Investing in the stock market is becoming increasingly popular in Canada. Many Canadians are moving away from traditional savings accounts. They are instead looking for investment opportunities with higher return potentials. With online investment brokerages multiplying, investing has never been easier or more accessible.
One of the main reasons for the boost of popularity in investing online is the introduction of robo advisors. Robo advisors use technology and algorithms to invest on your behalf. You will answer questions regarding your stock interests and trading style.
You will also be asked about your financial goals and risk tolerance. The robo advisor will then use their algorithm to design your investment portfolio. It will invest your money accordingly and manage your portfolio.
Investing with a robo advisor is what is known as passive investing. This is because your investment portfolio is managed for you. Having a robo advisor as a portfolio manager means that you do not have to do extensive research into your investment options.
You simply deposit your money into your investment account, and your robo advisor will choose your investments. They will continually rebalance your portfolio to make sure your asset mix is correct.
There are many robo advisors in Canada. Choosing the right one for you can be difficult. Today, we will look at the best robo advisors in Canada in more detail. We will examine the advantages and disadvantages of each so you can make an informed and sensible decision. Let’s begin!
1. Questwealth Portfolios
Questwealth is the robo advisor for Questrade. Based in Toronto, Questrade is the largest independent broker in Canada, with assets over $8 billion! Questrade was already a market leader in online investing. Since launching its robo advisor, it has regularly been voted as the best online brokerage in the country.
Once you set up your account, Questwealth will give you a questionnaire to determine your tolerance to risk and investment goals. The robo advisor’s algorithm will then match you with one of the five portfolio options:
- Conservative – Best for low-risk investors. It has an 80% allocation to fixed income and 20% to equity.
- Income – Best for low to medium risk investors. It has a 60% allocation to fixed income and 40% to equity.
- Balanced – Best for medium risk investors. It has a 40% allocation to fixed income and 60% to equity.
- Growth – Suited to investors with a higher than average tolerance to risk. It has a 20% allocation to fixed income and 80% to equity.
- Aggressive – For high-risk investors. 100% of your funds will be invested in equity.
Unlike many other robo advisors, Questwealth Portfolios use a hybrid approach to investing. This means that an algorithm organizes your account and portfolio and invests your money. However, your account is actively managed by a team of human advisors. They monitor the market and make any adjustments to your investing account. Questwealth Portfolios is renowned for its low fees and an easy to use investing platform.
- The management fee is extremely low compared to Questweath’s competitors at only 0.2%-0.25%.
- Exchange-Traded Funds (ETFs) have a Management Expense Ratio (MER) of only 0.17%-0.22%. This is lower than the industry standard.
- Socially responsible trading options are available. You can choose to invest only in companies that are environmentally friendly. You can also choose socially responsible companies with fair labour practices and a lower carbon footprint (see Canadian blue chip companies, too).
- Clients have access to tax-loss harvesting. This lowers your tax on any investment gains by offsetting it against any losses.
- You can link your account with family and friends’ accounts to get reduced fees.
- They are known for their excellent customer service, with over 100 human advisors ready to offer help and advice whenever you need it. Questrade received the ‘2019 DALBAR Seal for Service Excellence‘ award. This recognizes outstanding customer service.
- Clients have actively managed portfolios. A team of financial advisors watch your account and make any necessary adjustments. This helps to limit your losses and maximize your gains. Your account will also be automatically rebalanced by your portfolio manager.
- You could receive a transfer fee rebate of up to $150.
- Your dividends will be reinvested automatically.
- Your first $10,000 is managed free of charge.
- There is a minimum investment amount of $1,000.
- Some investors do not want actively managed portfolios and prefer their accounts to be managed only by robo advisors.
- Questwealth is a relatively new venture from Questrade and may not be as established as other robo advisors,
Questwealth Portfolios is one of the best robo advisors available in Canada. The low cost and low fees attached to their investment accounts make this an attractive option for many Canadian investors. Unlike other low fee robo advisors, Questwealth does not compromise on customer service. They also offer generous financial advice and an easy to use investing platform.
If you are looking for online investing that is purely controlled by robo advisors or only involves passive investing, this may not be the best option for you. However, if these are not dealbreakers for you, Questwealth could be a fantastic option for you and your investment needs.
Wealthsimple is one of the leading robo advisors in the world. Based in Toronto, Wealthsimple has more than $5 billion in assets and over 175,000 investment clients globally. They are frequently voted as one of the best robo advisors in Canada. The extensive experience in investments means they are highly regarded in the robo advisory industry.
