The Best Robo-Advisors in Canada for 2022
In today’s world, putting money into a traditional savings account isn’t enough to cut it. You can scrimp and save for decades and still not have enough money for your retirement. You need to invest your money to build up enough wealth to meet your long-term goals.
Thanks to technology, it’s surprisingly easy to invest long-term. The rise of robo advisors in Canada provides a simple way to “set it and forget it” as you strive to create a nest egg.
But what is a robo advisor, and can you trust a computer with your money? The good news is that robo advisors offer a cost-efficient and easy way to start investing. Read on, and I’ll answer your questions about robo advisors – and reveal my top choices.
What is a Robo-Advisor?
A robo advisor is a company that takes your money and invests it automatically in a portfolio that reflects your risk tolerance. But instead of using financial advisors, robo advisors automate the process using the profile, time horizon, and financial goals you provide. And instead of actively managed funds and individual stocks, robo advisors tend to favour index ETFs.
It’s all about automated investment using time-tested investment theories. Most robo advisors adhere to Modern Portfolio Theory (MPT), the management style put forth by Nobel Prize winner Harry Markowitz. The idea is to focus on asset allocation instead of individual stocks.
Canada’s Best Robo Advisors
To help you get started with robo advisor investing, I’ve compiled a list of what I consider to be the best providers in Canada for 2022. Each one offers some unique features and is well suited for a specific type of investor.
The Best Overall: Wealthsimple Invest
If you are looking for the best robo advisor in Canada, Wealthsimple is an excellent place to start. It’s the largest robo advisor in Canada, managing $400 million in assets, and the only mobile app in Canada that allows you to sign up for an investment account.
Wealthsimple Invest offers access to a wide variety of index exchange-traded funds to help you build an investment portfolio in various accounts. The advice is human-assisted, and the advisors have plenty of experience managing high-net-worth portfolios. Additionally, there are 15 full-time developers committed to building out the best technology available.
There are no commissions, and the fees are very reasonable. It’s a solid choice for anyone looking to get a good start. See complete Wealthsimple review.
- Invest in fractional shares, eliminating the need for account minimums.
- Connect with the Wealth Concierge team via phone, email, text, or Skype.
- Socially responsible investing options are available.
- Annual management fee of 0.5% or 0.4%, depending on account size
- A variety of registered accounts and non-registered accounts so that you can meet your various long-term goals.
Get started with Wealthsimple here.
Best for Large Portfolios: Nest Wealth
As your portfolio grows, you find that more dollars go toward fees. It’s just how it is when you pay a percentage of your balance. Nest Wealth changes that model by charging a flat fee of $20, $40, or $80 per month, depending on your account size. If your portfolio size is at least $150,000, you won’t pay more than $80 a month in management fees.
Nest Wealth is the only robo advisor in Canada to keep accounts at a major bank. You get access to a large bank’s resources and a smaller company’s service.
Finally, this Canadian robo advisor prides itself is using the most efficient combination of blue-chip ETFs. The average expense ratio works out to be about 0.13%, which is very low. You will have to pay third-party transaction fees and expense ratios, but if you have an extensive portfolio, the savings from management fees can make a huge difference. See complete Nest Wealth review.
- A wide variety of blue-chip ETFs to create low-cost portfolios.
- Fully personalized portfolios
- Monthly management fees capped at $80 per month
- Portfolio managers provide regular rebalancing
- A full range of registered and non-registered accounts are available.
Get started with Nest Wealth here.
ModernAdvisor: Largest Portfolio Managed for Free
If you’re looking to invest in an ETF portfolio with a Canadian robo advisor and don’t want to pay a lot in fees, ModernAdvisor can be a good fit. ModernAdvisor allows you to invest up to $10,000 without any management fees – the largest “starter” portfolio managed for free in Canada.
On top of offering a large free portfolio, ModernAdvisor also has one of the most competitive pricing structures for portfolios that hit $100,000. In many cases, Canadian robo advisors wait until you have a higher balance before your management fee drops to 0.4%.
You can also take advantage of the Springboard program to practice online investing. It’s an excellent way to get comfortable before investing your own funds.
- Free portfolio management up to $10,000. After that, fees range from 0.50% to 0.35%, depending on the size of your balance.
- The fee analyzer tool allows you to compare actively managed mutual funds with ETFs to see where you can get the best bang for your investment.
- Demo account through the Springboard program that allows you to test out online investing before committing your own funds.
- SRI choices for those interested in making sure their portfolios match their values.
- Registered and non-registered accounts are available.
Get started with ModernAdvisor here.
