Since their inception in 2014, robo-advisors have continued to be cost-effective vehicles for investment in Canada.
The reason is that robo-advisors automate investment, eliminating human errors and reducing investment costs compared to mutual funds.
However, while there are more than ten robo-advisors to choose from in Canada, not all are the same. Hence, the need to identify the best robo advisor canada.
Based on my personal experience and what I have seen work for others, here I review the best Robo-advisors in Canada, helping you make the best investment decision.
What is Robo-Advisor Canada?
A robo-advisor refers to a platform that offers automated investment and financial planning solutions with less human intervention.
As a result, a robo-advisor assesses your risk tolerance, financial situation and investment objectives to provide a customized solution.
Furthermore, a robo-advisor exposes you to a diverse group of securities across different markets and sectors.
Depending on market fluctuations and your portfolio mix, a robo-advisor will rebalance your portfolio periodically to your advantage.
However, due to their compositions, not all robo-advisors are the same. As a result, you need to identify the best robo advisor in Canada to make a cost-effective investment decision.
How Robo-Advisors Work
In order to offer automated investment and financial planning solutions, Robo-advisors use an algorithm that is operated by humans.
This algorithm is employed to create a diversified portfolio spread across different sectors and markets.
As a long-term investment vehicle, robo-advisors accumulate profits gradually because they don’t actively manage your portfolio.
Finally, robo-advisors have pre-built portfolios that match different risk tolerance and financial objectives.
Who Should Use Robo-Advisors?
Anyone can use robo-advisors from beginner to seasoned investors.
Beginner investors will find robo-advisors ideal as it helps them take the stress out from building and managing their portfolios.
Also, seasoned investors engaged with other activities will find robo-advisors perfect as it helps them automate the investment process.
However, robo-advisors are more suitable for investors that want to make mid-long-term investments.
Are Robo-Advisors Good for Beginners?
Yes. The best robo advisors are good for beginners because they have all the features a beginner needs to trade.
With an easy sign-up process, a beginner doesn’t have to worry about getting started on robo-advisors.
Furthermore, robo-advisors have a pre-built portfolio according to different investment objectives and risk tolerance.
Hence, an investor only needs to fill a questionnaire to describe their objective and risk to be automatically matched with a portfolio that suits them.
Why Use a Robo Advisor in Canada?
Fees take away from your investment returns, so it’s critical to invest in a low-cost portfolio.
Robo-advisors are cost-effective compared to mutual funds because they require less human intervention and invest in exchange-traded funds (ETFs).
Furthermore, robo-advisors have low minimum investment, as opposed to mutual funds, which often have a high minimum investment requirement.
In fact, some robo-advisors in Canada have no minimum amount requirement. This makes it possible to start investing with as little a $1 investment.
2. Human Financial Advisor
If you’re a beginner and need advice from a human being, the best robo-advisors provide 24/7 access to financial advisors.
A financial advisor can help you create the right investment objectives and guide you on investing in retirement and your overall finance.
However, access to financial advisors may be charged separately or included in the basic cost of the robo-advisors.
3. Ease of Use
One major advantage of robo-advisors is their ease of use. Upon identifying the best robo-advisors you want to invest in, you will be required to answer simple questions on your risk tolerance, investment objective and income.
After that, the robo-advisor will automatically connect you with a pre-built portfolio that matches your situation.
Unlike mutual funds, you don’t have to worry about selecting securities or monitoring the market yourself. The robo-advisor handles that. So all you need to do is focus on other aspects of your life.
What to Look for In the Best Robo Advisors Canada?
As mentioned previously, not every robo advisor Canada offers the same results. Hence, you must choose the best to get the best results. The following are the factors you should consider in selecting the best robo advisor Canada:
Fees can make the difference between the success or failure of your investment.
When selecting the best robo advisor Canada, you should consider the management fees and the management expense ratio (MER).
The management fees cover transaction fees such as buying and selling ETFs and financial advisor fees or trading commissions.
