In this article, we’ll review the best robo advisors in Canada for 2019. By the end, you should be able to decide a) if a robo advisor is right for you; and b) which one best suits your needs.
If you want a hands-off approach to investing and a combination of a human and computer algorithm to help you invest appropriately, a robo advisor might be for you.
Robo advisors have been around for years and are popular for offering low cost, easy investing. Recently, there’s an even more competitive landscape in Canada, with robo advisors popping up across the nation.
Table of Contents
Is Robo Advisor Right For You?
Robo advisors are investing platforms that use a computer algorithm to design and manage your investment portfolio. This creates a hands-off approach to investing. Robo advisors tend to do things like select investments or investment classes for you, build a portfolio based on pre-defined risk tolerance, and automatically rebalance that portfolio for you.
There are definitely pros and cons to robo advisors, which we’ll outline below. They’re not for everyone. But for some investors – particularly those who want to free themselves from high fees and decision fatigue – they can be a life-saver. They can also help you reach financial independence quicker, by making objective investment decisions on your behalf.
Best Robo Advisors in Canada 2019
|BMO Smartfolio||Human Touch|
|Questwealth Portfolios||Competitive Fees|
|Nest Wealth||Mature Investors|
Wealthsimple: Best Overall
Wealthsimple is more than just an attractive website and heart-warming commercials. They’re one of the leading robo advisors in the world, with offices in Canada, the USA, and Europe. They’ve secured funding from major investment firms and collected a board of directors and leadership team with extensive experience in the field. Today, Wealthsimple has 175 employees and $3 billion in assets under management for over 100,000 global clients, making them the largest robo advisor in Canada. The short story: they know what they’re doing with your money.
Regarding their platform, there’s no minimum investment amount, and anyone can open an account. Your portfolio is invested in ETFs that span the globe, and like most robo advisors, they’ll tailor the portfolio to match your style and risk tolerance. They have three pricing tiers, which are pretty straightforward:
- Basic (deposit up to $100,000) – 0.5% fee
- Black (deposits of $100,000 to $500,000) – 0.4% fee
- Generation ($500,000+ in deposits) – 0.4% fee with a bunch of additional perks
You’ll also find savings account options and features like tax-loss harvesting and financial goal-planning.
What we like:
- Tons of industry experience, with access to human advisors
- Sleek, user-friendly platform
- Broad investment selection, including Halal and Socially Responsible Funds
- The ETF MERs are nearly the lowest in the industry: average 0.20%, for a total cost of 0.60% – 0.70%
- No minimum investment requirement
- Reasonable fees at 0.50% for accounts under $100K (dropping to 0.40% after that)
- Free tax-loss harvesting (non-ETF purchases)
- Young and Thrifty readers get their first $10,000 managed for free for a year
What we don’t like:
- Higher fees than other robo advisors
- Doesn’t have many unique financial tools
- Limited portfolio options
BMO Smartfolio: Best for Human Touch
BMO Smartfolio is brought to you by Canada’s oldest bank, Bank of Montreal (BMO). We’re starting to see more banks add a robo advisor feature to their offerings, and BMO was one of the first with Smartfolio.
A few important details to note: there’s a $1,000 minimum investment amount and fees range from 0.4% to 0.7%. Their team of dedicated advisors helps you select from award-winning ETFs to build a portfolio that works for your preferences and risk tolerance. In addition, the MER of the ETFs held within your portfolio will likely be a weighted average of 0.20% to 0.35% of the value of your SmartFolio account.
What’s unique about BMO Smartfolio is its investment approach. Using a hybrid approach, they use “smart beta” ETFs and have a team of advisors watching your portfolio and actively making adjustments where needed. So it functions like a robo advisor, but with a more hands-on approach behind the scenes – which is very unique for this type of product. They’ll rebalance your portfolio roughly four times per year, so you’re always on top of your asset allocation.
What we like:
- A unique approach with human advisors pulling the strings
- 300 years of combined experience of Portfolio Managers and Chartered Financial Analysts
- Backed by Canada’s oldest bank, BMO
- Young & Thrifty readers get their first $15,000 managed for FREE
What we don’t like:
- Fees are higher than we’d expect – between 0.4% – 0.7% per year + average MER of 0.24%
- The human-touch may turn off some people who want an authentic robo advisor
Questwealth Portfolios: Best for Competitive Fees
Questwealth Portfolios is a robo advisor that falls under the umbrella of Questrade Wealth Management. When signing up for an account, you’ll get to align your investment strategy with a pre-defined portfolio, based primarily on your level of risk tolerance. The five portfolios are:
- Aggressive: for high-risk investors
- Growth: for medium to high-risk investors
- Balanced: for medium-risk investors
- Income: for medium to low-risk investors
- Conservative: for low-risk investors
Each portfolio has a different blend of equity and fixed income (stocks and bonds) that will generate a different level of expected return.