Best for RESPs: Justwealth
If you are looking for the best robo advisor for your child’s education account, Justwealth is an excellent choice. Justwealth specializes in target-date portfolios, which allow you to figure out your time horizon and manage your portfolio accordingly. As you work toward funding your child’s education, Justwealth can help you with a target-date RESP.
Justwealth charges a competitive management fee, divided into two tiers: 0.50% for account balances up to $500,000 and 0.40% for account balances above that. There are also minimum fees for smaller account sizes, so pay attention (although RESPs have smaller fees).
In addition to RESPs, Justwealth also offers a variety of registered and non-registered accounts you can use to meet various goals. Think about what you are looking for in order to achieve the best results. See complete Justwealth review.
- 0.50% yearly fee for accounts up to $500,000
- 0.40% for balances over $500,000
- $5000 minimum account size for all non-RESP accounts
- No account minimum for RESPs
- Specializes in target-date portfolios for RESPs.
- Portfolio reviews are available
- Simple fee structure, although there are minimum fees charged for smaller accounts.
- Tax-efficient strategies so you keep more of your money.
Get started with Justwealth here.
Best for Personalized Financial Planning: CI Direct Investing
If you’re looking for someone to help you with long-term financial planning, CI Direct Investing can be a good choice. Originally known as WealthBar, this is one of the best robo advisors in Canada since they offer money management help through a dedicated financial advisor for each client.
You do need a minimum of $1,000 to start investing with CI Direct Investing, but with fees that start at 0.60% and drop to 0.38% for the largest portfolios, and a management expense ratio below 0.20%, you’ll save a pile of money versus investing in traditional mutual funds.
Where CI Direct Investing really shines is in its commitment to the customer. Those involved with CI Direct Investing have long experience managing high-net-worth clients, and they bring some of that attention to detail and personal help to your portfolio. Plus, with the financial planning component, you know you’re getting a holistic look at your finances and investing. See complete CI Direct Investing (WealthBar) review.
- $1000 minimum investment amount
- Your first $5,000 is managed for free.
- All clients received a dedicated financial advisor.
- ETF MERs 0.18% to 0.19% (lower than traditional mutual funds)
- Access to private investment pools through your CI Direct Investing account.
- TFSA, RRSP, RESP, RRIF, LIF, Spousal, and non-registered accounts are available
Get started with CI Direct Investing here.
Best Big Bank Robo Advisor: BMO SmartFolio
If you tend to be somewhat hesitant to try new things, when it comes to testing the waters with a robo advisor platform, BMO SmartFolio might be right for you. What SmartFolio provides is the stability and peace of mind that comes from dealing with one of Canada’s largest financial institutions.
BMO SmartFolio fees however are somewhat higher than those of many of their competitors. For example, you will pay an advisory fee of .70% on the first $100,000, and .60% on the next $150,000 invested.
In addition, the Management Expense fees (MERs) associated with the SmartFolio ETF portfolios tend to be slightly higher than those of their competitors. This is mainly due to BMO incorporating more specialized ETF products designed to reduce volatility.
- Deal with one of Canada’s largest financial institutions.
- An introductory offer of $15,000 managed FREE for the first year.
- BMO SmartFolio will pay the fees to transfer your investments from another financial institution
- A low minimum account threshold of $1,000
Get started with BMO SmartFolio here.
Best for Your Spare Change: Moka
Moka is proof that investing doesn’t always have to be associated with long-term financial goals. When it launched as Mylo, this revolutionary app was similar to Acorns in the U.S., using a robo advisor platform to invest your spare change.
This makes Moka ideal for your short-term savings goals, things like that next vacation you’ve been planning, or the emergency fund you’ve been putting off. In fact, Moka places your financial goals at the forefront, by helping you set specific savings targets, including the date you wish to reach them.
Moka links to your main debit and/or credit card, and rounds up all of your purchases to the nearest dollar. For example, say you buy a coffee for $1.45. It will round up by assigning $.55 to the savings goal you’ve set. Once per week, it withdraws the “spare change”, and automatically invests it in a low-fee ETF portfolio that matches your investment time horizon and risk tolerance.
A basic Moka plan is only $1/month, so it’s very affordable. You can upgrade to Moka Advantage for an additional $2/month, and get a number of added perks, including TFSA and RRSP account options, and next-day withdrawals, which are free.
I recently opened a Moka account to see how it works, and I’m really enjoying it. Even though my investment plan is well established, it never hurts to set aside a few more dollars. Besides, Moka’s intuitive mobile app makes savings a lot of fun.
