If you have been living under a rock (aka, not tuning into regularly scheduled programming here at Y&T), you have probably not heard of robo advisors before. Well, robo advisors are definitely here to stay and are moving and shaking the financial world by merging finances and technology (hence the term “fintech”). People want to access their money when they want, where they want, and on their own terms. More and more Canadians are waking up to low-growth realities and they don't like to feel gouged with the high fees and lack of performance typically associated with traditional mutual funds. For more information on the overall industry and FAQ, check out our complete guide to robo advisors available in Canada. Today's post is honing in on one of the robo advisors available since 2014: Questrade's Portfolio IQ.
Who's Behind Portfolio IQ
Who's behind Portfolio IQ, you ask? Our old friend Questrade is behind Portfolio IQ. They are Canada's fastest growing online discount brokerage, with 30,000 accounts opened every year. Questrade has over $4.5 billion of assets under management (that's a lot!) and has established themselves as a leading player when it comes to presenting Canadians with ultra-cheap DIY investing options. Questrade is a big company compared to the other robo advisors out there. They also have some pretty snazzy commercials that make you question your current investments with the big banks. To put all of our cards on the table, we have been fans of Questrade for a long time now and love the fact that they let you purchase individual ETFs for free within a discount brokerage account. Let's hope they bring the same passion for savings to the robo advisor space going forward.
How Portfolio IQ Looks and Ease of Use
Portfolio IQ is embedded within the Questrade dashboard and interface (see below). It has a sharp purple and green motif and it is easy on the eyes and fun to look at. It is also easy to use – which shouldn't be a surprise given their time in the online investing world.
To see how your portfolio is performing, you can look at Investment Summary in Questrade (which is the usual platform that you will see if you are already a Questrade account holder).
Questrade often updates the interface (as well as the rest of their platforms) but usually the change is intuitive enough to figure it out fairly quickly.
How it Works
How Questrade Portfolio IQ works is that you don't need $100,000 to benefit from a financial advisor who will actively manage your portfolio – you can start with as little as $2,000. It is for people who want to invest but don't have the time, energy, or know-how to DIY. It is also for people who want to retire 30% wealthier (one of their slogans) because that's how much you are paying more in terms of sacrificed growth due to fees if you go the traditional big-bank mutual fund route. (I would argue that this is an imprecise measurement – and that the total for most people would actually be substantially higher than that.)
Basically instead of you managing your ETFs and re-balancing twice a year or so (aka couch potato investing), they will manage your ETFs for you and re-balance your ETFs (almost completely hands-off once you set your initial target allocations – if that's what you want) and you will pay a fee for that (see below).
Many people are too worried or scared to get into the stock market, or are worried about their emotions and how they might react when the next crash happens, so having your money managed for you might be a good idea if you fit into this category. If looking up individual ETF symbols and doing a little investment reading isn't your thing, robo advisors such as Portfolio IQ are probably your best bet.
What Portfolio IQ Will Cost You
The pricing of Portfolio IQ is based on a tier system (similar to several other robo advisors). The more you invest, the less it will cost you as a percentage of your account. The minimum that you need to invest with Portfolio IQ is $2,000, if you have less than $2000 you can still open an account but it will be in cash until you meet the threshold.
The Portfolio IQ MER fee does not include the underlying ETF fee which they say ranges from 0.31-0.83%.
- $2000-$99,999- 0.7%
- $100,000-$249,000- 0.6%
- $250,000-$499,999- 0.5%
- $500,000-$999,999- 0.4%
- $1,000,000+ – 0.35%
Types of Accounts
The types of accounts that you can open with Portfolio IQ are:
- Cash Account- Personal or Joint
- LIRA- Locked In Retirement Accounts
- RIF- Registered Retirement Income Fund
- Corporate Accounts
- LIF- Life Income Fund
What Makes Portfolio IQ Unique
Portfolio IQ is actively managed – sort of. This is probably the biggest difference between Portfolio IQ and the offerings of Canada's other robo advisors (also probably accounts for why their fees are slightly higher at the lower tiers). The belief is that by mixing some basic vanilla index ETFs with actively managed options they can offer better value and superior returns. They state they have assembled a team of experts who do daily research and market analysis and they adjust their strategies to take advantage of the market. To be honest, I remain sceptical on that active management adds value and/or that it will beat passive management over the long term.
Account Protection up to $11 million If you have $9 million lying around and you don't want your investments protected up to the $1,000,000 level that the Canadian Investor Protection Fund automatically protects you with, Questrade protects ALL clients for an additional $10 million for free.
MyFamily Program– You can link your Portfolio IQ accounts with your friends and family, and you will be a able to access lower fees (if your accumulated portfolio value meets the next tier for lower Portfolio IQ pricing). Find your friend who has $999,999 in portfolio assets and together you guys can decrease the cost of your Portfolio IQ pricing! (Perhaps there is a side benefit to getting Canadians to talk about investing and personal finance a little more?)
They Show you the Robo Portfolio's Past Performance– What makes Portfolio IQ unique compared to other Robo Advisors, in my research so far… is that you can see the past performance of the selected portfolio (Aggressive, Growth, Balanced, Income, or Conservative Portfolio) since 2011. It is not the actual performance of Questrade Wealth Management Inc. clients but created by One Capital Management LLC (a company based in California, USA) based on the ETFs performance within that portfolio (pretty snazzy if you ask me). I should also note that five years is not really an indicative frame of reference for long-term retirement planning, but at least there is some data there if you are curious.
Automatic Reinvesting when you make any cash deposits or have any dividend distributions, Portfolio IQ will automatically reinvest this into your portfolio.
A Peek Inside Portfolio IQ
When you first sign up for an account, you will be asked the standard questions to assess your timeline for savings and your risk tolerance.
For example, the question below asks the account holder whether they want to preserve capital, provide a steady stream of income, have a balance of income and growth, generate substantial asset growth or achieve maximum asset growth.
After a number of questions, you will be given an asset allocation. In the demo account that I opened, it says I would work best achieving a balanced approach, which involves 60% equity and 40% fixed income.
Then the balanced portfolio is created and reviewed with you, you will be able to see the exchange traded funds that are held within this portfolio.
This is a screen shot of the example of ETFs that Questrade IQ will use to create your customized portfolio.
The great thing about Portfolio IQ that is different from the rest of the robo advisors is that they allow you to see the past performance of this particular portfolio (that extends beyond 2 years since Portfolio IQ was only created in 2014). They do this by aggregating the exchange traded funds and analyzing their performance. Once again I would caution that it is wrong to put too much stock in this short-term performance, but it is a cool feature.
You can see below the 1-year performance, the 3-year performance, and the 5-year performance. Inception would be a more accurate performance of the Portfolio IQ balanced portfolio since Portfolio IQ was only available 2 years ago in 2014.
Act Now! How to Open up a Portfolio IQ Account
Sound enticing to have your money managed with Portfolio IQ and to not have to worry about re-balancing and checking the stock market all the time? Well, you are in luck because Young and Thrifty Readers can get their first month with Questrade's Portfolio IQ managed for FREE.
All you have to do is Click HERE to open up a Portfolio IQ Account and you will get your first month managed for FREE.