On the other hand, MER covers the fees of managing an ETF by your robo-advisor. This includes brokers fees, fund managers fees, market research fees, operating expenses and taxes.
Thus, the best robo-advisor is one that has the low management fee and MER.
3. Account Types
From TFSA, RRSP, RESP, RRIF, LIF, LIRA, and non-registered accounts such as savings accounts, there are many accounts to choose from in Canada.
However, not all robo advisors in Canada have the same account offerings.
As a result, you want to consider a robo advisor Canada with the accounts you want to invest in.
3. Minimum Account Balance
Although robo advisor Canada has minimum account balance requirements compared to mutual funds, you need to choose the one that suits your budget.
That said, some robo-advisors in Canada have no minimum investment requirement. This means that you can start trading with as little as a $1 deposit.
On the other hand, some robo advisors in Canada have minimum investment requirements, ranging from $1,000 and above.
Best Robo Advisors Canada Comparison
So far, I have explained what a robo-advisor entails, why you should use it and how to choose the best robo advisor Canada.
Here I present the best robo advisors Canada comparison based on my personal experience and what I’ve seen work for others.
Wealthsimple is a leading robo-advisor in Canada with more than CAD 8.4 billion assets under management (AUM) and more than 1.5 million clients globally.
Established in 2014, Wealthsimple is a low-cost robo-advisor with pre-built portfolios that appeal to different investment objectives and risk tolerance.
Every list of the best robo advisors in Canada starts with Wealthsimple, and it’s obvious why. Besides its low fees, Wealthsimple also has zero commission on buying and selling ETFs and stocks.
Like other robo advisors in Canada, Wealthsimple uses ETFs and algorithms to reduce risk while building a long-term diversified portfolio.
- Management Fees: 0.4 or 0.5% annually
- MER: Approx. 0.2% annually
- Account Types: TFSA, RRSP, RESP, Cash, RRIF, LIF, LIRA, Halal, SRI
- Minimum Balance: None
2. Questwealth Portfolios
Questwealth Portfolios is the product of Questrade, which has been a DIY leader in Canada since 1999.
Formerly known as Portfolio IQ, Questwealth Portfolios is similar to Wealthsimple Trade because it has zero commissions on buying ETFs. However, Wealthsimple Trade charges no commission on buying and selling ETFs and stocks.
What I like about Questwealth Portfolios is its wide range of offerings that suit different objectives and different risk tolerance.
From TFSA to socially responsible investing, and from conservative to aggressive risk level, you will find a portfolio that suits you on Questwealth Portfolios.
- Management Fees: 0.2 or 0.25% annually
- MER: Regular portfolios: 0.11%-0.23%, SRI portfolios: 0.21-0.35%
- Account Types: TFSA, RRSP, RESP, RRIF, LIF, LIRA, Cash, SRI
- Minimum Balance: $1,000
If you’re looking for the best portfolio for a registered education savings plan (RESP), Justwealth is what you need.
Justwealth is a digital portfolio manager that provides ETFs that suit a wide range of investment objectives and risk tolerances.
What I like about Justwealth is its target approach to investment. Once you set your target, a professional portfolio manager will help you achieve it accordingly.
- Management Fees: $4.99 monthly for all accounts except RESPs
- MER: Avg. 0.25% annually
- Account Types: Non-registered, TFSA, RRSP, RESP, LIRA, LIF, RRIF
- Minimum Balance: $5,000 except for RESP
4. CI Direct Investing
CI Direct Investing is one of the best robo advisors Canada that is on top of its offerings. This robo-advisor is ideal if you’re looking for customized financial planning for your long-term investment.
What I like about CI Direct Investing is its attention to detail. Their professional managers have years of experience in managing the finance of high-net clients. This makes it easy for them to help you with a customized financial plan.
- Management Fees: Avg. 0.35% annually.
