RRIFs), Registered Education Savings Plans (RESPs) and more.
Every year, MoneySense looks at the best robo-advisors in Canada and outlines the differences between these offerings, so that you can intelligently choose which is right for you. Here’s our guide for 2020.
What you’ll learn:
For full descriptions of each of the best robo advisors in Canada, scroll down.
|Robo Advisor||Fees||Investment Approach||Minimum Account|
|BMO SmartFolio||0.4% to 0.7%||Match with one of five custom portfolios containing baskets of BMO ETFs||$1,000|
|CI Direct Investing*||0.35% to 0.6% for ETF portfolios||5 low-cost ETF portfolios by risk tolerance; also non-traditional private-investment portfolios||$1,000|
|Invisor||0.50%||7 managed portfolios holding passive ETFs by risk tolerance; allocation aligns with global market weightings||None (deposits will be held in cash until account reaches $1,000)|
|Justwealth||$4.99/mo for accounts up to approx. $12,000, then 0.4% to 0.5%||More than 70 portfolios, including US$ denominated; mix of ETF providers; offers tax-loss harvesting||$5,000 (none for RESP accounts)|
|NestWealth||$20 to $80/mo||Allocated across six asset classes of industry-standard ETFs by risk tolerance||None|
|Questwealth Portfolios*||0.2% to 0.25%||5 core and 5 SRI ETF portfolios, managed in a passive-active hybrid style; extensive account type offering||$1,000|
|RBC InvestEase||0.5% management fee; approx. 0.11% to 0.30% MER for ETFs||10 portfolios, created from 14 different ETFs||$100|
|Wealthsimple*||0.4% to 0.5%||Variety of ETFs; socially responsible investment portfolio focussed on cleantech, low carbon||None|
Minimum account size: $1,000
Overview: BMO is just one of the many banks that now offer robo options. While its SmartFolio offering makes use of ETFs, it also employs real-life fund managers from BMO Global Asset Management, its massive investing arm, to design its portfolios. While BMO SmartFolio is open to anyone, most of the people who use it were already BMO banking clients.
Investment approach: After you’ve answered a few risk tolerance questions, the company will match you with one of its five model portfolios, which vary widely when it comes to asset mix. Its Capital Preservation portfolio, for instance, has a 10% allocation to equities and a 90% allocation to fixed income. Its Equity Growth option is weighted 90% stocks and 10% bonds. The rest fall somewhere in between. Each portfolio, which is essentially a fund-of-funds, contains a basket of BMO ETFs. It’s easy to change your asset mix—let them know when a life event happens, such as marriage, a significant job change, the arrival of kids, as that will require a shift in investing approach. Meanwhile, its managers will adjust its five portfolios if they think different asset class exposures are needed. MERs for CI’s Private Investment Portfolios range from 1.0% for Safety, to 1.55% for Balanced, to 1.40% for Aggressive.
This the best robo-advisor for… People who want a passive and active combo. While investors can take a set-it-and-forget-it approach, if something does go awry in the markets, a professional will adjust a fund’s asset mix accordingly. SmartFolio also has a team of advisors that can answer more basic client questions through live chat, email or phone.
Overview: CI Direct Investing (formerly WealthBar) was started by Chris and Tea Nicola, the son and daughter-in-law of John Nicola, a well-known money manager who started Vancouver’s Nicola Wealth Management. In January 2019, CI Financial Group became a majority owner in the company, which has provided access to new investment opportunities. One of the big differences between CI Direct Investing and its competitors is that financial advice is a central aspect of its offerings. It incorporates a more hybrid active-passive model, with portfolio managers constructing its funds, which are mostly based on ETFs.
Investment approach: The company offers two types of portfolios: a low-cost ETF portfolio and what it calls private investment portfolios. The former is similar to what you’d find with other robos: five portfolios that range from conservative to aggressive, and include ETFs from Horizons ETFs, Vanguard, iShares, BMO and, more recently, CI First Asset. The latter option includes three portfolios made up of Nicola Wealth Management mutual funds, which are invested in alternative strategies, private equity, mortgages and other traditional and non-traditional investments.
