Are you considering investing some money in the financial market, but you’d rather not be actively involved? A robo advisor is your answer! Suppose you don’t have the time or motivation to monitor your investments as they rise and fall closely, or your money is not enough to use a private financial advisor.
In that case, a robo advisor is a new, automated investment technology that does the job for you and helps you save on fees simultaneously. However, how does it work, and how do you know the best robo advisor Canada has for you? You are about to find out.
What are Robo Advisors and How do They Work?
Basically, a robo advisor is a digital technology platform that, most times, invests on a user’s behalf. You will be asked questions regarding your investment risk tolerance and annual income.
Then, your investment portfolio will be customized based on your replies. Investing has a close relationship with two concepts: risk and return. How? It’s simple. The higher the investment risks, the higher the return; the safer the investment, the lower the return.
After you state your risk tolerance and the level of financial risk you can take, the robo advisor commences asset allocation. Asset allocation is an investment strategy that splits percentages of your money into assets or investments that fits your specified risk profile.
The higher the risk you’re comfortable with, the higher the percentage of your money that will be invested into more volatile assets in your selected risk-modeled portfolio.
Suppose your investments start over-performing outside your specified risk level. In that case, the humans supervising your robo-advisor will program it to re-balance your portfolio so that your assets go back to performing within your set parameters.
A Quick Glance at the Best Robo Advisor Canada
|Robo Advisor||Fees||MER||Minimum Account|
|Wealthsimple||0.4% to 0.5%||0.20%||$0|
|CI Direct Investing||0.35% to 0.6%||0.26%-0.34%||$1,000|
|BMO Smartfolio||0.4% to 0.7%||0.20%-0.35%||$1,000|
|Questwealth Portfolios||0.2% to 0.25%||0.19%||$1,000|
|Justwealth||0.5% on $500K|
0.4% on $500K+
$0 for RESP accounts
|NestWealth||$20 to $80/mo||–||$0|
|Invisor||0.50%||0.20%||No. However, deposits stay in cash until account reaches $1,000.|
|Modern Advisor||0.35% to 0.5%||0.20%||$0|
Best Robo Advisor Canada has for: Investors who value simplicity, low fees, and a sleek user interface.
Wealthsimple has been rocking the investment industry since Michael Katchen founded it in 2014. It is a famous robo advisor Canada has that boasts of more than $4 billion in assets under management. The interface is sleek and offers a fantastic user experience so you can easily track your performance.
WealthSimple also operates and serves hundreds of thousands of clients in the U.S. and U.K. You can open investment accounts like RRSPs, TFSAs, RRIFs, LIRAs, RESPs, and more non-registered accounts with Wealthsimple in Canada.
Apart from the standard robo advisor portfolios, they offer other areas of investment. Examples are the Wealthsimple Trade and Wealthsimple Cash. Wealthsimple Trade is a DIY trading platform that allows people to buy stocks, while Wealthsimple Cash is their version of a chequing account.
Your investment is put into an array with ETF from Vanguard, VanEck, BMO, Powershares, and WisdomTree. The array has three principal portfolios (balanced, conservative, and growth). However, you can’t choose your portfolio. Instead, you will be asked several risk tolerance-related questions when you sign up, and your answers will determine the portfolio they put you.
Also, you can access Wealthsimple Black if you have over $100,000 worth of assets to invest. , It comes with access to airport lounges worldwide, a financial planning session with a human advisor, and a slashed fee.
Another option is Wealthsimple Generation. It comes with thorough financial planning, the chance to create custom portfolios, and human advisors. All you have to do to access it is deposit $500,000.
- $10,000 invested in the first year is managed for free.
- First $99,999 investment pays 0.5%
- Over $100,000 investment pays 0.4%
- No minimum initial investment
- There is no minimum initial investment requirement.
- You get a customized portfolio that fits your comfort level and financial needs.
- The fees are within the 0.35% to 0.50% range, depending on your portfolio size.
- Your investments are safe. It uses bank-level security, and your money is protected by the Canadian Investor Protection Fund (up to $1 million).
- Automatic contributions any time your portfolio strays from its supposed asset allocation.
- Unlimited financial planning advice from a human team of portfolio managers.
- Large accounts get additional perks like access to VIP airport lounge and financial planning.
