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By Dale Roberts, cutthecrapinvesting
Special to Financial Independence Hub
This is a battle between lower-fee Canadian Robo Advisor portfolios vs high-fee Canadian mutual funds. As you are likely aware, Canadians pay some of the highest investment fees in the world. Larry Bates, the author of Beat The Bank, calls those fees wealth destroyers. Lowering fees is one of the most predictable ways to increase your investment returns. More money stays in the right pocket; your pocket. By way of the Questwealth Portfolios (from Questrade) let’s have a look at the superiority of Robo Advisors over Canadian mutual funds.
Here’s the review of Larry’s Beat The Bank. That is a must read. On Larry’s site you will also find a tool that will calculate the cost of high investment fees.
The Questwealth Portfolios
There are three simple ways that Canadians can leave behind their advisor and high fee mutual funds. If you want investment advice and managed global ETF portfolios, you can look to one of the Canadian Robo Advisors.
Here is a post on what is a Robo Advisor? As you’re about to discover, this is a far superior approach to a typical high-fee mutual fund. Also consider that most high-fee mutual funds in Canada are offered by salespersons and not ‘real’ advisors.
Questwealth is one of the Canadian Robo Advisors. And don’t be fooled by that Robo word. While you can choose to do everything online from start to finish, real humans are available for investment advice and guidance. And at a shop such as Justwealth you’ll have a dedicated advisor, with financial planning available.
You can have it all in a low-fee environment.
Not investing with Mom and Dad’s guy
Questwealth offers the Questwealth Portfolios. They are the lowest fee Robo offering in Canada. And they are famous for their advertising. Many younger Canadians are not following their Mom and Dad, running into the bank, Investor’s Group or AGF (or other mutual fund sales shop) to fill the pockets of advisors and mutual fund creators. Nope, they are learning how to self-direct and how to take control of their own wealth building destiny.
In one commercial the younger brother turns to his embarrassed older bro and offers …
You’re not still investing with Mom and Dad’s guy, are you?
It’s nice to see many Canadians become their own advisor. Keep that 2% or more in your own pocket. You’ll need bigger pockets, by the way.
Questwealth Portfolios vs Canadian mutual funds
Questrade suggests (based on the simple fee math) that over time Canadians could retire 30% wealthier. That said, it’s a much greater benefit than that 30% suggestion. Based on the return differential to date, you’d be looking at returns that are 50% better (or more) over a 30-year period. Retiring with 50% more is obviously life changing.
And of course, a 5-year performance is a shorter period, but it aligns with the known underperformance of high-fee actively-managed Canadian mutual funds.
Also, past performance does not guarantee future returns.
You’ll find a calculator on their site.
Here’s the Questwealth Portfolios vs typical or average mutual funds in Canada, to the end of February 2023. The mutual fund returns are based on Questrade calculations, looking at the available data for the mutual fund space. That list and returns for the individual mutual funds was also provided to me.
And here’s Questwealth vs the RBC Select balanced mutual funds.
And here is a post that looks at Justwealth vs Canadian bank mutual funds.
The outperformance is outrageous.
Ditch your high-fee mutual funds
It appears to be a no-brainer: ditch your high-fee Canadian mutual funds. If you decide that a Robo option such as the Questwealth Portfolios is right for you, you’ll find it is an easy process to make the move. They can help you with the transfer process.
Here’s the link to Questrade.
But please pay attention to any tax consequences should you have any taxable accounts. You might consider Justwealth if you need to transfer considerable taxable amounts. They can accept your taxable account mutual funds and will drawdown the assets over time in a tax-efficient manner.
Create your own ETF Portfolio
If you want to leave your mutual funds behind, you can also create your own ETF portfolio. Here’s the performance of the core ETF portfolios.
You also have the option of global managed ETF portfolios that you can access by way of entering one ticker symbol. Visit the asset allocation ETF page. These are single ETF options, with more complete global portfolio at various risk levels. Those are game changers, high-fee mutual fund killers.
By building your own ETF portfolio you can lower your fees even more, compared to a Robo Advisor. But you will then need to manage your own portfolio and that takes a certain level of investment knowledge. This blog can help you with the education process. Here’s a video outlining the basics of building a simple but effective balanced portfolio.
And as I’ve previously posted, the Robo Advisors are a wonderful training ground for the self-directed investor. You might ‘go Robo’ and then go out on your own, one day.
Self-directed investors stick together. In addition to visiting My Own Advisor you might also check in with Bob at Tawcan, Rob at Passive Canadian Income, Dividend Daddy, Million Dollar Journey and Jonathan Chevreau’s site – Findependence Hub.
Also, look to MoneySense and Get Smarter About Money as wonderful resources.
You’ll find most of those investors are hybrid – they invest in a mix of ETFs and individual stocks.
You can also access an advice-only financial planner. You’ll pay as you go, and receive conflict-free advice that is not attached to any investment products.
Thanks for reading and discovering the superiority of Canadian Robo Advisors over Canadian mutual funds. Don’t be shy, leave a comment, or reach out by way of the Contact Form.
Good luck with that transfer process 😉
Dale Roberts is the owner operator of the Cut The Crap Investing blog, and a columnist for MoneySense. This blog originally appeared on Cut the Crap Investing on April 15, 2023 and is republished on the Hub with permission.