Who is the best robo advisor in Canada? There are so many robo advisors out there right now. Even then though, the assets under management for robo advisors still pales in comparison to mutual funds assets under management ($8 billion versus $1.63-trillion invested in mutual funds). People still like and trust their mutual fund salespeople.
Nevertheless, you may be interested in switching to a robo advisor because you are sick of high fees and you want more left for your retirement. If you are interested in change, you might be thinking of switching from your high fee mutual fund to a lower fee robo advisor.
In this post, I’ll explain what a robo advisor is, what the pros and cons of robo advisors are, whether robo advisors are safe, who the robo advisors are in Canada, and who actually is the best robo advisor in Canada.
Table of Contents
What is a Robo Advisor?
What is a Robo Advisor? A robo advisor is a financial technology “fintech” creation where you are able to invest your money while on autopilot. The only thing you need to do with a robo advisor is to deposit the money to invest, and your money is invested automatically into an exchange traded fund portfolio. You don’t need to look at annual reports, to look at P/E ratios, or to look at book value and recent earnings.
With a robo advisor, you will be tracking the index instead of trying to beat the market. Index investing is like the enlightenment journey in the 7 stages of investing. Also, with a robo-advisor, your money is automatically rebalanced and you don’t need to be making any trades on a brokerage to make sure you have the correct asset allocation (e.g. to make sure you don’t have Canadian home bias).
If you are a Canadian millennial looking to invest and you don’t know how to start (and you want to take advantage of this current bear market), or you don’t want to get involved with opening up a brokerage account and making trades yourself, then a robo advisor is probably a great option for you.
PROS Of robo advisors
One great benefit of having a robo advisor account is not feeling as accountable or responsible to freak out during a (this!) market correction. You know that your money is working for you and rebalancing on its own automatically without your needed intervention and rebalancing yourself.
You just need to put the money in and the robo-advisor will take care of it for you. You don’t have to learn to dollar cost average or to buy or sell ETF’s on something like a discount brokerage like Questrade
You don’t have to feel pressured to buy dividend stocks or ‘buy on the dip’ because it’s out of your hands and in your robo advisor’s hands. All you have to be responsible for is contributing to your robo advisor’s investment account.
cons of robo advisors
For people that ‘don’t have money to invest’ (whether it be because they are eating too much avocado toast (haha!) or saving for a down payment on a home) a robo-advisor won’t fix that because you first need to save to invest
If you prefer to meet someone in person then Robo Advisors aren’t for you
You don’t need a ton of money to start a robo-advisor account
It takes the emotion and discipline out of managing your portfolio and does it for you…and as we know, emotions are the bane of the do it yourself investors existence
The more money you have to invest, usually the lower the fees
They make sure asset allocation is done for you which is HUGE for making sure your investment portfolio is performing well and tuned up, protecting against market fluctuation.
There aren’t many downsides to using a robo advisor. The main downside that I see is related to the fees. Although using a robo advisor is definitely cheaper than buying a mutual fund with MER’s upwards of up to 2.25% (or more), it is still approximately 0.70-1.00% annually to invest with a robo advisor which includes the costs of the MERs from the individual ETFs within your robo advisor portfolio.
If you want lower fees, then you should take the DIY approach. The fees are approximately anywhere from 0.70% to 1%, which can still eat away at your capital and investment when you have a larger portfolio. A 1% fee on a $500,000 portfolio is still $5000 annually.
Are Robo Advisors Safe?
This is a great question considering one of the robo advisors in Canada recently went insolvent (Get Planswell).
Anyone would want their hard earned after tax dollars safe and would not want their money to end up in a company who may go insolvent.
Investments with robo advisors in Canada are protected by the Canadian Investor Protection Fund up to $1 million per account through different third-party custodians within specified limits.
What does this mean? It means that your investments are protected (up to $1 million) if the robo advisor company were to go bust. To be clear, if you lose money ON your investments (e.g. the stock market when down) obviously you are not protected for that. That would be lovely given the recent bear market, but unfortunately it is not the case.
Also in terms of portfolio safety, robo advisors can keep your portfolio safe from the most dangerous person- YOURSELF! Tinkering with your portfolio is tempting during a market crash (or even withdrawing the whole thing out) especially if you have individual stocks.
You’ll be tempted to take your stocks out and sell at a loss to soothe your ego more so if you had a DIY portfolio with individual stocks. Or even worse you’ll be tempted to ‘average down’ and buy more of the same bad company to soothe your ego. We can’t help it, it is human nature. I’ve done it.
Robo Advisors in Canada
There are a number of robo advisors in Canada. Here are some of the more popular robo advisors in Canada:
WealthBar is one of the original Canadian robo advisors and they are based out of Vancouver, BC. WealthBar was actually the first pioneer robo advisor in Canada from back in 2013. WealthBar is a registered portfolio manager in all provinces and territories in Canada. WealthBar is also a full Life Insurance Agent in British Columbia and Ontario. CI Direct Investing has approximately over $475 million in assets under management as of August 2020.