- Simple, roundup savings platform
- Intuitive, easy-to-use mobile app
- Focus on financial goals
- Ideal for newer investors
- Robo-investing for as little as $1/month
- TFSA and RRSP accounts are available with Moka Advantage ($3/month)
- Socially Responsible Investing (SRI) functionality
- Access funds with free, next-day withdrawals (Moka Advantage)
Get started with Moka here.
Why are Index ETFs so Great?
Most robo advisors in Canada use index ETFs in portfolio construction. So, what makes ETFs better than actively managed mutual fund portfolios or stock picking? Well, because human beings, research shows, are terrible at choosing the right investments.
Index investments, on the other hand, follow the performance of a wide swath of the market. You can even find index investments that track the entire market at once. With an index fund, you get access to the performance of a huge portion of the market as a whole. That means that it’s less about whether or not a single stock or bond is doing well and more about how the market overall is doing.
Since the market as a whole has never come up negative in any 25-year period, when you have a long time horizon (as you do when saving up for retirement), you aren’t likely to lose out with a diversified mix of index investments.
Rrobo advisor companies in Canada use ETFs for their low fees and passive management style. ETFs are very cost-efficient, usually with lower expenses than traditional mutual funds. And, of course, this also means that you can get a lower-cost product than you would by using a more traditional investment advisor.
How Robo Advisors Work
A robo advisor is perfect if you want to start investing, but aren’t sure where to begin. Or maybe you don’t feel like you have the time to do all the research needed to pick the right investments for your situation.
A robo advisor will figure out an appropriate asset allocation (the combination of stocks, bonds, GICs, and other assets), and then automatically apportion your monthly contribution to the chosen assets, in the form of ETFs.
Here are five things you can expect from most robo advisors:
- Access to a wide range of index ETFs
- Straightforward contribution choices are available for a variety of accounts, including RRSP, TFSA, and RESP.
- Simple and “light” advice, depending on the company, and usually access to human customer service to answer your questions.
- Websites that are intuitive, easy to use, and visually appealing.
- Services like automatic rebalancing help you stay on track with your long-term investment goals.
The great thing about a robo advisor is that it costs a fraction of what a human advisor will charge. You might pay fees upward of 3% a year with a human advisor. With a robo advisor, your fees might be much lower – closer to 1% a year (or less). That means more of your money goes toward building your wealth.
Are Robo Advisors Safe?
The answer is yes, your robo advisor portfolio is safe. All of the reputable robo advisors use investment dealers that are members of the Canadian Investor Protection Fund (CIPF). That means your investment account is protected from dealer insolvency – which doesn’t happen very often anyway. Your assets are protected from problems with dealers and robo advisors (even if you can’t fully protect your money from the vagaries of the economy and the stock market).
And don’t forget that robo advisors use investment methods that have been time-tested for decades and are considered suitable for most people. Plus, in many cases, robo advisors adhere to a fiduciary standard with their clients’ money. That means they have to put your interests first.
Couldn’t You Just Do All This Yourself?
The short answer is, yes. If you wanted to, you could simply open a discount brokerage account and then buy shares of the index ETFs used by most robo advisors, in the same proportions as are recommended for you.
However, the appeal of a robo advisor is the fact that you don’t have to do any of the legwork. You pay a little extra in investment fees (although not nearly what you pay a human advisor) for the convenience of having it all taken care of for you.
So, why do I recommend robo advisors to most people if they can do it for themselves and do it a bit cheaper? Simply because most people won’t actually do it.
It’s common for would-be DIY investors to research and read and swear that they will start investing – and then do nothing. The reality is that taking the first step is harder than it looks, and not everyone likes managing their portfolios, even if there isn’t a ton of management necessary.
What Is the Best Robo Advisor?
To summarize, you can’t really go far wrong with any of the robo advisors on this list. All of them feature lower management fees, especially when compared with actively managed mutual funds and more traditional investments. It’s a passive investment strategy that works.
In a way, it takes the concept of couch potato investing to the next level. You don’t have to do anything, other than take 10 to 15 minutes to sign up for an account, set up an automatic investment schedule, and then wait for someone else to do the heavy lifting.
Plus, don’t forget. There are some exclusive offers for MapleMoney readers. If you sign up through us, you can get:
- ModernAdvisor offers MapleMoney readers $50,000 managed free for one year when you open and fund a new account.
- CI Direct Investing gives our readers up to $15,000 managed free for 1 year when you sign up and fund your account.
- Wealthsimple has no management fees for a year on the first $10,000 of investments.
- Justwealth will give MapleMoney readers a special $50 bonus when you open a new account.
Investing truly is one of the best ways to build wealth over time. Don’t let it pass you by. Use one of the best robo advisors in Canada to start your investing journey and reach your long-term financial goals.