You may have seen the ads from Wealthsimple. Here’s their youtube channel if you want a refresher. They are Canada’s most famous ‘Robo advisor’ as they spend a lot of time and money attempting to reach Canadians. And when you hear about Wealthsimple, you’ll often hear the phrase ‘Robo Advisor.’
So what is a Robo Advisor? It’s an investment company that helps you invest with the aid of technology. And because they make the best use of new technologies, they can allow you to invest at a fraction of the costs Canadians typically pay. And that’s why the Robo’s are here – Canadians pay the highest mutual fund investment fees in the developed world. Those high fees can consume a significant portion of your investment returns over time – even more than half. Those high fees are destroying the wealth of Canadians. But thankfully, there’s a better way for those that want a managed investment portfolio.
A Robo Advisor can help you invest with 50% to 80% cheaper fees. That can be life-changing; potentially, it might allow you to retire with a portfolio that is almost twice as generous, or you might be able to retire several years earlier. Those lower fees will usually allow you to reach any investment goal better, even saving for a house or your child’s education.
And don’t let that word ‘Robo’ scare you. There are no robot advisors. While popularized, the moniker Robo Advisor is not all that accurate. Many human advisors and customer service representatives are ready to help at all of these investment companies. You can usually communicate by way of online chat or email as well.
As the CEO of Wealthsimple likes to offer …
“Humans when you want them, technology when you don’t.”
These companies simply use technology to manage their investments efficiently and cost-effectively. If you seek the ultimate in convenience, you can undoubtedly do everything online, from your account set up (it might just take a few minutes) to the completion of an online investor questionnaire that will offer you the most appropriate comprehensive investment portfolio designed to help you reach your goals. At the same time, you invest within your risk comfort level.
But once again, if you ever want that human touch, just pick up the phone.
All of these ‘Digital Wealth Managers’ offer the same style of sensible low-fee investment portfolios. You’ll have a well-diversified portfolio that includes large baskets of Canadian and US and International companies, and bonds are often present to manage the portfolio’s risk. The stock (companies) are there for growth. The bonds are present to reduce the risk or volatility. You’ll be offered a portfolio in line with your risk tolerance level.
And the portfolios are watched and professionally managed on a regular schedule. They are also re-balanced automatically to keep everything ‘in check’. There’s nothing you can do but sit back and add monies on a regular schedule. You can view your progress online. You can call in to chat if you have questions or concerns.
You can do and get everything you would typically need; you’ll simply do it in a much more cost-effective manner. You will keep considerably more monies in your portfolio pocket.
And all of these investment companies have their unique characteristics and offerings. You can visit my Robo Advisor page for a list of Canadian companies, and you’ll find reviews on many of these companies (I am still completing that writing process).
They also cover a broad spectrum. Questwealth and Nest Wealth offer the lowest fees; Questwealth for those with smaller to modest portfolios, while Nest Wealth is the most cost-effective for portfolios in the range of $300,000 and above. On any investment portfolio above $150,000, Nest Wealth will charge just $80 per month, capped. The savings on fees can be thousands upon thousands of dollars every year, depending on the size of your investment portfolio.
If you have a more complicated tax situation or need a complete financial plan, you might consider Justwealth. Once again, that advice is included in the low annual fees.
Please look at the list of companies on my site, read some reviews and if you have any questions, please send a note to [email protected] If you are interested in this low-fee approach, I can direct you to the companies that might best suit your needs.
The key is not to pay those wealth-destroying high fees when you invest. Those monies belong in your pocket.
Dale Roberts is the Chief Disruptor at Cut The Crap Investing. A former advisor on low-fee index portfolios, Dale now helps Canadians find the many sensible low-fee options available.