Their robo advisors work by investing your money into a variety of stocks – see ‘Best Canadian Stocks to Buy Right Now‘ – to create a balanced portfolio. They have three main types of portfolios based on your requirements:
- Conservative – This is a low-risk portfolio. It aims to generate returns faster than market inflation. This is the best option for short term investors.
- Balanced – This is a medium-risk portfolio. It aims to balance your investment growth with the protection of your capital.
- Growth – This is a high-risk portfolio. It may suffer short-term losses but should have the highest returns over a more extended time period (e.g. ten years). It is best suited to experienced investors and those with long-term financial goals – for example, Canadian small cap stocks (see post) have high growth rates potential unlike stocks from Power Corporation of Canada, although their investment risks are high, too. Just like with, let’s say, top energy stocks, your investment might depreciate to yield low returns.
They also have three different pricing tiers based on your minimum investment. The fees will differ based on how much you invest.
- Basic – Up to $100,000. The fees are 0.5%. It comes with basic features such as automatic portfolio balancing and dividend renewal. You can also access advice and information.
- Black – Up to $500,000. The fees are 0.4%. It comes with additional features such as tax benefits.
- Generation – Portfolios over $500,000. The fees are 0.4%. You also receive asset allocation and your own portfolio manager.
- There is no minimum initial investment amount.
- There are no trading fees. Regardless of what pricing tier you are on.
- You can opt to have a socially responsible portfolio that only invests in clean technology and low carbon companies. You can also opt for a Halal portfolio.
- Your investments are protected by the Canadian Investor Protection Fund, up to $1,000,000.
- You have access to human advisors. Their customer service is rated very highly and can be accessed via telephone, email and social media.
- They are the largest robo advisor platform in Canada. This means they are experienced and knowledgeable portfolio managers.
- The management fees for Exchange Traded Funds (ETFs) portfolios are only 0.1%-0.2%. This is lower than most other robo advisors.
- They help investors in the Black and Generation Tiers with tax-loss harvesting.
- Once you have an account with Wealthsimple, you have access to auto accounts rebalancing. You will also get an automatic reinvestment of dividends. You also have access to financial advisors.
- Having different portfolio types ensures that each client is investing their money in a way they are comfortable.
- There are extra perks for accounts with more money invested. These include VIP airport lounge access and financial planning advice.
- There are limited portfolio options compared to other online platforms.
- Other robo advisors have lower fees compared to Wealthsimple.
- You cannot choose your portfolio. This is designed for you by the robo advising tool. This may not be desirable for those with prior investment knowledge.
It is easy to see why Wealthsimple is often voted as one of the best robo advisors in Canada. If you are looking for passive investing and managed portfolios at a low cost, Wealthsimple could be the best option for you. However, if you are looking to have more control over your accounts and portfolios, Wealthsimple may not be the robo advisors for you.
Wealthsimple is popular with investors looking for simplicity and a stress-free experience. This robo advisor could be perfect for those who feel their investment knowledge and experience are not adequate. They are popular with those who invest both small and large amounts of money (see top penny stocks) and those with a variety of types of accounts. Their financial advice, access to financial planning and low fees make them an attractive robo advisor for many Canadians.
3. BMO SmartFolio
BMO SmartFolio is a robo advisor from the Bank of Montreal. They were one of the first banks in Canada to offer robo advisors to their new and existing customers. By using BMO SmartFolio, you will have access to a dedicated financial advisor and fund managers. When you open an account with BMO SmartFolio, your portfolio manager will give you a questionnaire. This is to determine your risk tolerance. They will then match you with one of the five ETF portfolios:
- Capital Preservation – Best for those with a low tolerance to risk. It has a 10% allocation to equities and 90% to fixed income.
- Income – Best for those with a low tolerance to risk. It has a 30% allocation to equities and 70% to fixed income.
- Balanced – Suitable for those with medium risk tolerance. It has a 50% allocation to equities and 50% to fixed income.
- Long Term Growth – Best for those with a higher than average risk tolerance. It has a 70% allocation to equities and 30% to fixed income.
- Equity Growth – Suitable for those with high-risk tolerance. It has a 90% allocation to equities and 10% to fixed income.
The fee you are charged changes depending on the amount of money you are investing. The higher your investment, the lower your fee. Below is a breakdown of the fees:
- Up to $100,000 – 0.7% fees.
- $100,000- $250,000 – 0.6% fees,
- $250,000- $500,000 – 0.5% fees
- Over $500,000 – 0.4% fees.
