The Best Robo Advisors in Canada

Robo Advisors are beginning to gain popularity in Canada and all around the world. According to Statista, there is $8.158 million in assets being managed by Robo-Advisors. Furthermore, there is an expected annual growth of 26.7% in Robo investing Canada for the next three years. With this growth, the estimated assets under Robo-Advisor management will come to $16.61 million in 2023. In Canada, traditional companies manage most of the money, but that seems to be changing ever so slightly.

As companies raise their fees, people are beginning to see the benefit of Robo investing. Traditional companies have started relying on computer algorithms for assistance in managing assets. Robo-Advisors in Canada now bring those computer algorithms directly to the customers.

Some Canadian Robo-Advisors offer human support, and many still have financial advisors available. The difference is the amount of human interaction with your money. Because Robo-Advisors have significantly less human interaction, the fees are much lower. Additionally, many of these Robo-Advisors offer no minimum starting balance to get started.

What is a Robo-Advisor?

What we stated before is that Robo-Advisors bring computer algorithms to the customer. That’s basically what they are and what they do. Using computer algorithms and minimal human interaction, they manage your money based on your risk preference. In addition, different advisors offer different portfolio options and investing strategies, which we will look at later.

Rather than advising like typical financial advisors, Robo-Advisors essentially manage your portfolio. Based on the company of your choice, different accounts offer different services, fees, your own goals, time zone, investing strategies and options, and so on.

Robo-Advisors are automated algorithms, that does not mean that the human touch and wealth management firms are inevitably left behind. Instead, the Robo-Advisor companies are directed and managed by actual human beings. Their jobs are to make sure they keep an eye on the algorithm being used, manage investors’ portfolios, and advise on all decisions before they are made.

Why Use a Robo-Advisor in Canada

For starters, using Robo-Advisors in Canada is easy. If you have a computer at home, you’re set. All you need to do is set up an account with your chosen company, answer some questions, and deposit some money. Based on how you answer the questions when getting started, your portfolio is designed accordingly. The Robo-Advisor will diversify your portfolio based on your goals, preferred methods, and risk tolerance.

Since your Robo-Advisor is a robot, after all, you have online access 24/7. Many have human support just a call or email away for any advice. In addition, many Robo-Advisors offer real financial advisors ready to assist you.

A Robo-Advisor typically uses exchange-traded funds (ETF’s) for a variety of reasons. First, ETF’s allow easy diversification for your portfolio, and they don’t require much human interaction. This makes ETF’s significantly cheaper than mutual funds. Because Robo-Advisors primarily use ETFs, the fees associated with these advisors are much more affordable than a traditional fund management company. Additionally, most of these Robo-Advisors automatically rebalance your assets over time.

Considering the fees with Robo-Advisors are significantly lower, sometimes as much as 2% per year, you have more significant potential for more earnings over time. In addition, by reducing fees, your yearly returns increase over time.

Let’s look at some of Canada’s Robo-Advisors.

Robo-Advisors Management Fees Minimum Balance Financial Advice Human Support Rebalancing Socially Responsible Investing
BMO Smartfolio 0.4% above $500,0000.5% for the next $250,0000.6% next $150,0000.7% next $100,000 $1000 Yes Yes Yes Yes
Wealthsimple 0.5% up to $100,0000.4% over $100,000 $0 Yes Yes Yes Yes
Nest Wealth $20/month for under $75,000$40/month for $75-$150,000$80/month for $150,000 and above $0 Yes Yes Yes No
WealthBar 0.6% on first $150,0000.4% on next $350,0000.35% above $500,000 $1000 Yes Yes Yes Yes
JustWealth 0.5% up to $500,0000.4% over $500,000 $5000 Yes Yes Yes No
QuestWealth Portfolios 0.25% with balance between $1000 and $99,0000.20% for balances $100,000 or more  $1000 Yes Yes Yes Yes, with higher fees
ModernAdvisor 0% up to $10,0000.5% for $10,000 to $100,0000.4% for $100,000 to $500,0000.35% for $500,000 to $1M $1000 Yes Yes Yes Yes

 

BMO Smartfolio

Canada’s oldest bank, BMO, has created Smartfolio, their Robo-Advisor with a human touch. With a Smartfolio, you get a Robo-Advisor with fees as low as 0.4% or up to 0.7%. An investor chooses from five different ETF portfolios: capital preservation, income, balanced, long-term growth, and equity growth. Each corresponds to your goals and risk tolerance.

When creating your Smartfolio Robo-advisor account in Canada, you must begin with at least $1000, corresponding to a 0.7% management fee. The management expense ratio (MER) is typically a weighted average between 0.2% and 0.35% of your total account value.