- Tax-loss harvesting to cut down your tax liability when relevant.
- Additional tools like Wealthsimple Roundup, Wealthsimple Trade, and Overflow.
- Wealthsimple Roundup helps you invest your spare change automatically in an affordable ETF portfolio. Overflow tracks your account balance and invests the extra money you aren’t using, while Wealthsimple Trade is an online stock trading service with no commission.
- The fees can be improved upon and made lower.
- You get only three possible portfolios.
READ ALSO: Wealthsimple vs RBC Robo Advisor <- Insert link [Spoiler Alert: RBC InvestEase Portfolio resulted in more $$]
[CA’s Note: I’ll move RBC up here]
#2. CI Direct Investing (previously WealthBar)
Best Robo Advisor Canada has for: Investors who want flexibility, more choice, and different ways to diversity.
Chris and Tea Nicola founded CI Direct Investing, and they called it WealthBar. They are the son and daughter-in-law of John Nicola, a popular money manager who established Vancouver’s Nicola Wealth Management.
CI Financial Group became a significant owner in the company in January 2019, and this partnership has opened up access to new investment opportunities. One thing that sets it apart from any other robo advisor Canada has is that its offerings are a core element of financial advice.
CI Direct Investing integrates a more hybrid active-passive model, with portfolio managers developing its funds, which are majorly based on ETFs.
CI Direct Investing offers two portfolio types: private investment portfolios and low-cost ETF portfolios. A low-cost ETF portfolio is similar to what other robo advisors provide. It has five portfolios ranging from conservative to aggressive, including ETFs from Vanguard, Horizons ETFs, BMO, iShares, and CI First Asset.
On the other hand, the private investment portfolios comprise three portfolios that are made up of Nicola Wealth Management mutual funds. These funds are invested in private equity, alternative strategies, mortgages, and other traditional and non-traditional investments.
- The minimum deposit is $1,000.
- Investments under $150,000 attract 0.6%.
- Investments above $350,000 and below $500,000 attract 0.4%.
- Investments above $500,000 attract 0.35%.
- You can get up to $10,000 managed free for one year when you sign up and fund your account.
- You will be designated a non-commission financial planner to advise you. It also has financial planning tools to help you create as many financial plans as you want.
- The automatic rebalancing feature makes investment easier.
- You can select between actively managed portfolios and ETF portfolios.
- MER for ETF Portfolios lies in the 0.26% to 0.34% range.
- The partnership with Nicola Wealth Management provides CI Direct Investing with access to private investment pools.
- It requires a $1,000 minimum investment.
- The management fee can be reduced.
#3. BMO Smartfolio
Best Robo Advisor Canada has for: Investors looking for a combination of passive and active management and those who want the safety of investing with a famous name.
BMO launched its Smartfolio in 2016, and they were the first big bank to launch a robo advisor. The Smartfolio uses ETFs as well as real-life fund managers from its huge investing arm (the BMO Global Asset Management).
Although it is open to everyone, most people who use BMO Smartfolio were already BMO banking clients. BMO products have a strong reputation, which backs the Smartfolio as well.
When you sign up, you will be asked a few risk tolerance questions. The company will then use your answers to determine which one of its five model portfolios match you. The portfolios vary greatly regarding asset mix.
For example, the BMO capital preservation portfolio has a 90% allocation to fixed income and a 10% allocation to equities. Its Equity Growth option’s weight is 90% stocks and 10% bonds. Each portfolio contains a basket of BMO ETFs.
You can easily change your asset mix; just inform them when a major life event happens, like a remarkable job change, children’s arrival, and more. These changes in your situation will need a shift in your investing approach. If the managers see the need for different asset class exposures, they will adjust its five portfolios.
The MERs for CI’s Private Investment Portfolios is 1.0% for Safety, 1.55% for Balanced, and 1.40% for Aggressive.
- First $100,000 investment attracts 0.7% annual fee.
- Next $150,000 attracts 0.6%
- Next $250,000 attracts 0.5%
- Investments above $500,000 attracts 0.4%
- Security. It is supported by one of Canada’s big five banks.
- Portfolio rebalancing every quarter.
- The customer service is excellent.
- BMO ETFs are used to design portfolios.
- ETF MER is in the 0.20% to 0.35% range.
