Robo advisors are making investing simple, affordable, and accessible to Canadian investors. Based entirely online, robo-advisors provide investors with an online platform on which to invest, and typically charge very low management fees and require small capital amounts to start off with.
These digital advisors make use of algorithms that allocate assets according to investors’ financial goals and appetite for risk, with some interaction from real-life humans behind the scenes.
More and more robo-advisors have been popping up on the scene over recent years, giving investors more to choose from. That said, some appear to be stand-outs compared to others.
Here, we’ve rounded up our top picks for the best robo-advisor in Canada.
What Is A Robo-Advisor?
A robo-advisor is an investment platform that makes use of an algorithm to create and manage your investment portfolio. This allows for a more passive approach to investing, though investors may also have the option to be more involved in the process.
Based on your particular financial position and investing style, robo-advisors will select investments for you, create a portfolio based on your tolerance for risk and financial goals, and automatically rebalance your portfolio when appropriate.
While algorithms are heavily involved in managing investments, there are actual human advisors behind the scenes that also play a key role in managing your investment portfolio. Robo-advisors are a great option for those who are looking to save on their investments, as their fees are a fraction of what the average human investment advisor charges. Plus, they’re great for novice investors who don’t have sizable capital to start investing with.
How Do Robo-Advisors Work?
Robo-advisors help you invest your funds using low-cost Exchange-Traded Funds (ETFs), which are designed to help maximize returns while slashing investment fees.
Before you open and fund an account and start investing, you’ll be asked a series of questions to help the robo-advisor platform determine which investment assets and classes to choose. The answers you provide will tell the robo-advisor what your long-term goals are, when you’d like to achieve them, and what your appetite for risk is. Then, an investment portfolio will be established that matches your requirements. You can then fund your account and start investing.
Once your money is invested, the robo-advisor will keep tabs on your account, and if any gains or losses fall outside of your allotted target range, your account will be automatically rebalanced. You won’t have to do anything to make this happen, which is why this type of investing is largely considered “passive.”
Robo-advisors are great for experienced investors with plenty of capital to play with, but they’re particularly beneficial for newer investors who have little investment capital and are looking to save on investment fees. As such, there’s a better chance to earn higher returns in a shorter period of time.
|Fees||MER Fees||Min. Investment||Key Features|
|Wealthsimple||– 0.4% to 0.5%||– 0.10% to 0.20%|
–SRI MERs from: 0.25% to 0.40%
|$0||– Reinvests dividends|
– Automatic rebalancing
– Financial advice
– Automatic deposits
– Dividend reinvesting
– Tax-loss harvesting
– Portfolio review
|CI Direct Investing||– First $150,000: 0.60%/year|
– Next $350,000: 0.40%/year
– Over $500,000: 0.35%/year
|0.19% to 0.26%||$1,000||– Tax-loss harvesting|
– Socially responsible investing options (as an add-on)
– Automatic rebalancing
– No withdrawal fees
– Access to Private Investment Portfolios
– 8 portfolios to choose from
|Nest Wealth||– Under $75,000: $20/month|
– $75,000 to $150,000: $40/month
– Over $150,000: $80/month
|0.13% for balanced portfolios||$0||– Tax-loss harvesting|
– Automatic rebalancing
– Live support
– Capped trading fees at $100
|Questwealth||– 0.20% – 0.25%||0.17% – 0.22%||$1,000||– User-friendly platform |
– Tax-loss harvesting
– Automatic portfolio rebalancing
– Automatic deposits
|Justwealth||– $5,000 – $500,000: 0.50%|
– Over $500,000: 0.40%
|Average of 2.20%||$5,000||– Automatic rebalancing|
– Tax-loss harvesting
– Free personalized financial planning
– Free portfolio review
– US dollar portfolios
Top 5 Best Robo-Advisor Apps
It can be hard to navigate your way through the plethora of robo-advisors available in Canada. To help you come to a decision, below is a brief introduction of some of the best robo-advisor apps you should check out.
