A guide to the best robo-advisors in Canada for 2022

Fast forward to today and the honeymoon atmosphere has dissipated. Against the backdrop of an extraordinarily long-lived bull market in stocks, active management has made a comeback (not least in the ETF space), exotic asset classes like cryptocurrency are on the rise, and new competition is coming from asset-allocation ETFs that do the job of portfolio management all in one security.

Suddenly robo-advisors find themselves having to prove their worth anew, all the while trying to establish a profitable business model in a low-margin corner of the investment universe. It’s surprising, really, because amid all the competition their fee structures and value proposition are as good as or better than ever. 

Depending how you define the term, the first stabs at robo-advisors were created in the United States between 2006 and 2008, and decidedly with the launch of Betterment in 2010. The pioneers in Canada were NestWealth.com, WealthBar and Wealthsimple in 2014. 

But it nonetheless behooves investors to probe deeper in their choice of robo-advisor, asking tough questions around performance, risk and the composition of portfolios. As our 2022 survey of the Canadian robo industry shows, they’re not all the same.

Great info on robo-advisors:

• Is there any risk in using a robo-advisor?
• How good are robo-advisors?
• Should you use a robo-advisor?
• How to use a robo-advisor
• What is a robo-advisor?
• Who uses robo-advisors?
• Robo-advisors vs human advisors

A quick look at the best robo-advisors in Canada for 2022

For full descriptions of each of the best robo-advisors in Canada, scroll down.

The best robo-advisors for 2022

Overall best robo-advisor for Canadians

Justwealth

Justwealth tops our list for overall best robo-advisor in Canada because it allows Canadians to get more granular to fit their specific needs. With so many portfolios, including a number of tax-efficient options for non-registered accounts and income portfolios for investors who are decumulating their wealth, users should be able to find something that works. And while the portfolio types are wide-ranging, those comparable to other robos’ offerings have been posting some of the industry’s highest returns. If you’re not turned off by an abundance of choice, “Justwealth is the shop,” opines Dale Roberts, MoneySense writer for the “Making sense of the markets” column, financial commentator and founder of the Cut the Crap Investing blog.

Overview: More than other robos, Justwealth truly justifies its portfolio management fee by simply:

1. Assigning clients a personal portfolio manager who helps find the right ETF portfolio based on their specific goals. 
2. Offering not just a handful of portfolios, but more than 70 of them, including ones focused on global growth, ESG, income and education savings
3. Providing value-added services, such as financial planning, personalized tax-loss harvesting and tax-efficient transfers. It’s a quantum step above what a single asset-allocation ETF provides, in other words.   

Investment approach: The company uses more than 50 ETFs from nine providers, including Vanguard, iShares and Schwab. It also offers the widest range of account types among Canadian robos, including registered retirement savings plans (RRSPs), registered education savings plans (RESPs), tax-free savings accounts (TFSAs), registered retirement income funds (RRIFs) and taxable accounts, as well as U.S.-dollar accounts. And in 2021, it started offering group RRSPs to employers and their employees. 

Justwealth tends to go deeper than the competition on these account types too; its RESP accounts are, uniquely among Canadian robos, set to a target date and become allocated more conservatively as your children approach graduation, for example. 

Say you want to transfer assets into your robo account from a brokerage account. Others will simply sell the stocks, reinvest the proceeds and leave you with whatever tax consequences result. 

“Justwealth is the only one that will accept a basket of stocks and draw it down in the most tax-efficient way possible,” says Roberts. Sounds complicated? You can contact your portfolio manager directly if you have questions.

Best robo-advisor for a passive and active combo 

BMO SmartFolio

While investors can take a set-it-and-forget-it approach, if something does go awry in the markets, a real, live 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, e-mail or phone.

Overview: BMO is one of a handful of banks with a robo option and it is also a big player in the ETF space, making for an integrated offering. While SmartFolio makes use of passive, index ETFs, it also employs real-life fund managers from BMO Global Asset Management, its massive investing arm, to design its portfolios. 

Investment approach: Once 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. The BMO capital preservation portfolio, for instance, has a 10% allocation to equities and a 90% allocation to fixed income. At the other extreme, its Equity Growth option is weighted 90% stocks and 10% bonds. The rest fall somewhere in between. 

Each portfolio contains a basket of BMO ETFs. It’s easy to change your asset mix. Just let them know when a life event happens, such as a marriage, a significant job change, or the arrival of kids, as that will require a shift in investing approach. 