- It is one of the costliest robo advisors with fees ranging from 0.40% to 0.70%.
- It can only be managed actively.
- It requires a $1,000 minimum initial investment.
#4. Questwealth Portfolios (formerly Questrade IQ)
Best Robo Advisor Canada has for investors who want extremely low fees and a discount brokerage to use for individual stock picking.
Questwealth, previously known as Portfolio IQ, is the robo-advisor arm of Questrade. Launched in 2018, Questwealth has one of the lowest management fees in Canada among robo-advisors.
Questwealth Portfolios is the robo advisor branch of Questrade. Questrade is an online discount brokerage that has been offering Canadians low-cost online investment solutions since 1999.
Questwealth was formerly known as Portfolio IQ, but it was rebranded to Questwealth Portfolios in 2018, and this change came with reduced fees. The fastest-growing robo advisor Canada has, with more than 30,000 new account sign-ups last year.
Questwealth has five actively managed ETF portfolios where it puts investors. The funds hold several brand name investments such as Wisdom Tree, SPDR, and iShares. One great thing about using Questwealth is that it offers more investment account types than many other robos with socially responsible investment options.
The account types include RRSPs, spousal RRSPs, RESPs, TFSAs, LIRAs, and many other non registered and registered accounts.
- The minimum account size is $1,000
- Investments between $1,000 to $99,999 – 0.25%
- Investments above $100,000 – 0.2%
- One of the lowest fees in the industry, ranging from 0.20% to 0.25%.
- Questwealth uses an active portfolio management style.
- You can link your friends and family accounts to benefit from the lower fees.
- No minimum initial investment
- Wuestrrade has been around for more than 20 years, so they are credible.
- Your investments are protected up to $11 million.
- The average ETF MER is 0.19%.
- It does not comply with traditional passive investing concepts, so it can only be actively managed.
Best robo advisor Canada has for: Canadian Investors with specific investment requirements and wants more investment options.
Justwealth is a Toronto-based company co-founded by Andrew Kirkland and James Gauthier in 2016. It portrays itself as a more sophisticated robo. Unlike the average robo-advisor Canada has, Justwealth boasts an array of more than 60 portfolio options from which they select which one suits your investment objectives.
Clients also get a personal portfolio manager who helps find the right ETF portfolios tailored to their specific financial goals. Justwealth also offers several accounts, including RRSPs, TFSAs, RESPs, RRIFs, and non-taxable accounts. Virtual Brokers, a part of Canada’s BBS Securities, is their custodian.
Justwealth offers over 60 portfolios. Some focus on Canadian growth, global growth, income, and education savings. The company utilizes up to 25 ETFs from seven different providers, like Schwab, Vanguard, and iShares.
It also provides personalized tax-loss harvesting and a “personal portfolio manager.” Your personal portfolio manager oversees your investments, and you can contact him or her directly when you have questions regarding your portfolio.
- Investments under $500,000 – 0.5%
- Investments over $500,000 – 0.4%
- The average ETF MER is 0.20%
- Free financial planning from professional Certified Financial Planners.
- It offers over 70 different portfolio options, including target date RESP portfolios.
- They also provide USD investment accounts.
- Automatic rebalancing
- Justwealth offers a free detailed professional portfolio review so you can see where to improve your performance and savings.
- RESPs less than $6,000 get a $2.50 RESP account pricing.
- The minimum initial investment is $5,000.
- User experience on Justwealth is not as sleek as you’d have with other robo advisors.
- The fees can be improved upon and made lower.
#6. RBC InvestEase
Best robo advisor Canada has for: Canadian investors who are already RBC customers or those looking for an effortless way to invest.
Another robo advisor Canada has from a big bank is RBC InvestEase. It was unveiled to all RBC (Royal Bank) customers in 2018. It is an easy option for investors, and now RBC has a partnership with BlackRock to create RBC iShares.
This partnership has made RBC the largest provider of exchange traded funds ETFs in the country. This is why this robo advisor’s portfolios are filled with iShares products.
RBC InvestEase has two primary portfolio types: standard and responsible investing. However, each portfolio has five programs within it that match different risk tolerance levels. They both use three bond and four equity ETFs from iShares.
The standard portfolio type’s equity portion invests in traditional regional products holding stocks in Canada, Europe, U.S., and emerging markets. The responsible investing portfolios, on the other hand, use ESG MSCI funds.