Wealthsimple is one of the more popular robo-advisors in the world, not just in Canada. They’ve worked with major investment firms and boast a board of directors who come with tons of experience in the investment industry. Today, Wealthsimple is managing around $5 billion in assets, which makes them the biggest robo-advisor in Canada.
No minimum investment amount is required, and there are no income requirements to open an account. Your investment portfolio is invested in ETFs, and your loan portfolio will be built to match your investing style and risk tolerance. Wealthsimple algorithms will automatically rebalance your account when it fluctuates past a certain range and will reinvest your dividends accordingly. Plus, you can take advantage of tax-loss harvesting, financial advice, and a personalized portfolio review.
Wealthsimple offers three simple, as their name suggests, pricing plans that you can opt for.
- Basic – offers a 0.05% fee for accounts under $100,000.
- Black – offers a 0.04% fee for accounts between $100,000 to $500,000.
- Generation – offers a 0.04% fee for accounts over $500,000
Who Is Wealthsimple For?
With no minimum investment required, Wealthsimple works great for beginners. If you want to learn how robo-advisors work, Wealthsimple is a great place to see how your money will be invested.
CI Direct Investing
Formerly known as WealthBar, CI Direct Investing was one of the first affordable investment platforms in Canada, which made professionally-managed investment portfolios more accessible to the average investor.
CI Direct Investing is based on long-term investing and diversifying portfolios to minimize risk and maximize returns. The platform encourages assets to be distributed over several ETFs so that even if one asset takes a dive, the others can pick up the slack. This also ensures higher returns compared to the average mutual funds while promising lower fees compared to conventional investment advisors.
Perhaps the stand-out feature of CI Direct Investing is the hybrid model, which combines algorithms with real-life human support to help manage portfolios and ensure they perform accordingly. The platform offers eight different investment portfolios to choose from to help tailor your investments to your exact financial goals and risk tolerance.
CI Direct Investing Pricing
CI Direct Investing’s pricing depends on how much you invest. Wealth bar has structured its pricing per year as follows:
- First $150,000 – 0.6%
- Next $350,000 – 0.4%
- Above $500,000 – 0.35%
Who Is CI Direct Investing For?
CI Direct Investing is great for people who know a little bit more about the stock market and are looking to invest in assets that are more premium.
Nest Wealth is a digital wealth management firm that offers customized investment portfolios. The platform makes use of state-of-the-art technology along with impeccable customer service and manages investment portfolios to ensure they perform according to investors’ profiles. Like most other robo-advisors, Nest Wealth offers lower fees compared to the average human advisor, along with other perks such as automatic rebalancing, tax-loss harvesting, and live support.
Nest Wealth’s investment approach involves diversifying and balancing investment portfolios made up of ETFs. This strategy helps to keep risk as low as possible while boosting returns. You’ll also have access to expert support from a live advisor via email, live chat, or telephone.
Nest Wealth Pricing
The robo-advisor’s pricing structure is quite unique. While most other digital investment advisors charge a percentage of invested funds to cover management fees, Nest Wealth charges a monthly fee instead. Nest Wealth charges a fee of $20 – $80 dollars a month depending on how much you invest. As such, it’s not great for small investors who may find their returns aren’t big enough to support a $20 charge a month. However, a fixed cost for big investors is much more cost-effective than rates that go by percentage.
Who Is Nest Wealth For?
Nest Wealth is great for people who are older. Why? Well, Nest Wealth offers its members a low-risk investment using passive investment strategies. Rather than trying to beat the market, they create low-risk portfolios to reach your goals.
Questwealth is an arm of Questrade, a popular Canadian investment management company that has amassed approximately $9 billion in assets under administration. Formerly known as Portfolio IQ, Questwealth allows investors to create and manage their investment portfolios online using ETFs, stocks, mutual funds, FX, CFDs, and more.
Investors can choose from a variety of accounts, including TFSAs, RRSPs, LIRAs, RRIFs, and LIFs. Depending on your financial goals and risk tolerance, you can choose to invest with a variety of portfolio types that range from conservative to aggressive, each of which is low-cost ETFs in different allocations.
