RBC InvestEase Review: Big Blue Enters the Canadian Robo Advisor Market

While Canadian Robo Advisors aren’t household names in Canada, they are beginning to catch on fast.  You can learn more about this fast-moving investing phenomena at an earlier post here, including a comparison of some of the leading Canadian Robo investment firms such as Wealthsimple. Earlier this month, the robo advisor space got just a little more crowded when news broke that the Royal Bank of Canada (RBC) was set to launch its very own robo advisor platform, joining BMO’s SmartFolio as the only two robo advisors by Canada’s major banks.

RBC InvestEase – What’s on Offer?

It’s still early days as far as RBCs Robo investing platform is concerned, with the launch announcement just made on Wednesday November 8th, 2017. Here’s what we know so far:

  • The RBC platform will be called InvestEase, and will be launched as a separate business unit to Canada’s largest Schedule 1 bank
  • It will primarily offer clients a select range of half a dozen proprietary RBC exchange-traded funds developed by RBC Global Asset Management. The selection will likely use a combination of the following RBC ETFs:
    • RBC Canadian Short Term Bond Index ETF
    • RBC Canadian Bond Index ETF
    • RBC Global Government Bond (CAD Hedged) Index ETF
    • RBC Canadian Equity Index ETF
    • RBC US Equity Index ETF
    • RBC International Equity Index ETF
    • RBC Emerging Market Equity Index ETF
  • Clients will also have access to automated investing advice, as well as discretionary portfolio management services
  • While delivery of these services will primarily be through a digital platform, accredited portfolio managers will be available to support clients
  • The platform is currently being piloted by a select group of RBC employees prior to a decision on broader launch

Upon signing-up for the service, InvestEase promises that clients will be provided with an instant portfolio recommendation, and a guarantee that their investments will be managed at a low cost.

RBC InvestEase Review

  • Account holders can start making regular contributions to their accounts
  • They can use online tools to monitor and track their investments
  • RBC’s automated tools (presumably under supervision of human advisors) will automatically rebalance portfolios to meet pre-determined client investment goals

During the current Employee Pilot phase, anyone attempting to sign-in or sign-up for InvestEase is politely reminded that the platform “…is only available to a select group of participants at the moment”.

RBC InvestEase 2

InvestEase is RBC’s approach to managing investments without the associated high fees charged for traditional investment management and advice. According to Rosalyn Kent, CEO of RBC InvestEase, one of the objectives for launching the new Robo service is to create a stepping stone along “…RBC's path as it evolves into a digitally-enabled relationship bank.”

When InvestEase is eventually launched for public access (no date has yet been set for the launch), RBC will be in good company, with robo advisory services from its peers like Bank of Montreal’s SmartFolio and National Bank of Canada’s Nest Wealth service.

InvestEase Review: How It Works

As is the case with most Robo investment services, InvestEase will not have physical access to your money – so you can rest easy that some algorithmic robot will not make off with your hard-earned cash. The custodian of your funds will be RBC Direct Investing Inc., which is a member of the Canadian Investor Protection Fund (CIPF)., and regulated by Canada’s investment watchdog – Investment Industry Regulatory Organization of Canada (IIROC).

RBC Direct Investing Inc will also be responsible for other functions, including:

  • Maintaining accounts
  • Keeping records
  • Settling trades, and
  • Reporting

Based on information currently available on the InvestEase website, RBC’s Robo advisory service functions pretty much like most of its peers:

  • The Welcome Page will request some authentication information
  • You will then be requested to answer some questions about your needs and investment preferences
  • A personalized portfolio will then be tailored and recommended for you. If the recommendations meet your approval, you can move forward with opening the account
  • Next, you’ll receive a call from a Portfolio Advisor to discuss the recommendations and confirm an investment plan with you

If all goes well, you’re in. Log into your account and make your initial deposit to start down your Robo investing journey! The initial deposit has been set at a minimum of $1,000 so that it can be split up into a diversified ETF portfolio. There is no limit set for subsequent contributions.

RBC InvestEase Pilot

For the Employee Pilot, InvestEase only offers access to non-registered accounts. The caveat is that even though you may already have other similar accounts with RBC, you will have to open a separate non-registered account with the bank to use InvestEase. Post-pilot however, plans are afoot to expand the types of accounts offered to include TFSAs, RRSPs, LIRAs, RLSPs, RRIFs, RESPs and joint accounts.

During this testing phase, clients will NOT pay any fees other than fees charged by the ETF manager, which amounts to an average of 0.12% to 0.14%. It is expected that RBC will initiate investment management fees roughly six months after going public with their platform. Current fee estimates include:

  • An annual management fee of 0.50%, plus applicable taxes. The fees will be based on average Assets Under Management (AUM), and will be billed each month
  • A $135 fee will be charged to transfer your InvestEase account to another financial institution

As with traditional money managers, InvestEase offers you 100% protection, through Canadian Investor Protection Fund (CIPF), against maleficence in your account. Remember, these are losses that may accrue through wilful negligence or fraud on the part of RBC InvestEase or its authorized agents. Capital erosion and losses due to account-holder negligence are NOT covered by CIPF.

A Natural Evolution

In many ways, the introduction of InvestEase could be seen as just a natural evolution for RBC into the world of “full Robo”. RBC has already been using technology to connect clients in real-time with its team of advisors.

RBC InvestEase 3

The RBC MyAdvisor platform, which is a product produced by RBC’s innovation lab in Toronto, enables clients and advisors to collaborate over an electronic dashboard to set investment goals and monitor and track performance.

RBC InvestEase platform

With the launching of InvestEase, it could be expected that MyAdvisor would either be dropped as a service offering, or its features rolled up into a bundled offering within the bank’s new Robo platform.

RBC’s Robo Advisosr: The Bigger Picture

So, what could RBC expect in the long-run from InvestEase? While definitive statistics aren’t available for Canadian’s appetite for Robo investing, we could use figures from across the border as a close proxy.

RBC InvestEase 4

A recent (October 2017) study of US investing habits conducted by BMO Wealth Management confirmed that only 5% of Boomers invested with Robo advisors, while that figure rose to (5 and 10% amongst Gen-Xers and Millennials polled. The news of RBC’s leap into Robo investing should therefore not be construed as something that will immediately see hundreds of thousands of investors flock to the new platform. It may be that Canada’s largest bank has a much longer-term vision.

While news of RBC’s intended foray into Robo investing emerged, we also learned, on November 21st, that the Financial Stability Board (FSB) has put the bank on its list of 30 global institutions it considers “too big to fail” – a term reserved for banks and other financial bodies that are considered “systemically” important. This means RBC will be required to hold even larger capital reserves and face even more rigorous regulatory oversight.

With Canada’s largest bank entering the Robo investing landscape, it provides more competition for the incumbents, which bodes well for Canadians.  

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