If not, it might be only because you haven’t heard about robo-advisors and what they can do for you
By Katrina Caruso
In the last five years, Canada has seen a growth in a new kind of investing, known as “online investment services” or “digital investment solutions,” but they’re also being cheekily referred to as robo-investors, robo-advisors, and even robos. At least 15 different services have cropped up, offering Canadians an easier approach to investing.
First, you should know that robo-advisors are not, in fact, robots. The term refers to the automated management of investments, primarily exchange-traded funds (ETFs), which are slowly edging out mutual funds as the most popular types of investments. Using information you’ve provided about your situation, preferences, and risk tolerance, robo-advisors create your investment portfolio and manage it, investing your money in a wide variety of ETFs and dealing with other tasks including annually rebalancing investments, handling the allocation of assets, and more. They allow you to set up automatic contributions to your investments, as well. The idea is to make investing easier and more convenient. (Naturally, a robo-advisor is available 24 hours a day.)
The service isn’t free, but it costs less than paying an actual advisor—usually around 0.5% of assets, but there may be other fees or payment models, such as monthly subscriptions.
Some of the top Canadian banks have already jumped on the bandwagon: BMO started it all in 2016 with their SmartFolio, and RBC is testing what the bank is calling InvestEase.
Boomers haven’t been as quick to jump on the new investment method as millenials have, so far. Millenials are enticed by robo-advisors because the system doesn’t require a lot of know-how from the customer, the fees are low, and you don’t need a lot of money to get started. However, firms such as WealthSimple (which manages over $1 billion currently) are now trying to attract more older and more affluent folks.
As always, it’s worth doing your research before taking the plunge with a service regarding your finances, but you may find this a simple, worthwhile, and potentially worry-free, investment option.