RBC also rebalances portfolios during the year like other robo advisors.
- No minimum account size, although money is only invested when your balance reaches $100.
- 0.5% on all amount invested
- Average ETF MERs is 0.10% to 0.30%.
- Security and Reliability: RBC has been in business for more than 150 years.
- It offers automatic contributions
- 0.50% management fee is relatively low compared to what other big bank robo advisors offer.
- You get access to a portfolio advisor if you have any questions.
- It supports TFSAs, RRSPs, etc.
- You have to pay $135 to transfer to another financial institution.
- There’s no fee break for bigger portfolio balances.
This RBC InvestEase review covers more details you should know about this robo advisor.
#7. Nest Wealth
Best robo advisor Canada has for: Older people who want a straightforward, low-risk passive investment approach.
Nest Wealth came out in 2014 and has since been one of the leading robo advisors in Canada. It creates personalized investment solutions with smart technology, bringing you closer to realizing your financial goals.
NestWealth believes you should invest your money in multiple asset classes and across several industries so you can stay safe and get maximum benefits. All NestWealth investments have Nest Wealth’s automatic balancing feature so the app can diversify your portfolio. The result for you will be better returns and lower risks.
The company uses several industry-standard ETFs from Vanguard, iShares, and BMO. Then they allocate your dollars across six asset classes, including emerging market, domestic equities, international equities, the government fixed income, and real return bonds and real estate. Your risk tolerance determines where you’ll be allocated.
- No minimum account size.
- $0 to $75,000 investment – $20 per month.
- $75,000 to $150,000 investment – $40 per month.
- $150,000 plus – $80 per month.
- It offers users a low-risk investment.
- It is easy-to-use and simple to understand.
- You pay the same monthly fee even when your assets grow.
- Companies can use NestWealth to improve their employee benefits offerings.
- It allows advisors to spend less time investing and focus on planning.
- $0 minimum deposit.
It’s not a good fit for small investors whose returns are not high enough for a $20 monthly charge.
Best robo advisor Canada has for: Investors looking for a single shop for both investment and insurance.
Invisor is operated by Alliance Insurance & Financial Services Inc. It works a little differently from other robo advisors. Users are asked to input their financial goals. Then they are put in one of their seven ETF portfolios, ranging from Safety (lowest risk portfolio) to All Equity (highest risk portfolio).
It also offers clients easy access to insurance products, like life insurance, critical illness, disability, and travel. Professional advisors are also on ground to answer investing-related questions.
Professional managers coordinate the company’s seven portfolios. Although they also possess passive ETFs from iShares and Vanguard, experienced managers coordinate the company’s seven portfolios. Your risk tolerance determines asset mix and geographic exposure.
- No minimum account size. However, deposits will be held in cash until the account reaches $1,000.
- 0.50% management fee on all investments.
- 0.2% MER (management expense ratio) on portfolio’s securities.
- Individual accounts are CIPF insured for up to $1,000,000.
- It is a one-stop-shop for insurance and investment, which is advantageous for people who want their financial products in one place.
- There’s no dedicated portfolio manager.
#9. Modern Advisor
Best robo advisor Canada has for: Investors who want to cut down their management fees to the bare minimum with a passive investment approach.
Modern Advisor is one of the oldest robo advisors in Canada. It was established in 2013. The Credential Qtrade Securities Inc holds any money you invest with Modern Advisor. It safeguards more than $20 billion for financial institutions across Canada and is also a member of CIPF, so your money is safe.
- No management fee on investments under $10,000
- 0.50% on investments between $10,000 to $100,000
- 0.40% on investments between $100,000 to $500,000
- 0.35% on investments above $500,000
- $0 minimum initial investment
- Competitive fees ranging from 0.35% – 0.50%.
- It is registered as a Restricted Portfolio Manager, so they have to put your best interests first.
- They have all the standard investment accounts available including, TFSA, RRSP, and non-registered accounts.
- Although there is no minimum account size, you need at least $1,000 for your money to be converted from cash to investments.
- It is not a popular name.
Best Robo Advisor Canada:
How Robo Advisors Invest Your Money
The best robo advisor Canada has to use low-cost ETFs to consider the investor’s risk tolerance, objectives, and investing time horizon, and then use this information to design a portfolio that matches their needs.