- MER: Avg. 0.18% annually
- Account Types: TFSA, RRSP, RESP, Non-registered, Savings, RRIF, LIRA, LIF, IPP, PPP, Informal In-Trust
- Minimum Balance: $1,000
This is another best robo advisor in Canada that was established in 2013. ModernAdvisor is unique because of its low-cost passive investment options to beginner and seasoned investors.
Although with slightly higher management fees and MER compared to other best rest advisors in Canada, I like the fact that ModernAdvisor has no minimum account balance.
- Management Fees: Avg. 0.35% annually
- MER: Avg. 0.27% annually
- Account Types: TFSA, RRSP, RRIF, RESP, Non-registered
- Minimum Balance: None
6. BMO Smartfolio
There’s not a complete mention of the best Canadian robo-advisors without the mention of BMO Smartfolio.
As the first bank to be established in Canada and one of the country’s Big Five banks, the Bank of Montreal (BMO) has consistently provided financial and investment solutions to Canadians.
Thus, its robo-advisor, BMO Smartfolio, is the first of its kind from Canada’s Five Big banks.
What I like about the BMO Smartfolio is its broad range of accounts which is beyond other robo advisors offering.
- Management Fees: Avg. 0.40% annually
- MER: Avg. 0.25%
- Account Types: TFSA, RRSP, RRIP, RESP, Non-registered investment accounts (individual and joint accounts)
- Minimum Balance: $1,000
7. RBC InvestEase
Last but not least best robo advisor Canada on my list is the RBC InvestEase, which is the product of the largest bank in Canada, the Royal Bank of Canada.
Launched in 2017, RBC InvestEase automates your investment and provides real human active management to moderate your portfolio.
Although RBC has no minimum balance requirements, you need to deposit at least $100 to start investing.
- Management Fees: 0.5% annually
- MER: Avg. 0.11% annually
- Account Types: TFSA, RRSP, Non-registered investment account.
- Minimum Balance: None
Which Robo Advisor Should I Use?
From the above review of the best Canadian robo-advisors, it may be confusing which to choose. But it shouldn’t be so.
In addition to the factors mentioned above, you need to narrow your selection when selecting the best robo advisor Canada amidst multiple options.
Thus, you need to consider which of the above best robo-advisors in Canada meet your investment objective and budget.
As you can see, each of the above robo-advisors has different account types for different investors. This means that the best robo-advisor you’re selecting must have the account type you’re looking for.
Secondly, some of the best robo advisors in Canada have higher management fees and MER while others have low. So you need to also narrow your selection to this factor as it can affect the success or failure of your investment.
However, based on the above review, here are my selected best Canadian robo-advisors:
|Wealthsimple||Overall Best Robo-advisor|
|Questwealth Portfolios||Competitive Offers|
|CI Direct Investing||Customized Financial Planning|
Which is Better Questwealth or Wealthsimple?
Since Questwealth and Wealthsimple are the leading robo-advisors in Canada, it’s essential to know which to choose.
But before judging the best between Questwealth and Wealthsimple, it’s essential to understand the major features of each of the robo-advisors.
Wealthsimple changes nothing for trading ETFs and stocks, but Questwealth charges a commission on selling ETFs and stocks.
Furthermore, Wealthsimple Trade has no minimum balance, but Questwealth has a $1,000 minimum investment requirement.
When it comes to management fees, Wealthsimple charges 0.5% per year while Questrade charges 0.25% per year.
That said, Wealthsimple Trade portfolios include conservative, balanced, growth, Halal, SRI. On the other hand, Questrade portfolios include growth, aggressive, conservative, balanced, SRI.
So as you can see, Wealthsimple is better than Questwealth in many aspects.
Nevertheless, both Questwealth and Wealthsimple stand by what they offer, and you can’t make a wrong choice choosing any of them.
But since the two robo-advisors have varying portfolios, I suggest you choose the one that suits your needs.
How Does a Robo Advisor Differ From a Human Advisor?