Best robo-advisor for sophisticated offerings

CI Direct Investing

Investors who want (or could want as their nest egg grows) greater portfolio diversification, with exposure to underlying asset classes beyond stocks and bonds will appreciate this robo service. It is a more sophisticated offering at a still competitive robo price.

Overview: Think of CI Direct Investing (formerly WealthBar, founded in 2014) as passive investing, plus. Yes, you can set up a low-cost ETF portfolio with the company. But if you’re not convinced that indexed stock and bond funds can meet the challenges investment markets face going forward, you can opt for what it calls Private Investment Portfolios, which include other asset classes too. And in 2021 CI Direct Investing added so-called Impact Portfolios that factor in environmental, social and governance (ESG) criteria in their investment selection.

Investment approach: The company now offers three types of portfolios. The first is similar to what you’d find with other robos: five portfolios that range from conservative to aggressive, and feature ETFs from Horizons, Vanguard, iShares, BMO and CI First Asset. The second, Private Investment group, includes three portfolios made up of Nicola Wealth mutual funds; these are invested in both mainstream and more rarified asset classes including alternative strategies, private equity and mortgages. (As you might expect, these come with higher fees.) And the last is a series of three ETF Impact Portfolios for socially and environmentally responsible investors invested in a combination of ETFs and mutual funds. While there is no minimum account size, CI Direct Investing will not invest the funds until the account reaches $1,000.

Best robo-advisor for having no fee surprises 

iA WealthAssist

If you want to know what to expect in your fee statements, this may work for your investments.

Overview: Formerly known as Invisor, this robo is now part of the Quebec-based Industrial Alliance Financial Group. It offers easy access to iA’s 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 offers seven portfolios overseen by professional managers but are invested in passive ETFs from Vanguard and iShares. Uniquely, iA WealthAssist offers a flat, all-inclusive fee of 0.7% on all sizes of portfolio that covers the management expense ratios of the funds it holds in addition to portfolio management. Accounts smaller than $1,000 will be held in cash until your savings surpass that level.

Best robo-advisor for Canadians with specific needs

Justwealth

Investors who want the ability to get more granular to fit their more specific needs will appreciate the functionality of this robo-advisor. With so many portfolios, including a number of tax-efficient options for non-registered accounts, income portfolios for investors who are decumulating their wealth and target date funds for education savings, users should be able to find something that works.

Overview: Justwealth sells itself as a more sophisticated and human-like robo. A personal portfolio manager helps find the right ETF portfolios for its clients, based on their specific goals. As mentioned above it offers a host of accounts, including RRSPs, RESPs, TFSAs, RRIFs and non-taxable accounts, and in 2021 started offering group RRSPs to employers and their employees.

Investment approach: While most other robos offer just a handful of portfolios, Justwealth has more than 70, including ones focused on global growth, ESG, income and education savings. It also has U.S.-dollar denominated portfolios. The company uses more than 50 ETFs from nine providers, including Vanguard, iShares and Schwab. And it also offers personalized tax-loss harvesting. Unlike some of its robo competitors, it comes with a dedicated 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.

Best robo-advisor for easy-to-use accounts

Nest Wealth

This is great for people who want a simple, passive approach to investing. It’s simple to understand, its cost structure is attractive—even if your assets grow within the same tier you still pay the same monthly fee—and its ETFs will be familiar to any index investor. If you’re currently working with an advisor, Nest Wealth Plus is a valuable tool to explore. It provides convenience, efficiency, and the independence of a digital wealth platform combined with the trusted, goal-based holistic advice from your advisor.  

Overview: Nest Wealth 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. It’s one of the only robos that also offers a referral platform for advisors. Nest Wealth Plus allows investors interested in a more hybrid approach to continue to work with their advisor and benefit from the low fees and digital experience of a robo platform. Indeed, it has a partnership with the National Bank Independent Network, Canada’s largest provider of back-office services to independent investment dealers and portfolio managers. National Bank is a minority shareholder of Nest Wealth.
Investment approach: Nest Wealth 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.

Best robo-advisor for stock pickers

Questwealth Portfolios*

Investors who might want to combine the power of a robo-advisor for their core holdings and a discount brokerage for recreational stock-picking can take advantage of the offerings from this robo.

Overview: Questrade is best known for its discount brokerage, which is the largest independent brokerage in Canada. It also has a robo-advisor platform, Questwealth Portfolios*. The two are designed to work in tandem, so you can have one account for your own trading and another managed for you. Some investors prefer this hybrid model, which gives them more control over their savings. In 2021, Questrade introduced the QuestMobile app, an intuitive interface that gives you a full level of functionality on your phone, if that’s how you prefer to track your investments.