When you hold an ETF portfolio with Smartfolio, your portfolio is automatically rebalanced four times per year. Additionally, there are experienced professionals regularly tracking, advice and adjusting your portfolio. BMO Smartfolio offers BMO global asset management and is a Robo-Advisor with more human interaction than most, which may be reflected in the fees being slightly higher.

There may be other transaction fees and closing fees associated with BMO’s Smartfolio. These fees range from withdrawal fees of registered investment accounts to transferring out of an account. You can see more about BMO’s fees here.

Wealthsimple

Wealthsimple is currently the most used Robo-Advisor in Canada, with over 100,000 users. They offer free portfolio analysis, no account minimum, and have human advisors available for one-on-one consultations. Wealthsimple also has socially responsible and halal-friendly portfolios. Each Robo-advisor portfolio is personalized based on the individual’s goals, financial status, and risk tolerance.

Two different management fees depend on your investment accounts’ balance. If you have less than $99,999, you’ll pay 0.5% for the Wealthsimple Black plan. If you have $100,000 or more, you’ll pay 0.4%. The MER for both balances comes to around 0.2%, depending on the funds you hold. You can deposit a balance one time or set up automatic, continual deposits.

Wealthsimple offers a variety of account options to its users. Customers can pick between savings accounts, TFSA, RESP, RRSP, LIRA, joint accounts, and more. Wealthsimple also comes with benefits like VIP airport lounge access. They’re also known for having an incredible user interface for their website and mobile app.

Check out their website here for more details on investing with WealthSimple, or read our WealthSimple review for more information.

Nest Wealth

Nest Wealth is an online portfolio management company using a Robo-Advisor just like the other companies on our list, but they have some notable differences. When obtaining your personalized investment portfolio, the fees associated with it are structured differently. Rather than paying a percentage, you pay a standard fee based on your balance. If your balance is under $75k, your fee is $20/month. From $75k to $150k, you’ll pay $40/month. A balance above $150k means you’ll pay $80/month.

In addition to these monthly fees, Nest Wealth works with two custodians, FCC and NBIN, which each have their fees. As a result, the MERs typically seen with Nest Wealth model portfolios is about 0.13%.

Nest Wealth has a lineup of 7 different ETF portfolios to work with, each in a distinct asset class. Depending on your preferences, your portfolio is diversified accordingly. In addition, Nest Wealth’s algorithms track your portfolio and rebalance it regularly to ensure your portfolio stays diversified correctly.

Nest Wealth has no minimum fees to start your Robo-advisor account and offers financial advice and human support. Look here for more information from Nest Wealth.

CI Direct Investing (Formerly WealthBar)

Beginning in 2014, WealthBar was the first complete Robo-Advisor in Canada. The unique and advantageous aspect of opening an account with CI Direct Investing is the dedicated financial adviser available. They offer financial planning and assistance to all customers no matter the balance held. So while you get an automated Robo-advisor managing your investment portfolio, you still have an actual human there to assist you.

Additionally, CI Direct Investing offers private investment portfolios. This gives you greater access or more human management for advice and guidance. They do come with higher MER’s, though.

You must deposit at least $1000 to start investing with WealthBar. The fees start at 0.6% for the first $150,000. The next $350,000 is 0.4% and finally 0.35% with a balance above $500,000. The management fees and MERs range from 0.19% to 0.25%, depending on your investment accounts. Private investment portfolios have MERs ranging from 1.0% to 1.55%.

With your account, you can add Cleantech which adds Powershares PZD, into your investment portfolio. The rest of your portfolio is selected between ETF’s with the lowest MER, great history, and high trade volume. In addition, WealthBar offers five different portfolios based on your risk tolerance.

For more information and advice on CI Direct Investing, check out their website here.

Justwealth

Marketed as Canada’s most comprehensive Robo-Advisor, Justwealth comes with great benefits and is one of the best Robo-advisors. When you sign up, you get a personal portfolio manager to assist you. Together, you’ll create your investment plan and build your desired portfolio of low-cost ETFs. Also, you get personalized financial planning and tax loss harvesting. Your portfolio manager will then continue to watch your portfolio as the Robo-Advisor is primarily managing it.

As you have a professional and Robo-Advisor, your portfolio is continually managed and rebalanced automatically as needed.

Justwealth offers over 70 different account options, giving you the option to find a solution that works best for you. In addition, they have chosen over 40 ETFs to create the best portfolios possible for various investment accounts and goals.