This portfolio is properly diversified, which lowers risk, and it’s also rebalanced automatically to save you time and from the stress of having to do it yourself.
Robo advisors use ETFs as cheap as 0.03% and charge low management fees ( 0.50% average compared to mutual funds’ 2%) which in turn helps you save a lot of money in fees.
Robo Advisors vs Mutual Funds
‘Robo-advisor’ is the technical name for online wealth management firms that use advanced algorithms programmed to invest your money automatically. Humans work in the background to ensure the computer programs run fine.
How do robo advisors play? Let’s use ‘active’ vs. ‘passive’ investing to explain this. Active investing entails trying to buy and sell stocks i.e., financial assets, continually, or gather a portfolio of assets that with better performance than a similar ‘buy’ and ‘hold’ portfolio – aka passive investing. An active investor is basically essentially trying to beat the stock market.
Active fund managers charge more fees because they are constantly busy monitoring your portfolio, hiring analysts to do research, and more. Their fees are popularly called the Management Expense Ratio (MER).
The harsh reality is that fund managers often underperform and rarely earn enough in profits to justify their fees, so investors are left at the disadvantage. However, when you use a robo-advisor, you get passive investing and lower fees.
Robo Advisors vs Financial Advisors
A common questions on a lots of people’s mind is whether to invest with a robo advisor or a financial advisor (human advisor). Like many things in life, both have their pros and cons. The one you choose depends on your personal circumstances. For example:
Opt for a Robo advisor if:
- You are just getting started in investing and with a small amount of money.
- You are okay with a standardize portfolio.
- You love the idea of passive investing.
- You prefer to pay lower investment fees.
Opt for a Financial (Human) Advisor if:
- You are looking to invest a substantial amount of money and prefer personalized support.
- You are okay with paying higher investment fees with the hope of getting more value.
- You prefer to personally manage your investment with the support of one-on-one advisor relationship.
- You value having someone talk to you about financial planning.
Best Robo Advisor Canada – Pros and Cons
Robo Advisors Pros
- They use easily liquid and easily tradable ETFs.
- Their flat fees are low.
- They allocate money to different ETFs automatically.
- They create a well-tailored portfolio based on your risk tolerance and time horizon.
- Automatic rebalancing
- They are tax-efficient
Robo Advisors Cons
- Investors can not change their asset mix on their own.
- They use specific ETFs which may not include the investor’s preferred brands.
- Redeeming takes some time, unlike a discount brokerage.
FAQs – Best Robo Advisor Canada
Are Robo advisors worth it?
Robo-advisors are a fantastic choice for entry-level investors. The best robo advisor Canada will offer perks like low fees, ease of use, and low-cost threshold. Individuals with less than $25,000 to invest will benefit from investing with a robo advisor.
Is Wealthsimple better than questrade?
These two are great options to check when deciding on the best robo advisor Canada has. Questrade offers better and more access to accounts, research, products, and tools than Wealthsimple Trade currently offers.
On the other hand, Wealthsimple Trade clients won’t have free from inactivity fees when they’re first starting. They also won’t get charged when selling ETFs to rebalance their portfolio.
How much should I invest in Robo advisor?
Some robo advisors have minimum investment requirements of $5,000 or more. However, most have minimum accounts of $500 or less.
Can you trust Robo advisors?
Yes, robo-advisors are safe. Some even provide free financial tools to track your net worth and analyze your investments if you wish.
Can you lose money with Robo advisors?
Robo advisors don’t have an extremely powerful diversification. Even though they offer exposure to the large stock market, despite the rebalancing and tax-loss harvesting, there’s still a risk of you losing money.
Bottom Line – How to Know the Best Robo Advisor Canada for You?
It’s okay to be confused when deciding on the best robo advisor Canada has. There are several best robo advisors options to select from and there is no one single answer to the best one for you. Investments involve your hard-earned money, so you need to make an informed decision.
Before you choose a robo advisor as the best robo advisor Canada has, patiently look at all the options we’ve highlighted and their features. Then select which one matches your financial goals and situation best. Overall, simplifying your investments and paying lower fees will help you save thousands of dollars.
This is what makes robo advisors a great choice, and the right one for you not only saves you money on fees but also stress!