BMO SmartFolio is popular with those who are looking for a combination of passive and active investing. The financial advisors will work like robo advisors. They monitor your portfolio and make adjustments when necessary. They usually rebalance your portfolio four times per year.
- This is a unique approach to online investing, working like robo advisors but monitored and controlled by humans. This may be preferable to some who are not entirely comfortable with their finances being managed by an algorithm.
- You can change your ETF portfolio and your asset mix when necessary. For example, if your job or income changes or you have children and your finances and investing style change.
- Their customer service is fantastic. You also have access to a financial advisor and unlimited advice.
- Their trading platform is user friendly.
- They also provide additional features, such as goal tracking.
- BMO will pay the transfer fees when you open an account with them.
- They have a sign-up promotion that your first $15,000 is managed free of charge for the first year.
- You are able to group accounts from the same household together, saving on the fees.
- There is a minimum account size requirement of $1,000.
- The fees are higher than many other robo advisors.
Combining robo advisors with a familiar and trusted Canadian bank may offer peace of mind to many investors. It may not be the best option for those looking to invest small amounts or have a smaller portfolio. However, the lower fees for accounts with higher investments could make this an attractive option for many investors.
BMO SMartfolio is known for its fantastic customer service and the extensive financial advice offered. The active management of your portfolio from human advisors is an attractive concept to many investors.
Justwealth is a robo advisor company that focuses on personal portfolio management. Their unique selling point is their personalized approach to your account and investing your money. They aim to make investing accessible for the average Canadian.
Justwealth offers a personalized service whereby you have your own financial advisor. They will help to set up your account and make sure you are risk level matches your long and short-term goals. Your private portfolio manager will assist you with financial planning and be on hand to offer you advice and guidance.
Justwealth is a great option for those who want more portfolio options. For investors wanting to tailor their account to specific requirements, Justwealth is a great option. Their fees are straightforward to understand, with only two fee tiers:
- Up to $500,000 – 0.5% fees.
- Above $500,000 – 0.4% fees.
- Justwealth has more than 70 portfolio options with a variety of focuses. There are many more account options available, with a variety of investment options.
- Having one personalized portfolio manager gives you a level of service and support, not usual with such a low-cost robo advisor. They are responsible for overseeing your portfolio, and you can contact them directly if you have any questions or concerns.
- The Management Expense Ratio (MER) only has 0.25% fees.
- Justwealth provides personalized support and advice for harvesting tax losses.
- Transfer fees, up to $150, are covered when you transfer more than $25,000 to your Justwealth account.
- You are not charged any withdrawal fees for taking money out of your account.
- Several different promotions are offered throughout the year to all accounts holders.
- It is possible to open USD investment accounts, saving on currency exchange fees.
- The minimum investment amount is $5,000.
- They do not have Socially Responsible investment accounts.
- There is a minimum monthly fee of $4.99.
Being able to have an investment account with your own portfolio manager and a tailor-made portfolio for such a low cost is a rarity in the world of robo advisors. With so many ETF portfolios available, Justwealth makes sure that you invest in the best portfolio for you and your finances.
Justwealth aims to give fair and unbiased advice. They offer investment accounts across all of the Canadian provinces with lower fees than many other robo advisors. For those who want a higher level of advice, support and guidance, Justwealth could be the best robo advisors for you.
ModernAdvisor is a less well-known robo advisor. However, they are growing in popularity thanks to their attractive fee structure. Many robo advisors charge higher fees for those investing less money. ModernAdvisor offers free management fees to those investing less than $10,000. This makes opening accounts more accessible to the average Canadian. The management fees for other investment amounts are also lower than many other robo advisors. Below is a list of their fee structure:
- Less than $10,000 – No fee.
- $10,000-$100,000 – 0.5% fees.
- $100,000-$500,000 – 0.4% fees.
- Above $500,000 – 0.35% fees.
ModernAdvisor’s unique selling point is designing your portfolio using algorithms and Chartered Financial Analysts (CFA). This means you are getting the highest level of support to optimize your account. ModernAdvisor also offers a Springboard Program. This gives inexperienced traders a chance to practice investing with $1,000 of fake money. Once you open your account and deposit real money, your practice investment can become real.
- Management fees are free on investments below $10,000.
- They offer responsible/ ethical investments for no additional fees.
- Your robo advisor will automatically rebalance your account if there is a 5% difference from your original investment. This helps to keep your risk level the same as when you first opened the account.