Investment approach: Questwealth puts investors in one of five standardized ETF portfolios, from conservative to aggressive. The portfolios hold a number of brand-name fund families, including SPDR, BMO and iShares. While the ETFs themselves are mostly index funds, Questwealth actively manages the mix, for example dialing back the higher-risk funds when the markets look vulnerable. The company also offers more account types than some other robos, including spousal RRSPs, TFSAs, RESPs and locked-in retirement accounts (LIRAs), among others, and it has socially responsible investing options as well.

Get more information about Questwealth Portfolios*

Best robo-advisor for simple portfolios

RBC InvestEase

Having an across-the-board fee of 0.5% means you know exactly what you’re getting. RBC has also recently integrated InvestEase with the RBC Mobile app, allowing customers to open an account and move money into it all from their phones.

Overview: RBC InvestEase is another big-bank robo offering, which adds a sense of stability and permanence that not all startups in the robo-advisor space have. It’s also one of the simplest options for investors, which could be a pro or a con, depending on what you’re looking for. 

Investment approach: RBC InvestEase has two main types of portfolios: standard and responsible investing (RI). There are five options within each category that fit with various risk tolerance levels. The portfolios are populated with a selection of 13 RBC iShares ETFs—RBC has had a partnership with iShares since 2019—with management expense ratios between 0.11% and 0.23%. There’s no minimum account size but the balance must reach $100 before it gets invested. 

Best robo-advisor with access to a financial planner

Smart Money Invest

This was made for investors seeking a level of service somewhere between the average robo and a human financial advisor.

Overview: Smart Money Invest offers a higher-touch service—with higher fees to match—than the average robo-advisor. The company, which has a partnership with Wealth One Bank, likes to use the metaphor of investing as a journey and the investor as a passenger. It views its role as getting them from their current location to their destination along whatever route they are comfortable with.

Investment approach: In addition to filling out a risk tolerance questionnaire, clients are promised a live discussion with a certified wealth planner to determine the portfolio match. Smart Money portfolios go beyond ETFs (mostly Vanguard and iShares) to include mutual funds and in some cases private equity, mortgage and real estate funds. Through the client portal, investors have access to a financial planner and data vault.

Best robo-advisor for skeptical investors

Qtrade Guided Portfolios*

Responsible investing devotees who are skeptical of ETFs using the ESG label will like this robo. With NEI funds, you at least know you’re working with a Canadian pioneer of the responsible investing space with 30 years of experience picking sustainable investments.

Overview: Qtrade Guided Portfolios is the robo-advisor arm of discount brokerage Qtrade Direct Investing. It offers a choice of a low-cost index ETF portfolio or a responsible investing (RI) option invested in mutual funds actively managed by NEI Investments.

Investment approach: The company will match you with one of six portfolios by risk tolerance in either its passive or RI streams. Though Qtrade Guided Portfolios’ own portfolio management fees are the same across the board, the management expense ratios differ depending on the underlying investments. On the ETF portfolios (mostly using Vanguard and iShares funds), they range from 0.08% to 0.13%; MERs are 0.79% to 1.01% on the RI funds, reflecting the active stock selection. 

Best robo-advisor for options

Wealthsimple*

If you specifically want options, now and in the future, Wealthsimple offers just that. As time passes and your investing needs and priorities evolve, Wealthsimple will probably have the right kind of account and portfolio to shift your money into.

Overview: Wealthsimple was one of the first and is still the largest robo-advisor in Canada, with $15 billion in assets under administration. Today backed by the giant Power Corp. conglomerate (purchased in 2015), it has become a diversified digital financial institution with stock and cryptocurrency trading, tax filing and payments platforms, but automated investing is still central to what the company does.

Investment approach: Wealthsimple has the widest selection of portfolio options in the robo Canadian market, with standard, responsible and even halal investing streams, each with the usual conservative/balanced/growth segmentation based on goals and risk tolerance. It offers the gamut of registered account options including RRSP, RESP, LIRA, RRIF and TFSA, along with an account specifically designed for business owners. While it makes use of iShares, Vanguard, BMO and State Street ETFs, it has launched its own responsible and halal ETFs where it felt the existing options in those areas were lacking.

Get more information about Wealthsimple Invest*

Is there any risk in using a robo-advisor?