When choosing your account type, you have many options. For example, you can create a portfolio for RESP, RRSP, TSFA, target-date accounts, and more.

There is a $5000 minimum for all accounts except RESPs which have no minimum size but a $2.50/month fee. The other accounts have a minimum of $4.99/month. Besides that, if your balance is under $500,000, you’ll pay 0.5%. Over $500,000 corresponds to a 0.4% fee.

With constant access via phone, email, or app, you can always check your portfolio and speak with your portfolio manager.

More information on Justwealth is available here.

Questwealth Portfolio

Questrade Wealth Management created Questwealth Portfolios as a way for individuals to invest in ETFs with low fees. Questwealth Portfolios offers five different portfolios, conservative, income, balanced, growth, and aggressive. All of these correspond to your level of risk tolerance and hold different assets. But, of course, each comes with different expected returns. With a Questwealth Portfolio, you’re guaranteed active management by real-life managers and real-time balanced of your portfolio.

Just like many of the other Robo-Advisors, Questwealth offers various account types for you to choose from. You can select a TFSA, RRSP, RESP, RIF, LIRA, LIF, and more.

You must start with at least $1000 to invest. If your account has a balance below $99,000, you’ll pay only 0.25%. Over $100,000 and you’ll pay 0.2%. There are no trading, closing, or transfer fees. The management fees MERs range from 0.11% to 0.23%, depending on your portfolio.

Questwealth also offers SRI portfolios, but these come with higher MER, typically between 0.21% and 0.35%. Besides that, SRI portfolios charge the same management fees as other Questwealth Portfolios.

Check out Questwealth here for more advice and information.

ModernAdvisor

Unlike most Robo-Advisors, ModernAdvisor used CFA charterholders to create your portfolio. That means experts design these portfolios. They also offer socially responsible portfolios.

ModernAdvisor analyzes hundreds of ETFs on the market and studies various factors in picking the best for their clients. As a result, they ensure every portfolio is diversified and build portfolios based on Nobel Prize-winning research.

Their portfolios are created based on the clients’ risk tolerance. As a result, some are suited for long-term goals, while others are built for short-term investors.

The fees change by balance. From 0 to $10k, it is free. From $10k to $100k, you’ll pay 0.5%. $100k to $500k, the fee is 0.4%. Lastly, from $500k and up, the fee is 0.35%.

ModernAdvisor gives you the option to pay for a personal advisor as well. Those fees start at 0.89% for the first $500k. 0.79% for the next $2M. 0.69% for the next $2.5M, and 0.49% over $5M. There is a minimum of $75/month.

Look here for further information and advice on investing using ModernAdvisor.

RBC InvestEase

Backed by one of the biggest banks in the country, RBC InvestEase is one of the most trusted Robo-advisors in Canada with low fees.

The Best Robo-Advisor Canada Offers

Wealthsimple

With reasonable fees, great benefits, no account minimum, and excellent history, Wealthsimple is the king Robo-advisor Canada has. It gives you a mix of low-fee ETF’s in a portfolio that you can customize. This Robo-advisor holds offices around Europe and North America and has over 175,000 clients. Wealthsimple is an excellent choice for all individuals looking to invest without the hassle of creating and rebalancing your portfolio often. Wealthsimple gives you peace of mind knowing your future is in the hands of a proven company.

Choosing a Robo-Advisor

If you’ve already decided to invest with a Robo-Advisor instead of a typical financial adviser, there are some things to consider.

Fees

Different Robo-Advisors charge different fees. As we’ve seen, most charge a percentage of your balance based on the quantity you hold. Whereas others, like NestWealth, charges a flat monthly fee based on what bracket you fall into.

Let’s look at the fees for Wealthsimple for an idea. If you’re initially investing $80,000, you’ll be paying $40 a month. Then, as your account grows with time, you’ll pay slightly more and more to correspond to your new balance. In addition to the management fees, you’ll have to pay MER, which does not go to Wealthsimple but to the fund companies.

Benefits

See what the benefits of each Robo-Advisor are before you sign up. Some offer free financial advice, tax-loss harvesting, rebalancing, and dividend reinvesting. Companies like Wealthsimple even offer VIP airport lounge access.

For example, many Robo-advisor companies offer introductory offers or better perks if you invest more than $100,000. If you want a Robo-Advisor that offers more human interaction, it’s essential to check on that as well!

Investing

Depending on the company, you have different investing options. Many Robo-Advisors require a minimum balance to invest. Not all need this, but it’s essential to be aware of when deciding on your Robo-Advisor. Some give you a choice between 5 different portfolios, whereas some may custom-build you a portfolio. You must choose how much customization you want and balance your wishes with fees and other benefits.