This is the best robo for… Investors who want more choice and different ways to diversity. Diversification is a key part of CI Direct Investing’s message, which is why it includes a variety of asset classes in its portfolios. Even its ETF portfolios have some real estate in them. With active management, access to advisors and Nicola Wealth strategies, CI Direct Investing is well-suited to those who like traditional investing, but want to get into the robo game too.
Get more information about CI Direct Investing*
Minimum account size: None (although deposits will be held in cash until account reaches $1,000).
Overview: Invisor, which is run by Alliance Insurance & Financial Services Inc., comes at investing a little differently than the others: It asks users to input goals and then puts people into one of seven ETF portfolios, which range from Safety (lowest risk) to All Equity (highest risk). It also offers easy access to insurance products, including life, disability, critical illness and travel, and it has professional advisors on hand to answer investing-related questions.
Investment approach: The company’s seven portfolios are overseen by professional managers, but they hold passive ETFs from Vanguard and iShares. Asset mix varies based on risk tolerance, and so does your geographic exposure. Invisor’s most aggressive portfolio also holds the most Canadian content, with 31.6% of its assets in the Great White North and 37.8% in the U.S. That may be too much Canada for some, but it’s still well below the 50%-plus that many investors tend to have in this country.
This is the best robo for… Investors who want a one-stop shop for investing and insurance. Being able to buy insurance through the site will appeal to those who want to keep their financial lives in one place.
Minimum monthly fee of $4.99 ($2.50 for RESPs) if the account balance is lower than the amount needed for 0.5% per month to be charged. (The upper threshold for that minimum fee works out to be around $12,000.)
Minimum account size: $5,000. There’s no minimum for RESPs.
Overview: This Toronto-based company bills itself as a more sophisticated robo. A personal portfolio manager helps find the right ETF portfolios for its clients based on their specific goals. It also offers a host of accounts, including RRSPs, RESPs, TFSAs, RRIFs and non-taxable accounts.
Investment approach: The company has more than 60 portfolios, including ones focused on global growth, Canadian growth, income and education savings. It also has U.S.-dollar denominated portfolios. The company uses around 25 ETFs from seven providers, including Vanguard, iShares and Schwab, and it also offers personalized tax-loss harvesting. Unlike some of its peers, it comes with a “personal portfolio manager,” which is a real person who, the company says, is responsible for overseeing your investments. You can contact that person directly if you have questions about your portfolio.
This is the best robo for… Canadians who want more investment options and the ability to get more granular to fit their more specific needs. With so many portfolios, including a number of tax-efficient options for non-registered accounts, and target date funds for education savings, users should be able to find something that works.
Overview: NestWealth is one of the only robos geared toward advisors and workplaces. It does have an array of options for individuals, but it also has a Pro version that allows fund companies to create their own robos with their own products, while its Plus and Work versions allow advisors to integrate robo-investing into their own practice, and help workplaces set up group RRSPs, respectively. NestWealth charges a monthly flat fee and not a percentage of assets, so you’re not paying more money as your portfolio grows within each tier.
Investment approach: NestWealth uses a variety of industry-standard ETFs from iShares, Vanguard and BMO. The company will allocate your dollars across six asset classes, including domestic equities, emerging market and international equities, government fixed income and real-return bonds and real estate. The allocation will vary depending on your risk tolerance and it regularly rebalances too.
This is the best robo-advisor for… People who want an easy-to-use, passive approach to investing. It’s simple to understand, its cost structure is attractive—even if your assets grow you still pay the same monthly fee—and its ETFs will be familiar to any index investor. NestWealth’s real promise, though, is in its professional lines of business. Companies can use it to enhance their employee benefit offerings, and it can help advisors spend less time investing and more time planning.