With socially-responsible investing options, low management fees, excellent customer service, and a user-friendly website, Questwealth is a fantastic robo-advisor for Canadian investors looking for an affordable and accessible way to invest.
- 0.25% for accounts with $1,000 – $99,999
- 0.20% for accounts with $100,000+
Who Is QuestWealth For?
QuestWealth is best suited to individuals who prefer to have a hand in their investment choices.
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Justwealth is another popular robo-advisor in Canada and is a member of the Portfolio Management Association of Canada (PMAC). The company aims to lower the barrier of entry for smaller investors while helping to make investing more cost-effective thanks to lower management fees compared to conventional human investment advisors.
Justwealth takes a passive investing approach that allows the platform’s algorithms to take over with the managing of investment portfolios without having to actively keep tabs on them. Investors can also take advantage of higher returns and hedge against risk by spreading their investment across a myriad of ETFs and diversifying portfolios.
Depending on the type of investor that you are, you can choose from a handful of portfolios, including Starter, Growth, Income, and Preservation portfolios. Of these portfolios, Justwealth can create 65 personalized portfolios using 38 different ETFs, so each portfolio can be specifically customized for every investor. Moreover, when you invest with Justwealth, your assets (up to $1,000,000) are protected by the Canadian Investor Protection Fund.
- All accounts cost $4.99/month.
Who Is Justwealth For?
Justwealth is best suited for people looking for variety in portfolios and appreciate a more professional hand managing their investments.
Robo-Advisors vs. Financial Advisors
Both robo-advisors and financial advisors have their benefits and drawbacks. Depending on what you’re looking for either one may work for you.
Choose A Robo-Advisor If:
- You’re new to investing. While robo-advisors are equally as good for experienced investors, they’re ideal for novice investors who are just starting out. That’s because the barrier to entry is lower, making it easier to get started investing.
- You don’t have a large amount of capital to start investing with. Traditional investment firms typically require a large amount of capital needed to invest. If you don’t have tens or even hundreds of thousands of dollars to play with, then a robo-advisor may be your best – and only – bet.
- You’re looking for a lower-cost option to invest. Unlike human advisors who charge a hefty fee for their management services, robo-advisors come with much lower fees. This makes investing a lot more affordable and leaves more money in your pocket at the end of the day.
- You like the idea of automating your investments. Once you answer a few questions, open and fund your account, and invest your capital, your job is pretty much done. You can let the robo-advisor take over your investment portfolio and rebalance it as required if your gains or losses fall outside your target range.
Choose A Human Advisor If:
- You’re looking to invest a large amount of money
- Don’t trust online investments
- Have no problem paying more for value
- You’re interested in using risk strategies to get higher returns
- If you want to personally manage your investments
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Features to Consider When Choosing a Robo-Advisor
Before you decide which robo-advisor to invest with, consider the following factors.
One of the first things you’ll want to find out is how much the management and MER fees are with the robo-advisor you choose, as these fees will have an impact on how much you are left with and how much faster you can grow your wealth.
Minimum Investment Amount
Robo-advisors tend to have much lower capital requirements to invest with compared to conventional investment management firms. Check out what each minimum investment requirement is with each robo-advisor on your shortlist to make sure it matches with what you have to work with.
Investment Options (ETFS, TFSA, RRSP, etc)
Robo-advisors will offer specific investment options, which you’ll want to scope out before you open an account. Ideally, the robo-advisor you choose will offer the exact types of options you are looking for to add to your investment portfolio.
Find out how many different portfolios the robo-advisor offers. Each portfolio will be based on risk tolerance and growth projections. For example, portfolios will typically range from low-risk, conservative portfolios with slower growth projections, to more aggressive portfolios that may be higher-risk but can help you see higher returns more quickly.
Dividend Reinvestment Plan
This type of arrangement allows investors to automatically reinvest cash dividends into another investment rather than cash out.
