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The best Robo-Advisors comparison tool in Canada
HOW TO COMPARE ROBO-ADVISORS WITH HARDBACON?
The main Canadian robo-advisors are very similar when it comes to offering services and even portfolios. The most important question is therefore the management fees. To compare the different advisors on this criterion, enter the amount you wish to invest through a robo-advisor in the left sidebar, and the estimated annual fees for each robo-advisor will appear in the comparison tool. Finally, several robo-advisors offer socially responsible portfolios that will appeal to the investor who wishes to invest in this type of investment value. To choose the ones that offer such type of investment, select this type of portfolio in the left sidebar.
WHAT IS A ROBO-ADVISOR?
Robo-advisors offer portfolio management services online which do not require interaction between the client and the portfolio manager. The main advantages of robo-advisors are that they do not require any investment knowledge and they offer lower management fees if you compare to a traditional financial advisor. Contrary to popular beliefs, the investment decisions of a robo-advisor are not done by algorithms, but by portfolio managers.
WHY CHOSE A ROBO-ADVISOR INSTEAD OF A TRADITIONAL FINANCIAL ADVISOR?
The main reason to choose a robo-advisor is mainly to save on investment fees. It may be that a customer can expect to pay in fees between 2 and 3% of its assets each year with a group savings representative, this fee will be less than 1% with a robo-advisor. Of course, unlike a financial advisor, a robo-advisor will not offer human support or personalized advice.
WHAT TYPES OF INVESTMENTS ARE AVAILABLE WITH ROBO-ADVISORS?
Most Canadian robo-advisors invest in index exchange-traded funds (ETFs). Concretely, this means that the portfolio managers working for the Canadian robo-advisors are not trying to beat the stock market, but to obtain a similar return while minimizing fees. Their portfolios therefore tend to be made up mainly of ETFs, which make it possible to invest in numerous financial products at little cost. However, there are some portfolios by robo-advisors that are made up of stocks or even mutual funds.
WHAT ARE THE FEES ASSOCIATED WITH AN INVESTMENT VIA A ROBO-ADVISOR?
There are several types of fees attached to investments via a robo-advisor. Management fees vary in relation to the money invested. Generally, they represent around 0.50% management fees with the main robo-advisors. Therefore, if you invest $10,000, you will have to pay approximately $50 in management fees in the first year. However, management fees are not the only fees to consider. There are also the transaction fees, which are usually included in the management fees of robo-advisors. In contrast, the fees that many investors ignore when it comes time to invest through a robo-advisor are the management expense ratios (MERs) of the exchange-traded funds (ETFs) in which the robo-advisor invests. These are not included in the management fees announced by the main Canadian robo-advisors, and generally vary between 0.2% and 0.35%.
WHY DON’T YOU COMPARE BETTERMENT, WEALTHFRONT OR PERSONAL CAPITAL?
The three aforementioned robo-advisors are all based out of the United States, and to date, are only offered to investors that have an address in the US and an American social security number. Canadian investors cannot avail their services at this time. However, there are a host of Canadian robo-advisors that offer similar services; however, their fees tend to be slightly higher than the ones from their American counterparts.
DO ROBO-ADVISORS BEAT THE MARKET?
In general, robo-advisors usually do not beat the market. But that’s because they are not designed to do so. Through passive investing strategies, robo-advisory firms enable their clients to get returns that are similar to the overall stock market, by investing in low fee ETFs. While a financial advisor may outperform or underperform the market across multiple years, a robo-advisor allows its clients to get a return that is in line with the stock market in general, while paying much less fees than they would have if they invested through an advisor. As a result, while robo-advisors do not ‘beat’ the market, they do beat a large number of financial advisors who help their clients select individual securities for their portfolios.
HOW DO ROBO-ADVISORS MAKE MONEY?
In Canada, the primary revenue streams for robo-advisors are the annual management fees they charge on the amount their clients have invested with them, which generally range between 0.5% to 1%. While not free, robo-advisors charge less fees than human advisors, which can charge up to 3% in fees, depending on how much money you have invested with them. However, while some investment advisors will provide services such as financial planning and even tax advice, robo-advisors’ service is limited to managing your money.
WHAT IS THE BEST ROBO-ADVISOR IN CANADA?
The ‘best’ robo-advisor is really a subjective concept. Since all Canadian robo-advisors offer an extremely similar service, the best robo-advisor in Canada is usually the one that charges the least in fees. Use Hardbacon robo-advisors comparison tool to find out which one is the most affordable for you.
HOW MUCH MONEY CAN YOU MAKE WITH A ROBO-ADVISOR?
The possibilities are unlimited! By saving and investing diligently, you can use robo-advisors to your advantage to create diversified investment portfolios at low cost. Use our Automatic Investment Plan Calculator to determine how much you can expect to earn over time with recurring investments made on a weekly, biweekly or monthly cadence. You can also have a look at our Investment Fees Calculator to estimate the long-term value of your investments after paying robo-advisory fees. Compare that to the returns you can expect to generate and the fees you would expect to pay with a financial advisor to assess which option is best for you.
Read more on robo-advisors in Canada
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