Passiv Review: Semi-Automatic Rebalancing for Canadian DIY Investors
I review a lot of different investment platforms here at MapleMoney – robo-advisors, online brokers, etc. It’s not often that I get to cover the tools designed to make investor’s lives easier. Passiv is one of those tools. Founded by Brendan Lee Young and Brendan Wood, the company’s mission is to make “passive investing simple for everyday investors who want to save money and time.” But what exactly is Passiv and how can it help you make more money with your portfolio?
What Is Passiv?
Passiv is a portfolio management tool that enables DIY investors to maintain their ideal asset allocation inside an online discount brokerage account. More than ever, Canadians are investing for themselves, but while the DIY approach can be cost-effective, you have to do the work of maintaining a balanced portfolio.
Passiv takes the work out of rebalancing, so you can focus on other things. To be clear, Passiv is not a trading platform or robo-advisor, and it won’t tell you which stocks or ETFs you should buy.
How Does Passiv Work?
Passiv syncs to more than ten online brokers without accessing login credentials, including Questrade here in Canada. They do this by connecting to the broker’s API, short for Application Programming Interface. An API lets two separate software applications communicate with each other.
Passiv assesses your brokerage account holdings and your available cash, and lets you know the types of trades you need to make to achieve your desired asset allocation.
Passiv has two levels of membership, which I’ll cover in more detail a bit later. Elite members don’t just get a portfolio management tool, they can use Passiv to execute trades with a single click.
Getting Started with Passiv
Like most fintech apps, Passiv makes it easy to get started. Here are the steps to follow:
- Sign up for Passiv.
- Link your brokerage account.
- Determine your ideal asset allocation by setting a targeted portfolio.
- Automate your investment contributions into your brokerage account.
- Let Passive take over.
Passiv does make it clear that they cannot execute trades without your input. They’ll notify you of recommended trades and you can enable one-click training with an Elite membership, but you have to be the one placing the trade. For this reason, I refer to the Passiv model as “semi-automatic” rebalancing.
Why Is It Important to Rebalance Your Portfolio?
Portfolio rebalancing protects investors from being exposed to more risk than they are comfortable with. Investors set their risk tolerance using a mix of criteria, including their investment style, their investment time horizon, among other things. The desired asset allocation considers these factors and makes up a big part of the investment strategy.
An Example of Asset Allocation / Portfolio Rebalancing
Let’s say a 40-year old investor has a time horizon of 20 years and a high risk tolerance. They understand that to achieve the best possible returns throughout their investment, and they’ll need to accept a higher level of risk. They complete an investor profile, which establishes that their recommended asset allocation is an 80/20 mix, 80% Equity (stocks, ETFs), and 20% Income (Bonds).
With this in mind, they place trades to achieve their ideal investment mix (80/20). However, over the next 12 months, there has been a significant upswing in the stock market. The equities in their portfolio outperform the income investments, and their portfolio allocation shifts to 90% equities, 10% income.
The client’s portfolio mix no longer matches their investing strategy, and they aren’t comfortable with the 90% equity weighting. To rebalance their portfolio, they sell off 10% of their equity holdings and purchase 10% more income holdings.
How Passiv Helps
Rebalancing can be both complicated and time-consuming. Passiv helps by sending you an email when cash has been deposited into your account and does the rebalancing calculations for you. To keep your portfolio balanced, all you have to do is place the trades.
What Brokers Are Compatible with Passiv?
The following brokers have partnered with Passive to help make investor’s lives easier. If you don’t see your preferred broker on the list, check back regularly, as Passiv is constantly looking for new brokers to partner with.
- Interactive Brokers
- TD Ameritrade
How Much Does Passiv Cost?
As I mentioned earlier, Passiv employs two pricing plans: Community and Elite. Community is 100% free, while Elite is $99/year, or complimentary for Questrade brokerage account clients. Here’s what you get with each plan:
Passiv Community Membership: Free
If you sign up for a community-level membership, you get all of Passiv’s basic portfolio management tools, which you can use across multiple brokerage accounts.
- Automated calculations
- Cash & dividend notifications
- Keep stock picks separate
- Multi-account portfolios
- Connect multiple brokerage logins
Passiv Elite Membership: $99/Year
A Passive Elite membership gets you everything in the community plan, plus three additional features for an annual fee. If you are a Questrade member, Passive Elite comes complimentary, waiving the annual fee.
Everything in the Community membership, plus:
- One-click trades
- Advanced currency handling
- Create tax-efficient portfolios
Passiv Pros and Cons
The basic Passiv membership (Community) is free, adding a lot of value to fee-sensitive investors. You’ll need to decide whether the added features of the Elite membership are worth the cost ($99). My guess is that it won’t be worth it for everyone.
- Offers semi-automatic rebalancing
- Notification of cash balance via email
- One-click trading available (Passiv Elite)
- Ideal for Questrade customers
- Not fully automatic, you still need to execute the trades
- You can only use it with Questrade in Canada
If you live in Canada and like the idea of rebalancing your portfolio using Passiv, you need to deal with Questrade. If you’re an existing Questrade customer, you just need to sign up for Passiv and connect it to your Questrade account. If you don’t deal with Questrade, you can sign up anytime using our exclusive link.
Not only is Questrade the only Canadian broker that works with Passiv, but it’s also our top-rated online broker here at MapleMoney. They feature some of the lowest fees in the industry, including no-fee ETF purchases.
Who Is Passiv Best Suited For?
One of the draws of robo-advisors like Wealthsimple is the simplicity of automatic portfolio rebalancing. Even portfolios of actively traded mutual funds can offer this feature. The problem is that the extra service comes at a cost and is reflected in a fund’s management fee or MER.
Passiv gives to something that’s very close to the automatic rebalancing of a robo-advisor, without the extra fee. In Canada, at the moment, Passiv can only be synced to a Questrade account, making it ideal for that brokerage’s account holders. DIY investing requires some work, so any automation is welcome. Hopefully, we’ll see Passiv expand to other brokers shortly, so more Canadian DIY investors can benefit.