Aja McClanahan is a personal finance writer who has a story of getting out of over $120,000 in debt. She's been featured in Yahoo! Finance, MarketWatch, U.S. News and World Report, Kiplinger and has written for publications like Business Insider, Credit Karma, Inc., and many others. Aja writes about investing and personal finance for Wealthsimple. In her spare time, she manages her own investment portfolios for herself, husband, and two kids. Aja double majored in Spanish and Economics and holds a Bachelor of Arts degree from University of Illinois at Urbana-Champaign.
Bank of Montreal (BMO) is now offering Smartfolio, a roboadvisory option to clients looking for a more automated, hands-off approach to investing. As you research Smartfolio or any other investing service, take a close look at fees. Even with great growth and results, many people underestimate how fees can whittle down even the best, well-balanced portfolio.
As a BMO Smartfolio client, here’s what you should know about the service and its related fees.
Wealthsimple offers an automated way to grow your money like the world's most sophisticated investors. Get started and we'll build you a personalized investment portfolio in a matter of minutes.What is BMO Smartfolio?
BMO Smartfolio is an offering from BMO bank’s investing services. This product is targeted at investors who desire a more hands-off approach to investing.
Once clients deposit funds into their BMO investing account, algorithms and investment experts allocate funds according to clients’ savings’ goals. It’s an investing service for those who don’t have the time or expertise to create, manage and analyze their own investing portfolios.
What products does BMO Smartfolio offer?
BMO Smartfolio exclusively offers only exchange-traded fund or ETFs for their clients. Their website explains that ETF investing allows for diversification and reduction of expenses.
ETFS are very similar to mutual funds. You can invest in multiple companies within a single fund. The fund approach to investing makes it easy to diversify your holdings and reduce your risk exposure to a single industry, company, or even asset class. However, ETFs, unlike mutual funds, do not usually require a minimum investment beyond the price of a single share. Some brokers even offer fractional shares of ETFs, making the barrier to entry for this fund type even lower.
With this approach, Smartfolio advisors focus on choosing and allocating ETFs as opposed to single stocks, which saves many hours of research. The associated savings is passed along to the consumer in the form of lower fees.
When you open an account with BMO, an assessment tool collects information about client income, savings goals, and timelines. Then, BMO Smartfolio advisors go to work curating custom ETF portfolios.
What are the BMO Smartfolio fees?
Although services like BMO Smartfolio promise to deliver low-cost services, fees will inevitably affect the overall performance of your investments, so it’s important to understand what they are and how they change over time.
BMO Smartfolio’s fee structure is easy to understand. Like most investment services, the fees you pay are a function of how much money you invest with the company. Typically, as your portfolio grows, the fees you are charged decreases.
BMO Smartfolio
Smartfolio has a graduated fee structure that stacks each amount on top of the other to arrive at a grand total for the annual advisory fee.
| Asset value | Annual Rate |
|---|---|
| First $100,000 | 0.70% |
| Next $150,000 | 0.60% |
| Next $250,000 | 0.50% |
| Above $500,000 | 0.40% |
For example, someone with $275,000 in their BMO Smartfolio account would have a yearly fee of $1,725 or an average of about .63% of their balance. BMO Smartfolio estimates that this presents great savings based on ETF Management Expense Ratios (MER) charging around 2.25% for a $60,000 portfolio.
Also, it appears that Smartfolio can offer its clients low fees because the MERS of the ETFs they choose will “likely be a weighted average of 0.20% to 0.35% of the value of your Smartfolio account.”
Self-directed trading
If you want to be a little more hands-on with your investing, you also have the option to place your own trades with InvestorLine Self-Directed. BMO InvestorLine is a platform that allows you to place trades, toggle between investment account types, and track your portfolio performance. Like other trading platforms, you can access tools like research and news updates for companies you’re considering investing in.
Self-directed trading with help
If you are still gaining your footing when it comes to self-directed trading, BMO Harris InvestorLine adviceDirect gives you access to investment experts that guide your self-directed trading for optimal results.
Think of it as a helpline for investors. The idea is to provide the knowledge of an investment expert without the bloated cost of a full investment advisory experience. Here’s BMOs fee structure for self-directed trading:
| For total billable assets of: | All-inclusive annual fee: |
|---|---|
| $50,000 to $100,000 | $750 Flat fee |
| or $100,000 to $500,000 | 0.75% x Billable assets |
| or $500,000 and up | $3,750 Maximum fee |
With each of these services, there may be additional fees, restrictions, and limitations. Make sure you read the fine print on and speak with an advisor who can break down every fee, allowing you to plan for these investing costs. Whether you are investing with a service like BMO Smartfolio or choosing your own stocks and mutual funds, fees matter. Every dollar that you save in fees is a dollar that can grow towards your savings' goals.
Last Updated October 10, 2018
Trade stocks commission-free
Start trading
