Give your portfolio a dose of digital advice

The evolving needs of Canadian investors and new avenues of portfolio management in the information age

Andrew Willis 24 April, 2019 | 2:00PM
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Andrew Willis: We live in the age of artificial intelligence. From smart homes to game-changing industry applications our society is becoming more informed, efficient and precise by leveraging automated digital technologies. In the world of finance, computerized and algorithmic investment management has been used for decades in quantitative and fundamental analysis to give human managers an edge. But now, we are starting to see computers take the helm of our financial future in the form commonly known as robo-advice.

To learn more, we have a human ambassador for these new robo-advisors with us today. Mike Allen is a Portfolio Manager with Wealthsimple, a service available for Canadians that uses highly specialized software to do the job of wealth managers or investment advisors. He is here to tell us more about the rise of robo-advice in Canada, the benefits of the software-driven service and how Canadian investors can make the move to more automated investing.

Mike, thank you for joining us today.

Mike Allen: Great being here, Andrew.

Willis: So, what's driving some of this growth in robo-advice throughout Canada?

Allen: So, the growth in the robo-advice sector, which we like to call the digital advice sector, is how investors are changing their requirements, what they are expecting from their financial services providers. Traditionally, there have been two routes an investor can go. One is using a full-service financial advisor. So, this person would need a little bit more handholding. But for this personalization, it usually comes with a higher cost, as well as the minimums tend to be higher, about $250,000 per person on average. And then the second route is the do-it-yourself option. So, this is for investors who are confident in their own investment selection and can rebalance their portfolios themselves.

And then, the third option which is now Wealthsimple, which is the digital platform, is we're essentially a hybrid between the full service and the do-it-yourself platform. So, we can construct a well-diversified portfolio accordingly to your goals, rebalance the portfolio as well as be able to give you on-demand advice when you need it.

Willis: And how expensive is this third option and what kind of portfolios are available?

Allen: So, our use of technology from an investment management standpoint and a client experience standpoint allows us to charge a very low cost. Our fees range between 0.4% and 0.5%, plus a small ETF cost in there as well. And for this you get a globally-diversified portfolio. We'll do the ongoing rebalancing of the accounts, we screen for it every day, as well as do the tax loss harvesting and again, we are on-demand for that financial advice when clients need it.

Willis: What do you need to get started with one of these portfolios and how do you move over your existing portfolio to this?

Allen: So, our mission at Wealthsimple is to make investing accessible to everyone. You can get started at Wealthsimple for as little as $1. You can go on to our website. It will take you 10 minutes from start to finish and you can essentially transfer an existing account in kind and we'll also reimburse all the transfer fees for you as well and this can all easily be done through a smartphone or a computer.

Willis: Thank you again for joining us, Mike.

Allen: Thank you, Andrew.

Willis: For Morningstar, I'm Andrew Willis.

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About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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