Despite the benefits of robo-advisors, you may be contemplating handing your money to a robot. This is where you extend your comparison to robo-advisors vs human advisors.
However, robo-advisors have proven to be cost-effective and efficient over time. Human advisors earn income by selling costly mutual funds and stocks that are actively managed.
When you add up traditional advisors’ fees, you would be surprised at the thousands of dollars you could have saved in the long run.
But with robo-advisors, you can have a low-cost portfolio build with ETFs with little to no commission.
Furthermore, the portfolio performance of robo-advisors vs human advisors varies, with the former having an edge over the latter.
Due to the imperfect nature of man, human advisors are prone to errors, thereby making costly investment decisions. The story is different with robo-advisors that use algorithms to make investment decisions.
Overall, robo-advisors are far better than human advisors. But if you’re just looking for a portfolio manager to actively manage your portfolio, consider a human advisor over a robo advisor Canada.
Verdict on the Best Robo Investing Canada
Now you know the best robo investing Canada and how to choose the one that suits your investment objective and budget.
Also, you’ve learnt the benefits of robo-advisors over human advisors on investment cost and errors.
However, the above is just my recommendation based on my personal experience and what I have seen work for others. The ball is now on your court to make the final decision.
But if you need additional help in the process of selecting the best robo advisor Canada, let me know in the comment section or contact a financial advisor.
FAQs on the Best Robo Advisors in Canada
Yes. Robo-advisors are a good investment platform compared to mutual funds. With fewer fees and errors, robo-advisors manage your funds more than human advisors.
It depends on the robo-advisor you choose. If you select one of the best robo advisors in Canada, such as Wealthsimple, you’re more likely to make money.
However, if you choose a robo advisor with high fees and commissions on trade, you may lose even your initial capital in the long run.
Yes. Wealthsimple is a good robo-advisor because of its zero commissions on trading ETFs and stocks, low fees, and impressive dividend yield.
Yes. Robo-advisors are good for retirees because they offer low-cost investment portfolios compared to mutual funds. Hence, retirees can easily convert their savings to expand their portfolios through robo-advisors.
No. Robo-advisors invest in different securities such as equities, gold, bonds, among others. So your portfolio is diversified and rebalanced automatically according to your investment objective and risk tolerance.
Wealthsimple has the best returns in Canada, with 8.2% returns over the last five years on its growth portfolios. Over the same timeframe, its conservative portfolio returned 5.3%.
It is not advisable to have multiple robo-advisors because they operate without interacting with each other unless you inform them.
So when each of your robo-advisors rebalances your portfolio individually, it could harm your overall investment.
Yes. Robo-advisors pay dividends. However, how much dividends you get depends on the robo-advisor, your risk level, portfolio mix, and the amount you invest.
Wealthsimple and Questrade offer tax-loss harvesting on their trading platforms (Wealthsimple Trade and Questwealth Portfolios).
When a robo-advisor goes out of business, your funds will remain safe in your bank account because the robo-advisor can’t use your funds beyond investing it in a portfolio of your choice.
Robo-advisors do not beat the market because they only match market performance closely by investing in index funds.
The pros of using robo-advisors include low fees, automatic rebalancing, and portfolio diversification.
On the other hand, the cons of using robo-advisors include less human interaction and less flexibility compared to mutual funds.
Robo-advisors came into existence in 2008 following the global financial crisis. Since then, robo-advisors have developed into automated portfolio management and asset allocation platforms.
Robo-advisors diversified across different securities, including Roth IRA. So if you’re looking for hands-off experience on Roth IRA, robo-advisors got you covered.
Robo-advisors are safe because they’re regulated by top bodies and use algorithms to invest your funds in the perfect portfolio.
However, you should bear in mind that no investment is risk-free, including robo-advisors investment.
It depends on your budget and investment goals. Some robo-advisors such as Wealthsimple don’t have a minimum balance requirement so you can start trading with as little as $1.
However, other robo-advisors like Questrade have a minimum deposit which you must meet before trading.