You’ll need at least $1,000 to open an investment account – anything less than this will be held as cash. Fees range from 0.20% to 0.25%, based on the amount you have in deposits (which are held by a member of the Canadian Investment Protection Fund).
You’ll also have to consider the MER that’s tacked on to this fee (more on MERs below). The MERs on Questwealth’s funds average around 0.19%, but they can reach up to 0.35% if you’re looking for an SRI portfolio.
Questrade uses the following example to outline this:
“If you invest $20,000 in a Questwealth Balanced Portfolio the total fee would be 0.42% (0.25% management fee + a Portfolio MER of 0.17%). Compare that to the average mutual fund fee of 2.17% and you’ll see how much you’re saving on yearly investment fees, which in turn help you keep more of your money.”
Still cheaper than mutual funds and other robo advisor options.
With multiple account types and expensive fund options, such as Socially Responsible Investments, Questwealth Portfolios offers opportunities for all kinds of investors. Like others, Questwealth uses a hybrid approach and has advisors actively managing your portfolio behind the scenes, based on market fluctuations.
What we like:
- Competitive fees: charging 0.20% – 0.25% to manage your money, plus an average ETF MER of 0.19%
- A wide variety of funds and investment options, such as socially responsible investing
- Low minimum investment requirement ($1000 minimum to open an account)
- The user-friendly platform makes investing enjoyable
What we don’t like:
- Actively managed: human touch may turn off some investors who want an authentic robo advisor.
Nest Wealth: Best for Mature Investors
Nest Wealth focuses on investments that are more conservative, primarily targeting mature investors that are entering or in retirement. It has a unique pricing model that benefits those who invest large sums of money: with Nest Wealth, you pay a monthly fee rather than an annual percentage of your portfolio value like most others. The pricing tiers are:
- Under $75,000: $20/month
- $75,000 and Under $150,000: $40/month
- $150,000 & Above: $80/month
These monthly fees are in addition to the average MER of the ETFs, which is 0.13% for a balanced portfolio. Overall, this pricing system makes Nest Wealth a cost-effective option for investors with large portfolios.
However, Nest Wealth isn’t solely for retirees, but it does tend to appeal to that demographic. There’s no minimum investment amount, and you’ll walk through a series of steps to develop a customized portfolio for you.
It’s a true robo advisor, so your trades will occur automatically and follow an algorithm. They do charge some extra fees that others don’t (such as rebalancing fees), so consider that when making your decision.
What we like:
- Low-risk investments with low fees make sense for mature investors with large deposits ($20-80 per month + average MER of 0.13%)
- Customized portfolio creation for each customer
- No minimum investment amount
- Young & Thrifty readers can try Nest Wealth FREE for the first 3 months
What we don’t like:
- Pricing can be confusing for those not used to their model
- High fees ($20-80 per month + average 0.13% MER + $100 trading fees per year) can eat into smaller accounts
- Not many options for those who want a variety of investments, including more high-risk ETFs
Justwealth: Best for Investment Variety
Justwealth isn’t your average robo advisor. When signing up, you’ll receive a portfolio manager that will manage your investments, as well as additional services like financial planning and portfolio reviews for an extra cost.
Justwealth has a massive selection of portfolios – 70 different portfolios derived from more than 40 ETFs. According to Justwealth, they have the biggest collection of portfolios out of any robo advisor in Canada. You can open a variety of account types, and the fee structure is straightforward:
- 0.5% for balances under $500,000
- 0.4% for balances over $500,000
- $4.99/month fee for accounts under $25,000
There’s an additional average MER of 0.25%. You’re also protected up to $1 million through BBS Securities, Inc.
What we like:
- Massive selection of ETFs and portfolio types
- Straightforward pricing
- Options for personalized advice
- Young & Thrifty readers receive a cash bonus of up to $500 when they open a new Justwealth account.