What makes CI Direct Investing unique is that they offer investing available to Canadians who live abroad, offer RDSP accounts, offer portfolio customization, and offer private investment portfolios for everyone. These premium asset class portfolios incur more fees but they contain a mix of asset classes, leaving them less susceptible to the swings of the stock market.
Wealthsimple is the largest robo advisor in Canada (from assets under management). They are backed by Power Corporation of Canada. Wealthsimple was founded in 2014, and has over $5 billion in assets under management (that’s more than 50% of assets under management with robo advisors in general in Canada). Wealthsimple has clients in the United States, U.K., and Canada.
What makes Wealthsimple is a bit more ‘different’ and unique is they aren’t just a robo advisor. They have a high interest savings account (Wealthsimple Cash), a robo advisor portfolio (Wealthsimple Invest), and a trading option (Wealthsimple Trade). Wealthsimple even recently acquired and added Simple Tax (a free Canadian tax software) to their offerings, a way for you to keep things like doing your taxes even more simplified.
Questwealth is known as the Questrade robo advisor. Questrade has been an online discount brokerage since 1999. They have been a big self-directed investing supporter since 1999, and I have been a happy discount brokerage customer since 2009. Questrade recently expanded to offer Questwealth in the last few years.
These Questwealth portfolios are also a basket of ETFs but they are are actively managed (unique in that most other robo advisors are not actively managed), feature socially responsible investing, and have the lowest fees of all the robo advisors. The active management piece of this Questrade robo advisor is to take advantage of tax loss harvesting in taxable accounts to reduce capital gains.
Here are the ETF holdings in the Questwealth Growth portfolio:
Modern Advisor is based out of Vancouver, BC and recently announced they are joining Guardian Capital Group. They are unique in that they have a risk free trial for you to test out a robo advisor before you commit (a $1000 account). You can open an account and keep any gains that you make with a credit for your real account. If you do not make money with your trial account, you are still able to have another month free. A win-win situation, sounds like.
Modern Advisor also offers socially responsible portfolios.
Justwealth was created by financial experts is the robo advisor with the most portfolios available (they have over 70 different portfolios to suit your unique needs).
Unlike a lot of other robo advisors who keep their portfolio performance more discreet, Justwealth proudly share updated information of the Justwealth robo advisor portfolio’s performance on their website.
Justwealth is unique and great in that they have Target Date portfolios for RESPs. You can input when your child may graduate and when you will plan to need the RESP. Then it will invest your money accordingly according to the Target Date. As your child gets closer to graduation from high school, you will want to preserve the capital invested.
Here’s more information on Justwealth RESPs in comparison to Wealthsimple’s RESP.
Nest Wealth was founded in 2014 and is based out of Toronto, Ontario. Nest Wealth has offerings for individual investors, for financial institutions, for employers, and financial advisors. They created Canada’s first software wealth management platform.
Nest Wealth is unique amongst the other Canadian robo advisors because they charge a flat monthly fee ($20, $40, or $80) depending on your amount invested. This is on top of the MERs of the individual ETFs though. The disappointing thing about Nest Wealth was that you cannot see who created Nest Wealth or see any pictures or names of the people that created Nest Wealth (and currently run Nest Wealth).
BMO Smartfolio is managed by BMO Nesbitt Burns and the BMO Smartfolio portfolio is handled by BMO Global Asset Management (which has over $300 billion in investments). Smartfolio charges you 0.7% management fee as a robo advisor fee. However, this fee schedule is actually tiered. The more you have to invest the less you will pay.
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The 17 dedicated Smartfolio advisors are available by live chat, email, or by phone and you can see their faces and names (pretty awesome for a big bank, I’d say)! BMO Smartfolio does not consider themselves a robo advisor because there is a team of expert portfolio managers making each investment decision (not entirely passive).
Royal Bank also has a robo advisor, called RBC InvestEase. Their products are RBC iShares ETFs, partnered with Blackrock Asset Management Canada, one of the biggest ETF providers out there.
Royal Bank has your safety and concerns about cyber security in mind. If there is any unauthorized transaction in your account, RBC InvestEase will reimburse you 100% through their online security guarantee. This might be reassuring for those who are skittish about investing online.
Those are some of the robo advisors available in Canada.
For a more detailed look at comparing Wealthsimple and WealthBar robo advisors, I have a review here.