Most Robo-Advisors are entirely transparent with their investment strategies. However, if you want a more hands-on approach, you should speak with an advisor before committing. This will allow you to see the ETF’s in your potential portfolio and provide advice for future selections.

You may also want a Robo-advisor company that takes part in socially responsible investing (SRI). Many Robo-Advisors offer SRI portfolios now, but not all. Make sure to do your research about this.

Pros of Robo-Advisors

  1. Using Robo-Advisors will cost less than using conventional advisors. However, financial advisors will usually ask for more minimum investing amounts and management fees than Robo-Advisors such as CI Direct Investing.
  2. Robo-Advisors are more convenient, primarily due to web applications and mobile phones to invest in various assets.    
  3. The set-up process and operation procedures are easy to use. All you need to do is create the account and add ongoing contributions. After that, you will provide your risk levels and goals and finally top it off by picking the befitting portfolio.
  4. In most taxable accounts, you will get a tax-loss harvesting scheme that is automated. The scheme uses temporary losses in the market to balance with the gains. This process will help you avoid getting massive tax reductions.  
  5. Behavioural economics has shown how emotions can block the investment decisions of even the most skilled investors. Due to the emotional detachment, Robo-Advisors provide fewer chances for your emotions to ruin your investment.
  6. Financial advisors can help their clients in accessing Robo-advisors. By doing this, financial advisors provide the human aspect of investing while still providing lower-cost investment management. 
  7. Robo-Advisors are tailored to fit different needs and goals. So regardless of your budget or preference, you can be able to find the best Robo-advisor for you.

Cons of Robo investing.

  1. The lack of full financial planning while using a Robo-advisor can deter some investors. Some financial issues can benefit from having a conversation with an actual person, getting human advice. Financial advisors can know your needs better to provide the support you need, especially after a huge market drop.   
  2. As much as Robo-advisors are cheaper than actual human financial advisors, hiring the latter can sometimes be a better choice. Some of these cases may involve financial advisors who charge hourly rates, thereby giving you control over the amount of money you want to spend. Another scenario may include the incorporation of Robo-advisors into the financial advisor’s work. Combining the two can significantly reduce the cost of financial advisors while still providing a human’s advice.   
  3. The elimination of face-to-face interactions is the major downfall for the Robo-advisors. When it comes to investments, people can sometimes get cold feet, have emotional breakdowns and make terrible decisions if not well guided. Conventional financial advisors perform better as they have the human experience and knowledge to help the investors.

Robot Advisor FAQs

Is every Robo-advisor the same? If not, how do they differ from each other?

As seen from the list mentioned above of best Robo-advisors, no two platforms are similar. They share several features, but they remain distinct due to several package differences and service provisions.

The Robo-advisors differ based on; the fees charged, provided services, the needed initial minimum investment amount, the availability of several investment strategies, type of available investments, ability to contact actual financial advisors, and extra features such as tax-loss harvesting and rebalancing.

Do Robo-Advisors Offer Investment Strategy Advice?

What is the target audience for these Robo-advisors?

A majority of the people who invest regularly tend to stay clear of the Robo-advisors. It is a massive misconception that Robo-advisors are only meant for beginner investors without much money to spare.

Experts and researchers in the field have repeatedly proven that putting your money in the hands of an automated program is safer than handling it yourself. The Robo-advisor can use its algorithm to counterbalance significant market drops and rises. By using Robo-advisors, an investor can avoid emotionally and gut-oriented decisions that will almost definitely eat up your money.

With that said, you can see why Robo-advisors are not only for the experienced but also the average Joe looking to make better financial decisions. Moreover, Robo-advisors provide a smooth and gentle path for beginners. It is easier for an investor to get into the industry using the programs due to the low management fees, general costs and ease of use. 

What is the difference between Robo-advisors and

Mutual Funds?

Unlike Robo-advisors, mutual funds do not select the best investment options by using a pre-programmed algorithm. Instead, mutual funds are an investment option usually controlled by money managers in investment firms. The idea behind mutual funds is that there is a pool of funds collected from various investors.

From this pool of funds, the money managers can then choose what assets are good to buy and those that are not. The main advantage of mutual funds is that you have a human being behind the whole operation, either a financial advisor or just you.

Despite having the human aspect in mutual funds, they are still less preferable to Robo-advisors due to their management fee and funds. For example, you can be charged a Management Expense Ratio (MER) of a minimum of 2% and sometimes even 3% for the mutual funds. On the other hand, these same management fees can go from 0.1 % to 0.7% when using Robo-advisors.