What we don’t like:
- Website and platform aren’t as intuitive as other robo advisors
- Some may not want or need the personal advisor
- Minimum investment of $5000 (except for RESP accounts where no minimum is required)
ModernAdvisor: Best Expert-Assembled Portfolio
ModernAdvisor combines low-cost ETFs with smart indexing and technology to develop an expert-advised portfolio to meet your investment needs. In one of their most unique features, ModernAdvisor uses CFA charterholders to design your portfolio.
For those of you who may not know, the CFA charter designation is one of, if not the, highest honour anyone in the investment field can have. It's a gruelling, three-level assessment taken over the course of a few years that develops some of the best minds in investing. The CFA Institute also focuses heavily on ethics.
Aside from having that kind of firepower behind your portfolio, ModernAdvisor has moderate fees – ranging from 0.35 to 0.50% (more on this below), but they place a deep focus on making things simple. For example, there are “no commissions, no hidden fees, no conflicts of interest.” ModernAdvisor says that they “have a fiduciary duty to our clients, that means we’ve got your best interest in mind with every decision we make.” Regarding MERs, their ETFs have an MER range anywhere from 0.06% to 0.56%.
There are two types of accounts you can create with ModernAdvisor:
- ModernAdvisor Digital (Robo-advisor)
- ModernAdvisor Personal
When you use the standard robo-advisor, ModernAdvisor will use their smart technology to invest your funds, like any other robo-advisor, and charge you a flat fee based on the amount you have invested. The fees are as follows:
- Up to $10,000 – FREE
- $10,000 to $100,000 – 0.50%
- $100,000 to $500,000 – 0.40%
- $500,000 to $1 million + – 0.35%
If you want a personal advisor, the fees are as follows:
- First $500,000 – 0.89%
- Next $2,000,000 – 0.79%
- Next $2,500,000 – 0.69%
- Over $5,000,000 – 0.49%
- Minimum fee – $75/month
What we like:
- Portfolio assembled by a CFA Charterholder
- Heavy focus on Socially Responsible Investing
- Ability to have a personal advisor if you’d like more attention
- Young & Thrifty readers receive $50,000 managed for free for one year
What we don’t like:
- You won’t get into a competitive pricing tier until you hit $500,000 in investments
- Have a deep FAQ section that isn’t visually appealing, and it seems like they push you there versus contacting them directly
- The blog content is just okay, and it’s not updated regularly.
Robo Advisor Comparison Chart
Here’s a quick comparison chart we’ve put together as well, so you can determine which path is best for you:
|Brand||Special Features||Fees||Minimum Balance|
|Wealthsimple||Special perks for those who invest over $100,000; amazing interface.||0.4 - 0.5%/year|
+ average 0.20% MER
|BMO Smartfolio||Owned by BMO; high level of human interaction||0.4 - 0.7%/year|
+ average 0.24% MER
|Questwealth Portfolios||Takes a hybrid approach with its investments; rewards large deposits with lower fees||0.20 – 0.25%/year|
+ average 0.19% MER
|Nest Wealth||Pricing and investments gear towards mature investors||$20 - $80/month + average 0.13% MER||None|
|Justwealth||Personal advisor; large selection of ETFs||0.4 - 0.5%/year|
+ average 0.25% MER
|ModernAdvisor||CFA charterholder-crafted portfolio; ability to get a personal advisor for an additional fee||0.35 - 0.5%/year + average 0.25% MER||None|
Other Recommended Robo Advisors in Canada
- WealthBar Review (+Young & Thrifty readers get up to $15,000 managed FREE for 1 year)
- RBC InvestEase Review
- Invisor Review
- Responsive Review
- Smart Money Capital Management Review
What to Look For in a Robo Advisor
Here are some important things to consider when choosing a robo advisor:
Probably the most important consideration is a robo advisor’s fees. In nearly every case, the company will charge you based the amount you have invested with them. The more you invest, the lower the fee you’ll pay. Some robo advisors, like Nest Wealth, have a different type of fee structure where you’ll pay a flat monthly fee.
In other cases, though, you’ll pay an annual fee based on a percentage, which is calculated on the amount you have invested. So, for example, if you have $100,000 invested and your annual fee is 0.5%, you’ll pay $500 (100,000 x .005), or about $42 a month. Note that the paying lower fees isn’t always better, as it may mean missing out on some critical features.
You’ll also want to be familiar with the management expense ratio, also called the MER. The MER is another fee added into a fund for its management. According to Cleverism, “The MER can simply be defined as the ratio between the sum of the fund’s operating costs and management fee divided by the total value of the fund’s assets under management. The MER is usually expressed as a percentage of the fund’s total AUM.”
