The Canadian Robo-Advisor Roundup 2016
A robo-advisor is an online wealth management service that provides automated portfolio management advice minimizing the use human financial planners. Consequently, the costs to you for a robo-advisor will be far lower than that of a traditional mutual fund or wealth manager.
This post summaries and compares for you all the robo-advisors operating in Canada, and will be updated on a regular basis.
In the United States, names such as Wealthfront, Betterment, Vanguard Personal Advisor Services, and Schwab Intelligent Portfolios dominate the space. In Canada, we’ve got a growing industry albeit at a slower rate than our southern friends.
How do robo-advisors differ?
Robo-advisor services can follow one of two basic approaches to investment management when they manage their money. Both types will put you into a broad and diversified set of assets.
Option 1: Passive Asset Management
Option 2: Active Asset Management
Markets are completely efficient.
Market returns cannot be surpassed consistently over time.
Low-cost investments held for the long-term will provide the best returns
That a specific style of management or analysis can produce returns that beat the market.
The active approach seeks to take advantage of inefficiencies in the market
It’s possible to anticipate the movement of markets based on factors such as economic conditions, interest rate trends or technical indicators
This is the most important distinction for good reason.
If you select passive asset management, your only consideration with passive robo-advisors should be keeping your fees down and thus you should select the Passive asset management robo-advisors with the lowest management fees. Ignore the marketing hype around “tax optimization”, “tax loss harvesting” and “automatic rebalancing” – all of these services provide these features. They are basically table stakes.
If you select an active asset manager, ensure that you agree with the robo-advisor’s investment philosophy.
If you are interested, you can read more about active vs. passive asset management on the Responsive.fund blog.
List of Canadian Robo-Advisors
The following table outlines the major robo-advisor players in Canada. Please note that the total fees you will pay will be a combination of the robo-advisors fees, and in addition the underlying assets management expense ratios (which on average, will add ~0.15% to the overall that you pay).
$100,001 to $250,000 - 0.50%
$250,001 to $500,000 - 0.40%
$0 - $10K - 0.50% (if $1,500 contribution, or $49 per year)
less than $75K - $20 per month ($240 annually)
$75K to $150K - $40 per month ($480 annually)
$150K or more - $80 per month ($960 annually)
WARNING: When rebalancing, you will be charged an additional $9.99 per trade
$2,000 - $99,999 - 0.7% ($99.95 minimum)
$100,000 - $249,999 - 0.6%
$250,000 - $499,999 - 0.5%
$500,000 - $999,999 - 0.4%
Smart Money Capital Management
$150,000 - $500,000 - 0.4%
$250,000 - $999,999 - 0.40%
more than $1,000,000 - 0.35%
Responsive Capital Management
NOTE: For any corrections to the above table or to have your company added, please respond with a comment below and we’ll update this table as soon as possible
If you’re going passive, one last consideration…
Do you have basic investment acumen? If so, in order to keep your fees down why not just invest in the ETFs yourself? The Canadian Couch Potato website shows some sample model portfolios that you can invest it to save yourself a boatload of fees.
Regardless of what option you choose, selecting a robo-advisor over a traditional wealth manager or mutual fund will allow you to keep your fees low and grow your wealth quicker. A wise choice indeed.
Responsive is launching Canada’s first actively managed robo-advisor. We algorithmically adjust portfolios based on economic and market conditions in order to protect against market turbulence. To secure your spot when we launch and to receive updates, please signup at Responsive.fund and follow us at @responsivefund
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