Aman Raina is a Toronto investing coach and founder of Sage Investors, and he did a very interesting test with robo-advisors. As a thought experiment Raina signed up for an account with an unnamed provider in February 2015. Depositing $5,000, he wanted to see what kinds of ETFs the algorithms placed him in, how his portfolio really performed over a set five-year period and, most importantly, what would happen in the case of a market crash.

He was surprised to find his supposedly passive investing vehicle was in fact more active than he bargained for. Initially, the robo had him invested in niche and even tactical funds that strayed far from basic geographical indexes. Over time, its focus shifted. Though the split between stocks and bonds stayed essentially the same, within each class there was significant churn as categories such as “risk-managed bonds,” “dividend stocks” and “real estate” were eliminated, to be lumped in with broader index allocations. At one point the robo switched to currency-hedged foreign funds from unhedged status without so much as a notification.

Raina had no issue with his portfolio’s performance, which in the course of the five years closely tracked market averages. And he liked the way the robo kept him fully invested all the time. He found the customer interface easy to navigate, even though he had no interaction with human advisors at all after his initial sign-up. But he advises investors considering these services to look into the ETFs the robos actually choose and ask themselves whether they fit the mandate they’re looking for.

“I assumed the algorithm would choose the best of the best [investments, but] far from it. There were securities in my portfolio that made me scratch my head,” he says. Raina suspects there is some level of “politics” behind the families of ETFs that at least some of the robos favour; the ones owned by banks are likely to use their own ETFs, for example.

As it happened, the five-year experiment wrapped up in February 2020, on the eve of the COVID-19-induced market meltdown. Though he had already cashed out, Raina subsequently calculated how his portfolio would have fared had he remained invested. He was shocked to discover a 32% drop in its value from January 30, 2020 to March 23, 2020, which would have left him under water after more than five years. 

Granted, the algorithm had assigned Raina a relatively risky mix of investments, appropriate for a youngish investor with expert investment knowledge and a high tolerance for risk. Nonetheless this reminds would-be users that most robo-advisors are meant to track the markets, not make day-to-day tactical moves that might cushion the blow of a crash the way an active full-service broker, advisor or mutual fund would. If losing five years of gains in 53 days scares you, you need to dial back the growth skew in your investor profile or consider a different kind of investing vehicle. 

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How good are robo-advisors?

Robert believes robo-advisors still provide the best investing solution for a vast swath of Canadians who lack both the investment knowledge to manage their own portfolio and the size of nest egg to make a fee-based advisor worthwhile. 

Meanwhile asset allocation ETFs aren’t really competition, in his mind. Yes, they offer a managed portfolio. But choosing which fund to buy amounts to self-directed investing, something few investors are in a position to do. Most “need someone to hold their hand,” says Roberts, by choosing the asset mix and answering questions if needed. Robos do that cost-effectively.

One thing that people who are considering shifting their assets to robo-advisors need to factor in is whether it will trigger taxes or fees from the mutual fund accounts they’re divesting. If all you have are registered accounts, go for the robo with the lowest fees, Roberts suggests. But if your situation is more complicated, choose a provider that will handle the transfer in the most tax-efficient way possible. Justwealth, Wealthsimple and CI Direct Investing all offer financial planning services, he notes.

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How to use a robo-advisor

The process of setting up an account with pretty much any robo-advisor begins with a questionnaire. This way the service gets to know what the account will be used for and the level of risk you’re comfortable with. 

With some robo-advisors, the process involves an interview or text chat with one of their live representatives. After that, the algorithms get to work, deciding which of a selection of portfolios to place you in. You transfer money into the account and away you go. 

Generally, robo clients don’t have to worry about trading fees—any rebalancing or changes in the portfolio are covered by the portfolio management fee. In most cases this fee is separate and additional to the underlying management expense ratio (MER) charged by the ETFs themselves. (iA Wealth Assist promises an all-inclusive fee of 0.7% per year, which may suit investors seeking maximum fee transparency.) 

Between the robos’ and the ETFs’ fees, you shouldn’t end up paying more than 1% per year for the management of your investments—that compares to an average of more than 2% for mutual funds—unless you opt for a robo and account offering investments other than ETFs. The latter typically come with higher fees, as noted in the profiles of the different providers above.