They’ve also created a basic visual to understand the formula better:
And if you’re more of a visual learner, Cleverism also put together this video that explains the MER in a little more detail:
MER is nothing to be overly concerned with, but it is worth understanding as it's an additional fee that will be factored into your cost of owning the fund.
Aside from low fees, you’ll want to make sure the robo advisor you choose has features that make sense for how you invest. For instance, if you are investing in a taxable account, you might be interested in tax-loss harvesting, which reduces your tax impact. Other features you might run into are in-depth calculator tools, budgeting tools, and goal-setting options to help you save more money. Make sure you check out the full list of features before signing up with a robo advisor.
While robo advisors can help reduce decision fatigue, you’ll still want to know what your options are for investing. For example, Socially Responsible Investing has become very popular, and more investors want funds that cater to companies that focus on SRI. Thus, many robo advisors have started including strategies to build a SRI portfolio.
You may also want to focus on specific countries, philosophies, or categories. Check to see what types of investment options your robo advisor offers before signing up. On the flip side, you may want as few options as possible to keep the decisions to a minimum. Either way, it’s your call.
|Online Investing Platform||Recommended for||Fee Structure||Account minimum||Apply|
|Wealthsimple Review||Novice investors||· 0.50% up to $100K|
· 0.40% above $100K
· + ~0.2 ETF MER
|BMO SmartFolio Review||Large portfolios||0.40% - 0.70%|
· Average MER = 0.24% (ranges from 0.20% to 0.35% of the value of SmartFolio account)
|Questwealth Portfolios||Novice investors||For balances between $1,000 – $99,999: 0.25%|
For balances $100,000 and above: 0.20%
Average MER = 0.19% (ranges from 0.17% to 0.22% of portfolio value)
|Nest Wealth Review||Large portfolios||· $20/mo under $75K|
· $40/mo up to $150K
· $80/mo above $150K
· + $100 trading fees
· + average ~0.13% ETF MER
|Just Wealth Review||Novice investors||· 0.50% for every $500,000 invested|
· 0.40% for more than $500,000 invested
· $4.99/month fee for accounts under $25,000
· Average MER = 0.25%
|Modern Advisor Review||Novice investors||· Free up to $10K|
· 0.50% up to $100K
· 0.40% up to $500K
· 0.35% above $500K
· + ETFs MER ranges from 0.06% to 0.56%
|WealthBar Review||Personalized financial planning||· 0.35% to 0.6%|
· +average of 0.32% MER (ranges from 0.26% - 0.34% ETF MER)
|Planswell Review||Financial Planning||· 0.5% up to $99,999|
· 0.4% above $100K
· +average ~0.20% ETF MER
|*Funds in account won’t be invested until account balance reaches $1,000.|
Humanizing Robo Advisors
There’s an exciting trend occurring in the robo advisor space. Years ago, robo advisors became a popular alternative to hiring a financial advisor, especially since they offer much lower fees. But some experts say that the pendulum has swung too far in the other direction – making the entire process of investing robotic. Engaging with your money is an emotional experience to many, so having a “real person” within a company is essential to some investors.
Because of this, robo advisors are seeing the value in adding a human face to supplement the technology behind the robo advisor itself. For instance, Justwealth pairs you with a financial advisor. Ideally, this person will give you investment advice and talk to you about your finances, while the robo advisor continues to operate in the background and manage your portfolio.
This trend is going to continue to evolve. And you’ll start to see more and more robo advisors adding humanized components. Whether it’s the ability to call a live advisor, chat online with someone before changing your long-term financial plan, or meet a financial advisor face-to-face who simply uses robo advising technology – times are changing. You’ll have the option for more human interaction with the intent of improving the overall customer experience.
Now, many people love robo advisors because it’s hands-off and there is no need to interact with anyone. You’ll still have those options if they’re important to you, which provides an even further draw to robo advisors. For now, be on the lookout for how companies are changing and marketing their value proposition with the addition of human elements when using a robo advisor.
Are Robo Advisors Safe?
The short answer is yes. Robo advisors are just about as safe as any other investment broker, primarily because most are backed by the CIPF (Canadian Investment Protection Fund) or some derivative of it. When you choose a robo advisor, always look to see where your funds are being held and how you as a Canadian consumer are protected. Typically they offer some type of disclaimer at the bottom of their website.