Nevertheless, the minimum amount of cash an investor can invest in any asset is higher when you use mutual funds instead of Robo-advisors. So your choice will boil down to what you prefer; a human hand holding you throughout the process or a cheaper and effortless program that does most of the heavy lifting. 

What is the difference between Robo-advisors and

Financial advisors?

Financial consultants or advisors are the more expensive option when it comes to the available investment options. The job of a financial advisor is to make sure they help you manage your assets by investing your money and picking the best table of contents for your asset mix.

You can use Robo-advisors such as CI Direct Investing from anywhere in the world since everything is done through the web. Additionally, you never have to meet any person, ever.

On the other hand, an investment adviser can only be found in offices where you will have to meet them face-to-face for most businesses. The silver lining to financial consultants is that a few companies can provide financial advisors through virtual means.

Financial advisors are generally expensive, with an estimated average cut of 1% from the assets managed per year. Also, newbies may be required to have a minimum balance of $250,000, or more in some cases, before obtaining a personal financial advisor. Some consultants charge flat or hourly rates to help usher new investors on their asset mix packages.

As you can see, financial advisors charge a lot of management fees, unlike a Robo-advisor. We, therefore, recommend investors choose financial consultants instead of Robo investors only if; you genuinely need one, have more wealth than $250,000, and want to focus on major areas such as estate planning.   

What are the risks related to ETFs (Exchange Traded Funds)?

As compared to other investment options, ETFs are subjectively a more intelligent route to take when investing. This is because ETFs consist of assets such as bonds, stocks, commodities, derivatives, or a combination of securities. This basket of stocks makes ETFs low-risk investments and generally a low-cost option.

ETFs may be safer and easier to take, but they face various challenges, some of which are synonymous with mutual funds and stocks. These risks include market risk, tax risk, exotic-exposure risk, shutdown risk, counterparty risk, crowded-trade risk, ETF-trading risk, and broken-ETF risk.  Regardless of the risks involved, Robo-advisors are still one of the safest investment options.

If the Robo-advisors fail, get corrupted, or are attacked, what will happen to my money?

One of the myths and misconceptions about a Robo-advisor is that it controls your money. Robo-advisors in no way have any access to your money. Your money is stored in your bank, and the only person who can authorize its use is you or someone who can access your bank details.

A Robo-advisor is just the middleman between the bank that has your money and you who wants to invest that money. The program then uses its pre-programmed algorithms to invest your money better using ETFs.

If a Robo-advisor malfunctions or gets corrupted, your money will remain safe and sound in your bank account. The only thing affected is the program alone, causing an immediate stop to any transactions.

Your Robo-advisor will have more information about this under the terms and conditions. Be sure to thoroughly read them so that you know, at all times, what happens to your money.   

Can you lose money with a Robo-advisor?

Every investment opportunity presents itself with its risks. Unfortunately, the use of Robo-advisors is no different; despite the addition of tax-loss harvesting and rebalancing, you can still lose money with Robo-advisors.

The edge that Robo-advisors have over other conventional investment methods is its ease of use and low cost. Provided with these two factors, you can quickly enter the investment game with as little money as you want and with little to no experience.

All of this makes for an excellent strategy to help you invest slowly while still learning all the fundamentals. In conclusion, Robo-advisors may be as risky as other methods, but they provide a stress-free and low-risk experience that most newbies would prefer.

Closing Thoughts

Investing with Robo-Advisors is gaining popularity in Canada for a good reason. They offer significantly lower fees than traditional investment agencies. In addition, many come with benefits like human financial advisors. For example, during a financial crisis, a Robo-Advisor may be less likely to dump stocks and be able to retain much of your investment compared to typical advisors. Since a Robo-Advisor works off an algorithm, no human tendencies or emotions are involved, purely mathematics.

With more popularity, there are now more options for your choice of Robo-Advisor. With time the algorithms are getting better; backed by science and research, Robo-Advisors may become the norm.

Unfortunately, if you came here looking for Ellevest Canada, Betterment Canada, or Wealthfront Canada, they are not yet available. With time they may make their way into the Canadian market, but you’ll have to be patient for that. The Robo-Advisors Canada offers, however, range from internationally researched and backed to home-grown companies.

Keep in mind; it’s essential to do your research on each of these companies. Although we’ve rated Wealthsimple as your best option, you may find another Robo-Advisor that is a better fit for your situation. There are many options with different benefits, fees, investment strategies, and more. Be thorough and sure when you research and make your decision!

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