- The website is easy to use. Opening accounts online are also simple and quick.
- Their customer service is always on hand to offer help and advice. They can be contacted via phone, email or instant chat.
- ModernAdvisor is insured by the Canadian Investor Protection Fund (CIPF). This protects your accounts up to $1,000,000.
- There is no minimum deposit amount required when you open the account.
- You have the choice between robo advisor accounts or accounts that comes with a personal advisor.
- There is a minimum investment amount of $1,500 per year.
- Your money is invested in increments of $1,000. This means you need at least $1,000 in your account before you can begin your investments.
ModernAdvisor invests in low-cost ETFs using recommendations from robo advisors and CFAs. This results in a well-rounded portfolio based on your short term and long term investment aims and your tolerance for risk.
Having the option to choose an account with a personal advisor may be very attractive to new investors. Experienced investors investing larger sums of money may also prefer an account with a personal advisor. Bear in mind that this will come with additional fees attached.
Although still not as well known as other robo advisors, ModernAdvisor could still be a great choice for you and your investment needs. If you are unsure, you can choose to sign up for their 30-day free trial Springboard Program. This will give you the opportunity to use their platform. You can see what investments they recommend based on your answers to their questionnaire.
6. WealthBar (Now CI Direct Investing)
Based in Vancouver, WealthBar has recently partnered with one of Canada’s largest investment managers, CI Financial. One of their most significant selling points is that they focus heavily on providing their clients with financial advice. Choosing WealthBar will involve both active and passive investing. A robo advisor will help to design your account, and a portfolio manager will oversee your investments.
CI Direct Investing offers five low-cost ETF portfolio options:
- Safety ETF – Best for preserving and protecting your finances. Made up of 16% equities, 69% bonds, and a mix of real estate and preferred shares.
- Conservative ETF – Best for protection and steady growth. Made up of 29% equities, 56% bonds, and a mix of real estate and preferred shares.
- Balanced ETF – Best for moderate growth with some volatility, Made up of 44% equities, 41% bonds, and a mix of real estate and preferred shares.
- Growth ETF – Best for growth with high volatility. Made up of 52.5% equities, 32.5% bonds, and a mix of real estate and preferred shares.
- Aggressive ETF – Best for maximum growth and higher volatility. Made up of 62.5% equities, 22.5% bonds, 10% real estate, and 5% preferred shares.
Additionally, you could choose from three private investment portfolios. With these options, your money would be invested into private equities, mortgages, alternative strategies and other investment types. Below are the three private investing options:
- Safety Private
- Balanced Private
- Aggressive Private
The fees you will be expected to pay are higher than other robo advisors, although this will depend on the amount of money you invest. Below is a list of the fee amounts for each investment bracket:
- Up to $100,000 – 0.7% fees.
- $100,00-$25,000 – 0.6% fees.
- $250,000 – $500,000 – 0.5% fees.
- Above $500,000 – 0.4% fees.
- You get unlimited access to a portfolio manager to help you with things such as financial advice and optimization of your taxes.
- Socially and Ethically Responsible Investing accounts are available. You could also choose a Halal portfolio or an Impact Investing portfolio.
- There is no withdrawal fee if you need to take money out of your investment account.
- They are consistently rated very high for their customer service.
- Investors are able to choose between private and ETF investing accounts.
- CI Direct investing focuses heavily on diversifying its users’ accounts.
- Financial planning tools are available to all clients.
- Non-Candian ex-pats are able to open investment accounts with CI Direct Investing.
- Your first $10,000 is managed free of charge for the first year.
- Both the online and mobile platforms are easy to use and rated highly by clients.
- Your portfolio is rebalanced automatically.
- You can be reimbursed (up to $150) for transfer fees that are over $25,000.
- A minimum investment of $1,000 is required.
- CI Direct Investing charges a higher management fee compared to other robo advisors.
- Socially Responsible options are not as extensive as other robo brokers.
Although the fees attached to CI Direct Investing are higher than other robo advisors, they are still very popular with Canadians. Their financial planning tools, extensive investment advice, diverse portfolio options, and extreme investment success makes them an attractive option. Once you open an account, they can help you to understand your current finances. They can also help you to plan for the future and offer a professional review of all your financial information.
CI Direct Investing could be a great option for both new and experienced investors. Although they have a minimum investment amount of $1,000, it is still possible to have smaller accounts with less money invested. However, you will be rewarded with lower fees if you have a bigger portfolio.