If they don’t, dig through their disclaimers. If you still can’t find any statement of where your money is held and how it’s protected, call them to clarify or avoid the robo advisor. The CIPF and their subsidiaries are there to protect your balances, up to a specific dollar amount, in case your broker or bank go under. So you’ll want to make sure that protection is there.
Outside of financial protection, read through the robo advisor’s privacy statement as well. Some companies, especially low-cost ones, make up their money by selling your information. If it’s disclosed and you agree to it, they’re free to do so. So read the fine print and make sure you’re comfortable with the robo advisor you choose.
Robo Advisor vs. Financial Advisor vs. DIY
|Situation||Which to Choose||Why|
|You like doing your own research||DIY with an online brokerage||If you enjoy reading up on stocks, financials, and other information pertaining to investments, you’ll want to go DIY with an online broker. Robo advisors and financial advisors take care of this for you|
|You don’t want to rebalance your portfolio at least four times a year||Robo advisor||Rebalancing means you’re re-setting your portfolio to the original asset allocation in your plan. This is a manual process unless you go with a robo advisor that does it for you automatically.|
|You need a high level of personal interaction||Financial advisor||A financial advisor’s job is to be the point person for your investment related questions. If you need someone to walk you through investing and be there for questions and advice, go with a financial advisor.|
|You are a new investor||Robo or financial advisor||If you’re new to investing I’d recommend a financial advisor for the same reason above - but if you’re comfortable going at it alone, a robo advisor is just as easy to get started with.|
|You want to invest in individual stocks||DIY with an online brokerage||Most robo advisors won’t allow you to invest in individual stocks - they need to be a part of an ETF.|
|You want a hands-off approach||Robo advisor||If you really want to set it and forget it, go with a robo advisor. They do everything for you and it’s well worth the cost.|
Where does Robo Advisor Invest Your Money?
Any robo advisor will be transparent with where your money is being invested – you’ll see it in your portfolio. The main thing to think about is what your level of risk tolerance is, and what that portfolio looks like with each robo advisor. You will also want to consider any special investment requirements you have, such as Halal or Socially Responsible Investing. Once you determine your investment goals and preferences, your robo advisor will design a portfolio for you that matches those goals.
Take Questwealth Portfolios as an example: they have five different portfolios that have a different makeup of investments and corresponding risk levels. In theory, the riskiest portfolio would also generate the highest return. The lowest risk would be the safest but have a low-ceiling for possible returns.
After this is all figured out, your portfolio is put together with low-cost ETFs (exchange-traded funds). As a reminder, ETFs are essentially a basket of stocks, all rolled into one. So, for instance, a Socially Responsible ETF would contain a bunch of stocks that focus on Socially Responsible Investing.
By having several ETFs in your robo advisor portfolio, you’re instantly creating a broadly-diversified portfolio that will balance your risk and help you meet your financial objectives. You’ll also get things like automatic rebalancing with a robo advisor, which saves you from having to go in a few times a year and rebalance the stocks in your portfolio.
American Robo Advisors: Wealthfront vs. Betterment
If you arrived here looking to see if you could invest in Betterment or Wealthfront as a Canadian citizen or resident, the answer is: probably not.
Unfortunately, these two pioneering robo advisors are only available to USA residents at this time. This means that Wealthfront and Betterment cannot be used to open a TFSA, RRSP, or RESP.
While it might seem advantageous for these two prominent robo advisors to come to Canada, the reality is they’d have to go through regulatory burdens and face several regional companies that have shops already set up.
It’s too bad from a consumer’s point of view because these robo advisor giants would no doubt raise the competition bar throughout the industry and work to keep costs as low as possible. On the other hand, perhaps there is something to be said for “Made in Canada” solutions.
I’m a little biased because I use a robo advisor, but I do so willingly. I have two degrees in finance, both with a specialty in investments. I know how to select a stock, but I’ve chosen not to go that path. For me to select the right portfolio and maintain it, it sucks up too much time. It’s just not worth it for me. So instead, I use a robo advisor that takes into account my preferred risk tolerance to construct and manage a portfolio that works for me.
But that's not for everyone. Do your due diligence and make a decision that’s right for you. The one thing I’d confidently advise you to do is start investing, whether it be through a robo advisor, a financial advisor or with a DIY approach. You’re wasting time and money by not putting your dollars to work for you right now.
The original article was written by Kyle Prevost. It was updated in 2019 by Chris Muller to reflect the latest changes in the robo advising world.
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