If you’re looking to hedge against taxation, a tax-loss harvesting feature may be attractive to you. This type of service allows you to sell a security that has realized a loss. By “harvesting” a loss, you can offset your taxes on both income and gains. Then the security that was sold can be replaced by another similar one so that your asset allocation and expected returns are maintained.
Robo-advisors should have some level of personalization with your investment portfolio to best suit your particular financial requirements and comfort level.
Socially Responsible Investing
Many robo-advisors allow investors to invest in social and environmentally-conscious portfolios that match their ethics.
To make things as convenient as possible, consider choosing a robo-advisor that offers an app through which you can keep tabs on your portfolio on the fly.
Are Robo-Advisors Safe?
Considering the fact that you’re dealing with a lot of money, you’ll want to make sure that the institution that you are dealing with can be trusted. The last thing you want to do is have a shady entity handle your money, leaving you wondering what will happen to it.
The good news is that Canadian robo-advisors are safe and are usually protected by the Canadian Investor Protection Fund (CIPF), so your money is kept secure while it’s being invested. So, in the unfortunate and highly unlikely event that the robo-advisor platform falters, up to $1 million of your money is guaranteed to be returned back to you.
Frequently Asked Questions
What kind of accounts can I invest in with a robo-advisor?
Should I invest using a robo-advisor or a financial advisor?
What is an ETF?
What is tax-loss harvesting?
If you’re new to investing, robo-advisors are safe and easy to use. They will create and manage your money based on your risk tolerance and investment goals. However, if you’re looking to customize your investments or prefer to have greater control over them, a human advisor is suggested. Regardless, if you choose a human advisor or a robo-advisor, investing your money is important to building a more stable financial future. Just like an investment portfolio, diversifying your money and assets will help build your financial worth and strengthen your financial health.
|Annual Report||A yearly report provided by a company to its shareholders that discusses the business activities and finances from the past year.|
|Annuity||An annuity is a financial product that pays out a guaranteed income. It is used mainly by those who are putting a retirement plan together. When an investment is made in an annuity, it then makes regular payments at a date or dates in the future to create an income stream for retirement.|
|Asset Allocation||A type of investment strategy that aims to balance risk and rewards by adjusting the portion of money invested in different types of assets in an investment portfolio. The specific investment strategy depends on the risk tolerance, time frame and goals of the investor.|
|Bond Fund||A mutual fund that invests in bonds or similar debt securities, also known as a debt fund.|
|Bond Maturity||The term to describe time passing throughout a bond’s term. At the bond’s maturity date, the end of a bond’s term, the principal and interest will become due to the investor.|
|Bonds||A type of debt security or financial instrument that represents a loan made between an investor and a borrower. The borrower is often a corporate or government body. Bonds are lower risk and yield less return than other types of investments.|
|Common Stock||A type of equity ownership in a corporation. Holders of common stock vote on corporate policies and elect the board of directors.|
|Diversification||Investors are typically encouraged to diversify their loan portfolios in order to hedge against risk and garner the highest returns since different assets react differently to the same economic events. Diversification refers to a portfolio that consists of various assets that are not correlated with one another.|
|Dividend||An amount of money that is paid on a regular basis by a company to their shareholders. The amount paid comes out of the company’s profits.|
|Dividend Yield||The ratio of a company’s dividend per share to the price per share. The dividend yield communicates how much dividend income you received in relation to the price of the stock. The ratio is most commonly expressed as a percentage.|
|Enterprise Value||A measure of a company’s total value typically used as an alternative to equity market capitalization. The calculation considers market capitalization, short term debt, long term debt, and cash on hand.|
|Equity Fund||A mutual fund that invests primarily in stocks, also known as a stock fund.|
|ETF||ETF stands for exchange-traded funds. To put it simply, an ETF is like a mutual fund where it is comprised of securities like stocks and bonds and, like stocks, can be traded on the stock exchange. You are able to buy and sell shares of the ETF, like a stock, without having to buy each bond, stock and other securities separately. You own a part by buying the ETF which is comprised of these securities.|