Overview: Questrade is best known for its discount brokerage, which is the largest independent brokerage in Canada. However, it also has a popular robo-advisor option, which, in November 2018, it rebranded from Portfolio IQ to Questwealth Portfolios, and also reduced its fees. One of the advantages of Questrade is that people easily use its robo and discount brokerage service, which can, for the right type of person, provide for a more robust investing experience.
Investment approach: Questwealth puts investors in one of five actively-managed ETF portfolios, from conservative to aggressive. The funds hold a number of brand name investments, including from SPDR, Wisdom Tree and iShares. The company does offer more account types than some other robos, including RRSPs, spousal RRSPs, TFSAs, RESPs and LIRAs, among others, and it has socially responsible investing options as well.
This is the best robo for… Canadians who might want to use a robo for their core holdings, and a discount brokerage for individual stock picking. Because of Questrade’s long do-it-yourself history, it’s experienced in catering to people who prefer to invest on their own. While anyone can use Questwealth Portfolios*, savvier investors may like this one more than some others.
Visit Questwealth Portfolios* for more information.
Get more information about Questwealth Portfolios*
Overview: RBC InvestEase is another big-bank robo offering. It’s also one of the simplest options for investors, which can be a pro or a con, depending on what you’re looking for. In January, RBC and BlackRock joined forces to create RBC iShares, making the bank the largest ETF provider in the country. So, it’s no surprise that the robo’s portfolios are loaded with iShares products. RBC InvestEase is a fairly new entrant in the robo world, but its ease of use could help it gain more market share.
Investment approach: RBC InvestEase has two main types of portfolio—standard and responsible investing – though there are five options within each one that fit with various risk tolerance levels. Both make use of three bond and four equity ETFs, all of which are from iShares. The former’s equity portion invests in traditional regional products that hold stocks in Canada, U.S., Europe and emerging markets, while the responsible investing portfolios uses ESG MSCI funds. Like others, RBC will rebalance portfolios during the year.
This is the best robo-advisor for… Canadians who are looking for an easy way to invest. While some people have said they would like tiered fee discounts, having an across-the-board fee of 0.5% means you know exactly what you’re getting. Some people will also like the fact that the platform is backed by a big bank, while human advisors, who can speak in English and French, can help people with questions. RBC clients in particular can easily add this service to their existing ones.
Overview: With more than $5 billion in assets under management, this Toronto-based robo is the biggest, and best known, of the bunch. It’s sleek interface provides a great user experience and performance is easy to track. Over the last 12 months, the company has ventured into new areas of investment. In May 2019 it launched Wealthsimple Trade, a do-it-yourself discretionary trading platform lets people buy stocks, while in January 2020 it launched Wealthsimple Cash, its version of a chequing account. Power Corp., one of Canada’s largest financial firms, now owns nearly 89% of the business.
Investment approach: Wealthsimple puts your money into an array popular of ETFs from iShares, Vanguard, WisdomTree, VanEck, BMO and Powershares. It has three main portfolios—conservative, balanced and growth—but it also has a socially responsible investment portfolio that focuses on clean tech and low carbon, and a Halal portfolio, among other things. Investors can’t pick their portfolio—they get put into one after answering a series of risk tolerance-related questions upon signup. Wealthsimple has launched a number of new account options over the years, including RRSP, TFSA, RESP, RRIF, LIRA and, more recently, an investment account for business owners.
This is the best robo-advisor for… Investors who like simplicity. If you have more than $100,000 in assets to invest, you’ll get access to Wealthsimple Black, which comes with a reduced fee, a financial planning session with a human advisor and access to airport lounges around the world. Deposit $500,000 to access the Wealthsimple Generation service tier, which includes in-depth financial planning with human advisors and the ability to create custom portfolios.
Visit Wealthsimple Invest* for more information.
Get more information about Wealthsimple Invest*
When the words robo-advisor first entered the investing lexicon, it referred to a company that offered a robo-advisor tool and the platform itself. With many traditional financial institutions providing robo options today, the term refers to the technology involved.
Essentially, a robo-advisor is a cloud-based technology platform that, in many cases, invests on behalf of a user.
