Danielle Kubes is a trained journalist and investor who has written about personal finance for the past six years. Her writing has been published in The Globe and Mail, National Post, MoneySense, Vice and RateHub.ca. Danielle writes about investing and personal finance for Wealthsimple. She has a Bachelor of Humanities from Carleton University and a Master of Journalism from Ryerson University.
Robo-advisories are fast becoming a favourite way to invest for Canadians. They’re part of the wider democratization of investing that’s taken place over the last decade and a half or so. Investing in stocks and bonds was once incredibly expensive and time-consuming—each trade cost up to $50 and you had to place the trade by phone with an actual human. You would also get a stock certificate in the mail (it’s still possible to do this by the way!), and investors would place stacks of certificates in a safe as proof of ownership.
That world is almost impossible to imagine now. The price of trades have gone down to about $5 to $10 dollars and in some places, like Wealthsimple, they’re free. You can check your position, balance, and stock movements any time online, at your desk or waiting online at the supermarket.Wealthsimple Invest is an automated way to grow your money like the worlds most sophisticated investors. Get started and we'll build you a personalized investment portfolio in a matter of minutes.
What’s a robo-advisor?
Robo advisories emerged around 2014. These apps capitalized both on algorithmic technology and a new investment product called exchange-traded funds, or ETFs. ETFs are like a basket of stocks that follow a sector, country, or any other kind of index. A single ETF can hold hundreds of individual stocks. A few ETFs across different asset classes (such as stocks, bonds, real estate, commodities) can replicate an entire diversified portfolio.
A robo-advisory devises portfolios consisting of different sorts of ETFs. Portfolio holdings are usually dependent on risk level—a high-risk portfolio may include equity-only ETFs from North American and volatile emerging markets, for example. Medium- and low-risk portfolios include less-volatile holdings.
What’s innovative about these portfolios is that the algorithm does all the work, such as rebalancing the holdings across asset classes. The savings involved in using a computer to make such calculations instead of a human are immense and are passed along to the consumer. That’s why these firms are able to charge such low fees.
Robo-advisories are great for investors who want to avoid high fees, or who get overwhelmed by choosing investments, or who simply don’t have time to manage their own portfolios.
The Toronto-based Justwealth is one such robo-advisory.
What is Justwealth?
Justwealth uses 50 ETFs from nine different providers to offer 70 different model portfolios. Justwealth recommends a portfolio to meet your needs based on an initial assessment. What portfolio works for you depends on what you’re looking to get out of your investments—do you want to grow your wealth? Preserve your wealth? Create an educational fund for your children or a retirement account for yourself?
A portfolio manager is there to assist you along the way.
What are Justwealth’s fees?
Justwealth’s fees are comparable to others in the industry. They charge 0.5% for the first $500,000 invested and then 0.4% for the funds invested over that limit.
The ETFs inside the funds also have a fee which average around 0.2%.
The minimum fee is $4.99 a month for all account types besides RESPs which are charged $2.50 a month.
There is also a minimum balance of $5,000 for all non-RESP accounts (RESPs have no minimum balance).
What products does Justwealth offer?
Justwealth offers the full gamut of account types, both registered and non-registered.
They can also work with institutions, corporations, group savings plans and joint accounts.
Here’s a full list of the account types they offer:
The importance of fees
Investing fees add up dramatically over time.
The median mutual fund fee in Canada is almost 2%—one of the highest fees in the world. Meanwhile, the average total fee for a robo-advisory portfolio is 0.7% (a management fee of 0.5% plus .2% for the ETFs). While that may not sound like a huge difference, it really is. It’s estimated that if you’re paying 1-2% in fees, you can lose up to 40% of your expected investment returns.
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