|Guaranteed Investment Certificate (GIC)||A GIC is considered a low-risk investment vehicle because it is guaranteed. It works similar to a savings account because the money deposited in it earns interest.|
|Index Funds||A type of mutual fund that is built to match or track a financial market index, such as S&P 500. Index funds are low risk which makes them safe investments, but there is little opportunity for big earnings.|
|Investment||When an individual or entity contributes money towards something with the intention of turning a profit or gaining a material outcome, it is considered an investment. All of the money invested would be considered an individual or entity’s investments.|
|Investment Advisor||An individual or group that manages money or makes financial suggestions on behalf of another individual or group in exchange for a fee.|
|Market Cap||The market value of a public company’s outstanding shares. The market cap is calculated by multiplying the share price by the outstanding number of shares.|
|MER||MER stands for the management expense ratio. The management expense ratio includes management fees, operating expenses, and taxes associated with a fund.|
|Mutual Funds||A mutual fund is a portfolio of different securities (stocks, bonds, short-term debts) that many people can invest in. Rather than diversifying your investments by buying different securities yourself, you can invest in a mutual fund. Depending on how much you invest, you will own a share of the mutual fund. This allows investors to have their hands in different stocks with one transaction.|
|Number of Holdings||The sum of all holdings types in a fund, investment or portfolio. For example, if you have a portfolio with common stock, bonds and preferred shares, the number of holdings would be three.|
|Par Value||Par Value – Par value refers to the value of a stock as stated on the stock certificate or the corporation’s articles of incorporation. The par value per share is typically of very little or no value.|
|Portfolio Management||The professional science and art of executing investment decisions and performing investment activities on behalf of an individual or institution.|
|Portfolio Rebalancing||Portfolio rebalancing is the act of consistently balancing your investments according to your needs by buying and selling assets.|
|Preferred Stock||A type of equity ownership in a corporation. Holders of preferred stock have a higher priority when it comes to dividends or asset distribution when compared to common stockholders.|
|Premium Bond||A premium bond is one that costs more than its face value. Bonds may trade at higher values as a result of a higher interest rate compared to current market rates.|
|Price to Earnings Ratio||The ratio of a company’s share price to earnings per share. This ratio is used to determine if a business is overvalued or undervalued.|
|Price-to-Book (P/B) Ratio||The P/B ratio refers to a company’s stock price divided by its book value per share (total assets less liabilities). Low P/B ratios may be a sign of an undervalued stock.|
|Reinvest Dividends||The process of investing dividend cash payments into the company or fund that provided that dividend.|
|Risk Tolerance||Risk levels vary with different investments. While some investments come with low risks, others are riskier in nature. Risk tolerance refers to the amount of risk that an investor is willing or able to undergo when investing in a particular investment vehicle.|
|Share Price||The price of a sole share in a company. A share price is not fixed and fluctuates depending on market conditions.|
|Shareholder Value||The value brought to equity owners of a corporation as a result of management’s actions to increase sales, free up cash flow, boost earnings, pay out dividends, and earn capital gains for shareholders.|
|Stockbroker||A professional who purchases and sells securities on a stock exchange for their clients.|
|Stocks||A type of debt security or financial instrument that represents ownership share in a company. Issuing stock is a way for companies to raise money and investors to turn a profit. Stocks carry more risk, but have the possibility for greater returns. Once you own a share of the company you can gain money through dividends paid out by the company or by selling the stock for a higher price than when purchased.|
|Tax-loss Harvesting||The practice of selling an asset or security that has incurred a loss with the intention of offsetting taxes on capital gains and income. Using the proceeds of the asset or security sale, a similar asset or security is purchased to maintain optimal returns and investments.|
|Volatility||The statistical level of variation of a trading price over time. Often, volatility is measured using the standard deviation of logarithmic returns. When volatility is high, the risk of investment is also high.|
|Yield to Maturity (YTM)||Yield to maturity refers to the total anticipated return on a bond if it is retained until maturity. If an investor holds onto a bond until it matures, the YTM is the rate of return of an investment if all scheduled payments are made and reinvested at the same rate.|