Now that most robo-advisors in the Canadian market have a five-year track record, we’ve added back-dated performance data in the table above, for comparison. All the returns are for a middle-of-the-road, balanced portfolio made up of approximately 60% stocks and 40% bonds, net of fees, as of Nov. 30, 2021, unless otherwise noted. As robos are meant to match the portfolio to the investor, it should be understood that the comparisons reflect only how a small segment of their customers’ investments performed; as such, this is only a starting point in any discussion around relative performance. 

If you’re considering setting up an account with a robo-advisor, look on the provider’s website for performance data for the kind of portfolio you expect to set up. If it’s not posted, request it. You want to feel comfortable that the robo has a history of capturing the kinds of returns it promises: and you need to achieve your goals. 

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Should you use a robo-advisor?

As you can see from this list, the options for low-cost, automated investment management have evolved and expanded since the U.S. leader in the space, Betterment, arrived on the scene in 2010. And the now meaningful track record of Canadian robo-advisors shows they can at least compete on a performance basis with higher-cost forms of portfolio management. The next decision is up to you. 

Use the information here as a starting point in your search for the best service for your needs, then delve deeper; check out the provider’s website and chat with a representative to determine whether its fee structure, choice of account options, investment offerings and, ultimately, performance to date satisfies your expectations and requirements.

What is a robo-advisor?

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. Now, 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 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 the 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. —Bryan Borzykowski

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Who uses robo-advisors?

There used to be a perception that robo-advisors were for newbie investors or those without a lot of money, but that couldn’t be further from the truth now. An increasing number of high-net-worth investors—those who don’t want to pick securities on their own—are seeing the value in using this kind of digital investing platform. In fact, many robos are now catering to this investor set, with some offering more sophisticated tax-loss harvesting, as well as accounts for incorporated professionals. 

Whatever end of the income spectrum you’re on, it’s a lot more efficient to use a program that divvies up your money for you into the right buckets for your risk tolerance, and automatically rebalances when market values either climb too high or drop too low. 

Robo-advisors are also ideal for fee-conscious investors, which is just about everyone these days. While fees do vary, and it’s possible to invest more cheaply by buying an all-in-one ETF than in a robo (though you’d have to do all the investing work yourself), costs are still well below the average mutual fund fee of about 2%. As ETF fees continue to fall, and with most robos using ETFs to build portfolios, robo-advisor costs could decline over time, as well.

There are some situations in which a robo-advisor may not be a fit. One is if you’re saving for short-term needs, where your money could be better served by sitting in a savings account or a guaranteed investment certificate (GIC). Some robos do offer non-market-based products, so in some cases it’s possible to keep all of your money with one firm, but most don’t offer anything other than investing. 

Also, a robo won’t be right for you if you have a complicated estate where you might be making use of insurance products, or if you want to invest in real estate or other specialized products and securities. And while some robos are now offering security trading capabilities, more sophisticated investors may still want to use brokerage firms that have analyst reports and better trading tools.

Ultimately, though, robo-advisors now cater to pretty much everyone, and there’s no good reason as to why you shouldn’t at least explore using one. —B.B.

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Robo-advisor versus a human advisor

In some ways, the term robo-advisor is misleading. It is, for the most part, the financial companies that have found a way to simplify the investing process. It doesn’t provide in-depth financial advice and it doesn’t take into account your big life events that might affect how and how much you should invest (eg. buying a home, having children, retiring). 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. —B.B.

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Robo-advisors vs. mutual funds

A lot of people tend to compare robo-advisors to mutual funds, but that’s not a fair comparison. 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 stocks—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. —B.B.

Pros and cons for robo-advisors and more

Robo-advisors

Pros:

1. Charge low flat fees
2. Use easily liquid and easily tradable ETFs
3. Creates a diversified portfolio based on one’s risk tolerance and time horizon
4. Automatic rebalancing 
5. Automatically allocates money to various ETFs
6. Tax-efficient 

Cons:

1. Investors can’t always change asset mix on their own
2. Typically uses only ETFs; investors may want to add other securities into their portfolio 
3. Uses specific ETFs; investors may prefer different brands that the robo doesn’t utilize 
4. Redeeming isn’t always instant like it may be with a discount brokerage 

Mutual funds

Pros:

1. Diversified basket of stocks
2. Funds are managed by a professional, which many people still prefer 
3. A lot of different fund options on the market 
4. Some funds have track records that go back decades

Cons:

1. Generally high fees
2. Can only buy and sell at the end of the day
3. Not as tax-efficient as ETFs
4. Aren’t usually available through robo-advisors

—B.B.

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This article was published March 15, 2022, and updated on August 2, 2022.