|Robo Advisor||WealthBar||Wealthsimple||Questwealth||ModernAdvisor||Nest Wealth||BMO Smartfolio||RBC InvestEase|
-RESP for Quebec residents
-Group TFSAs & RRSPs Accounts
-Individual and Personal Pension Plans
-RESP + Family RESP
-Locked in RRSP
-Corporate (opened manually)
|Minimum Account Size||$1000||$0 minimum||$1 but a portfolio will only be invested if deposits reaches $1000||$0 but a portfolio will only be invested if deposits reaches $1000||$0 minimum||$1000||$0, money is invested in a “Small Balance Portfolio” once it reaches $100. Moves to standard portfolio after $1500.|
|Robo Advisor Fees||Tiered fee structure:|
< $150,000 invested, 0.6% annually
Next $350,000 invested= 0.40% annually
Next $500,000 invested, 0.35% annually
Less than $100,000 = 0.5%
Less than $100,00= 0.25%
$100,000+ = 0.20%
for larger accounts
Under $75,000= $20/month
More than $150,000= $80/month
Above $500K= 0.40%
|0.50% flat fee|
|Average MER for ETF portfolios||Ranges from 0.18% to 0.25%|
Private investment portfolios= 1-1.55%
|Ranges from 0.06% to 0.25%|
List of ETFs used here
|Ranges from 0.11%-0.23%|
SRI portfolio range from 0.21%-0.35%
|Ranges from 0.12% to 0.22%|
Socially responsible portfolio from 0.22% to 0.34%
|Average is 0.13% for a balanced portfolio||Ranges from 0.20-0.35%||Ranges from 0.11%-0.22% (0.14% weight average)|
For Responsible Investing ETF MERs, it is 0.18-0.30%
|Trading Commission Fees||None||None||None||None||$7.99 to $9.99 per trade depending on the Custodian used (Fidelity vs National Bank). Trades more than $100 per year will be paid for by Nestwealth||None||None|
Only robo that has an RDSP account
“one stop shop” has Wealthsimple Trade and Wealthsimple Cash
Currency exchange fee (buy and selling USD)
The free trial perk is unique to robo advisors in Canada
Includes Northwest Territories
Different pricing model, has the lowest monthly investment fee in Canada
Dedicated Portfolio Manager
Has 5 Model Portfolios available
Easy access to a dedicated financial advisor, and financial
Also offers insurance in BC and Ontario
Impact investing and Halal investing available upon request
Wealthsimple Cash HISA
Wealthsimple Trade $0 commissions
Can connect your account to a family member’s to qualify for lower fees (My Family)
Socially responsive investing (SRI)
|Can start a trial account with $1000 of their money and keep the gains after 1 month (you have to open a real account for 90 days)|
Low MERs for their ETFs: VSB, ZAG, XIC, XRB, XSP, VNQ
Doesn’t identify as a robo advisor “expert portfolio managers making each investment”
RBC iShares ETFs, which are managed by BlackRock Asset Management Canada
|Genymoney.ca Promo||Get your first $10,000 managed free with WealthBar||Get your first $10,000 managed free with Wealthsimple||Get $10,000 managed free for first year||More info on ModernAdvisor here||More info on |
|Get up to $1000 cash back (0.5% for every $1 invested up to $200,000 using promo code: PROMO1000||Get your first 6 months managed for free if you apply before April 30, 2020 (Promo Code automatically applied)|
Who is the Best Robo Advisor in canada?
So who is the best robo advisor in Canada? I think the best robo advisor in Canada depends on your personal situation, so I’m going to highlight what you might be looking for and which robo advisor would be best suited for your more important needs. Canadian robo advisors are not created equal, and that’s the beauty of it.
If you’re looking for the cheapest robo advisor for your investment portfolio, the Questwealth fees are the lowest in Canada (at 0.20-0.25%).
If you want to just pay a flat monthly fee instead of a percentage of your assets fee, Nest Wealth is unique to this (and it’s only between $20 to $80 a month).
If you’re looking for a ‘one stop shop’ place to put your cash and earn interest, a place to expand to when or if you feel ready to start trading individual ETFs or stocks, there is Wealthsimple Invest (which has Wealthsimple Cash and Wealthsimple Trade).
If you are looking for a more personalized touch and want someone to talk to more easily, there is CI Direct Investing.
If you are wanting to invest in a RDSP (Registered Disability Savings Plan), looks like CI Direct Investing is the only robo advisor in Canada who offers this.
If you’re looking for robo advisor that provides insurance as well, CI Direct Investing (formerly WealthBar) offers both robo advisor portfolios and insurance needs.
Canadian Robo Advisor Summary
In summary, robo advisors are a fintech creation where you can invest your money online without having to head to a bank or deal in person with a financial advisor. There are a number of pros and cons when using a robo advisor in Canada, one is lower fees (but not as low compared to self-directed investing).
There are a number of robo advisors in Canada, namely:
- CI Direct Investing (formerly WealthBar)
- Nest Wealth
- RBC InvestEase
- BMO Smartfolio
- Modern Advisor
As for which Canadian robo advisor is the best, it really depends on what you are looking for in a robo advisor.
Alternately instead of the robo-advisor route (if you have a little more time, potential for a bigger portfolio, and a bit more interest with investing), you could go the Do It Yourself Investing route. For example, on my $600,000+ portfolio, I spent $300 in commissions over the past 12 months mainly buying ETFs for free using Questrade. This is 0.05% cost annually for me.
In comparison, if I were to use the cheapest robo-advisor out there at around 0.70% per year, it would be $4200 a year.
If you sign up for Questrade using this promo link, you can get $50 off your first 10 trades (and remember, buying ETFs is free using Questrade).
To rebalance you could use something like Passiv to help you rebalance. It’s free for the first year for Questrade users.
Do you use a robo advisor?
Which robo advisor do you use?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.