Where Do Robo Advisors Invest Your Money?
Robo advisors use complex algorithms to decide where to invest your money. The algorithm is based on Modern Portfolio Theory (MPT), invented by a Nobel prize winner. This algorithm aims to optimize your portfolio and ensure its diversity. It maximizes your returns whilst ensuring the investments are appropriate to your risk level.
A robo advisor can invest money into a variety of products. This can include stocks, bonds, mutual funds and real estate. However, the majority of robo advisors will invest in Exchange Traded Funds (ETFs). The type of ETFs a robo advisor may invest in will depend on the current economic climate. Some common assets for investment are:
- Equity Markets – This will focus on the stock market in Canada.
- Bonds – This is government-issued debt. The Canadian government will sell its debt to investors.
- Foreign Exchange – This involves buying currency.
- Precious Metals – This includes gold and silver (see also how other in-demand metals’ stocks such as Canadian nickel fare).
Are Robo Advisors Safe?
Although robo advisors are more popular than ever, a concern of many investors is how safe they are to use and how secure their investments will be. For this reason, some investors are still choosing to use a financial advisor or a more traditional online brokerage. This can end up costing you more in management fees. To help you understand robo advisors, we will examine their safety and security.
Robo advisors are heavily regulated by the Financial Industry Regulatory Authority (FIRA). This means robo advisors have to follow strict compliance rules. Additionally, robo advisors should have a custodian bank and private insurance. This protects your finances in the event of the company’s bankruptcy. It is always worth researching this and checking that all of your money will be protected before opening any accounts.
Although technology and algorithms are used to create your portfolio and invest your finances, robo advisors are still a traditional investment company. They simply allow passive investing to be easier and more accessible. As you would with any financial decision, before committing to a robo advisor, it is very important that you research them thoroughly.
You should check the safety of their online systems and read user reviews. Robo advisors have the same level of risk as any other investment company. Make sure that you have done your research and contact the company directly with any questions you may have.
Things to Consider When Choosing a Robo Investor
When choosing a robo advisor, there are several things you should consider.
- Management Fees – Different robo advisors will charge different management fees per year. Additionally, the fees may change depending on how much money you invest. Consider how much you plan to invest each year and calculate how high your fees will be. Also, take into account whether you are receiving any extra services that may justify higher fees.
- Additional Services – Some robo advisors offer free financial planning or advice. You may also have access to automatic account rebalancing or tax support. Other companies will offer you socially responsible investment choices. Decide what services are important to you before choosing your robo investor.
- Account Minimum – Some robo investors require you to deposit a minimum amount before you can begin trading. Others require a minimum investment amount each year. If you do not reach the minimum investment amount, you may be faced with additional charges or may be prevented from investing.
- Portfolio Allocation – Different companies have different asset allocation. Make sure that your portfolio will be diversified. Also, make sure that the company is aware of your tolerance for risk. You may also consider whether socially and ethically responsible investments are available.
- Robot vs. Human Advice – Some investors feel more comfortable if they have access to a human advisor. If this is something that is important to you, research the credentials of the advisors and their hours of availability. The level of advice and support they can offer you should also be taken into account.
- Online Security – With hacking becoming more commonplace, ensuring the security of your finances is vital. Look at the security measures of any robo investors you are considering before making a final decision.
Once you have considered all of these factors, you may still have more than one robo investors you are interested in partnering with. In this situation, it is recommended to go onto their website or download their app and get a feel for their platform. Some companies may offer you a free trial to help you decide if you are compatible with their platform. Others may have no sign-up cost and no minimum deposit amount. You could therefore open an account free of charge and practice using it before committing 100%.
Our top recommendation:
The Bottom Line
Choosing the best robo advisor for you can be a complicated process. By following the steps listed in this article, you should find the decision process easier. Consider what is important to you. What level of fees are you comfortable with?
Do you want a higher level of support and advice? Are you looking for active or passive investments? What type of investments are you most interested in? How much are you planning to invest? Are socially and ethically responsible investments important to you? What is your tolerance for risk?
These are all important questions you need to ask yourself before you begin researching robo advisors in Canada. Once you have narrowed down your list of the best robo advisors for you, ensure you research them carefully.
Read user reviews, check their online security and insurance coverage. Also, look at any additional services they offer and decide whether they are important to you. Once you know what you are looking for, it should make the process of choosing the best robo advisor for you much easier.
Investing using a robo advisor could be a smart financial decision. You are investing in your future and should hopefully see financial gains in both the long and short term.