There are other ways to invest online, of course. For example, with discount brokerages, you put money into an account and then you have to divvy up those funds among securities on your own.
Robo-advisors, on the other hand, automatically split up the assets in your robo account (again it could be an RRSP, RESP, TFSA or others) into various exchange-traded funds (ETFs) based on your risk tolerance and goals. An ETF is a basket of securities that’s similar to a mutual fund but isn’t actively managed; often, it’s set up to track a specific market index, such as the S&P 500 Index. ETFs are also different from mutual funds in that they can be traded on the market, like an individual stock or bond.
It’s this ease of use that’s made robo-advisors so popular. Most work in a similar way: You fill out a questionnaire to determine your tolerance levels, you then connect your bank account to the software and enter the amount you want to invest. The robo-advisor will then put your money into its funds and continually rebalance your dollars to keep your asset mix where it should be.
The short answer for many people is yes. Now that robo-advisors are catering to people up and down the wealth spectrum, everyone should consider using one. Study after study has shown that high fees can significantly eat into long-term returns and these sites come with lower than average expenses.
In general, robos are passively managed, meaning there isn’t usually a human who makes active decisions about buying and selling specific securities within the portfolio; so if you want to invest in more actively managed portfolios, or prefer do-it-yourself stock picking, may want to look elsewhere, though some hands-on investors are now incorporating robos into their personal repertoires.
In some ways, the term robo-advisor is misleading; they are, for the most part, companies that have found a way to simplify the investing process. They don’t provide in-depth financial advice and they don’t care about your big life events that might affect how and how much you should invest. Human advisors, on the other hand, can both invest funds on your behalf and help you figure out a personalized financial plan.
However, more companies are offering some hybrid of robo and human advice where the software does the investing and the human provides the financial advice. We’ll likely see more of that in the future, as it appears to be what people want: A Capital One survey found that 69% of investors would like to use a digital-human hybrid to manage their money, while 74% say they want a financial advisor to help them get through turbulent markets.
A lot of people tend to compare robo-advisors to mutual funds, but that’s not quite accurate. A robo-advisor is a technology platform, while a mutual fund is an investment product. What people are really comparing when they talk about robo-advisors versus mutual funds is ETFs versus mutual funds, because the vast majority of robo-advisors build client portfolios with ETFs.
It’s highly likely that there would be no robo-advisors without ETFs, at least in their current form. Why? Because it’s really easy to create a portfolio with passive funds. Since ETFs are priced and traded during the day and on normal stock exchanges—rather than being priced once a day at market close—robos can quickly move people in and out of these investments. That makes automatic rebalancing, a key robo-advisor feature, simple to do. As well, because ETFs are not actively managed like mutual funds, they’re a lot less expensive to own. That can make using a robo a more affordable alternative to a human advisor.
ETFs, like mutual funds, are diversified baskets of stocks or bonds. However, while mutual funds are actively managed with an aim to beating the market (spoiler alert: they often don’t), ETFs passively track the market. A S&P/TSX Composite Index-tracking ETF will hold all the funds in the index. Put a few of these together into one portfolio—a Canadian, U.S., European, an emerging market and a bond fund—and you’ll set yourself up for the long term. You could create a similar portfolio with actively managed mutual funds, but it’s better to use ETFs. Decades of research has shown that ETFs consistently outperform actively managed funds—in large part because mutual fund fees, which, in Canada, average about 2%, take too much of a bite of total returns. Many big-time investors, including Warren Buffett, advocate for ETFs.
Robo-advisor technology was built to quickly create an ETF portfolio based on an investor’s risk tolerance level and time horizon. Most robos use a predetermined number of ETFs (they’re not mining the entire ETF universe) that can fit into most people’s portfolios, and then they split up how much of each ETF a person should own based on a risk tolerance questionnaire. A conservative investor would have, say, more money in a bond ETF than an aggressive one. The ETF structure makes it easier to automate this process than if they used mutual funds.
In the future, all sorts of securities could end up in a robo-advisor portfolio, but for now ETFs trump mutual funds.
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