Investing is by far the best strategy when it comes to building wealth. So finding the right company to invest with is a decision you shouldn’t make lightly. In Canada, technology has helped both new and existing investment companies re-imagine the way investing can work. These robo-advisors offer a wealth of features and functionalities. Here’s everything you need to know about finding the best robo-advisors in Canada.
What Is a Robo-Advisor?
Simply put, a robo-advisor is a type of software-based service designed to help you make and manage your investments. With the advancements of technologies and algorithms, tasks like making investment recommendations and rebalancing an investment portfolio have become less art and more science.
Robo-advisors minimize the human element of investing and instead rely on automation to serve your investment needs. Many financial studies have shown that robo-advisors are just as good, if not better than human investment brokers.
In Canada, robo-advisors have been gaining popularity for a while as a way for folks from all walks of life to manage their finances and build wealth. There are now more choices than ever before for Canadians to invest their money simply and smartly!
What Are The Benefits of a Robo-Advisor?
Robo-advisors offer many benefits, especially when it comes to saving you time and money. Building and maintaining your own investment portfolio could take you hours, days, or even weeks of research, not to mention stress.
Robo-advisors save you time by using algorithms to keep your portfolio on-track to meet your financial goals. They are also simple to use, and you can get started with a robo-advisor from the comfort of your own home, 24/7.
Are Robo-Advisors Expensive?
One key benefit of robo-advisors is that they are extremely cost-effective. Most Canadian robo-advisors tend to skip high-fee mutual funds in favor of low-fee ETFs, so your fees are much lower from the start.
Additionally, the fee for using a robo-advisor can be less than half the fees of using a traditional mutual fund or brokerage firm. And last, most Canadian robo-advisors don’t charge any commissions on trades, so you can buy and sell without extra costs.
Which robo-advisor is right for me?
There are a handful of popular Canadian robo-advisors that you might have heard of: Wealthsimple, JustWealth and Modern Advisor. Here, we’ll tell you which is best for the variety of investment priorities you might have.
Priority Area: Social Responsible Investing
Not all robo-advisors offer socially responsible investment options. In Canada, both Wealthsimple and ModernAdvisor understand that investors care about the companies they’re investing in, so they do offer socially responsible investing. JustWealth unfortunately misses in this area. Also, know that Wealthsimple is the only one of our three popular robo-advisors to offer Halal investing options.
Priority Area: Dividend Reinvesting
All three of our popular Canadian robo-advisors offer this feature. It’s important to note that this is a great feature of robo-advisors. Many major brokerage firms do not automatically reinvest your dividends as these robo-advisors do. This means you can miss out on the power of compound interest since your uninvested dividends could sit around for weeks, months, or even years. One more reason to feel confident about your choice to use a robo-advisor!
Priority Area: Minimum Balance
Let’s face it, not everyone has a ton of cash set aside. If you want to get started investing and don’t have a lot of money, robo-advisors can be a great solution. Wealthsimple is our top candidate in this area since they have no minimum balance required to start investing. So you have no excuse to delay starting! Modern Advisor is only available with a minimum investment of $1,000. Which is much less than our last candidate, Justwealth, with a whopping $5,000 minimum.
Priority Area: Management Fees
We’ve already talked about how robo-advisor fees are significantly less than their big brokerage firm counterparts. Here’s the proof: all three of our popular robo-advisors start with a tiny base fee of 0.5% of your total investment amount. That’s incredibly low! Each has a different tiered fee system as your account grows.
For example, Wealthsimple’s fee is 0.5% until your account reaches $100,000. Then it lowers to only 0.4%. Justwealth also starts with a 0.5% fee but doesn’t lower it until your investment reach $500,000, when it moves to 0.4%. Last but not least, ModernAdvisor has no fee at all for accounts under $10,000. They begin with a 0.5% fee for accounts of $10,000 to $100,000, with a lower 0.4% fee for accounts of $100,000 to $500,000, and finally a super low 0.35% fee on accounts over $500,000. Long-term, both WealthSimple and ModernAdvisor are better choices for those who are fee-conscious.
So Which Is The Best Robo-Advisor In Canada?
Finding the best robo-advisor for you means taking a look at your financial and lifestyle priorities. While all these great Canadian robo-advisor options offer the ease and simplicity of a robo-advisor, the small details are what will ultimately make your decision.
Take a look at a full breakdown of the best robo-advisors in Canada for more nitty-gritty details, now that you know all about the benefits and downsides of the most popular options. Most importantly, the sooner you start investing, the longer your money has to grow!
