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As my latest MoneySense Retired Money column explained when it was published early Saturday morning, Questrade Inc., the leading independent Canadian online brokerage, is laying down the gauntlet on fees. You can find the full story by clicking on the highlighted headline here: Questrade’s new robo advisor service showcases rockbottom fees.
For consumers, it’s good news that the new iteration of Questrade’s Portfolio IQ robo adviser service — rebranded Questwealth Portfolios — pushes fees down to around the level of the new Vanguard Asset Allocation ETFs.
That’s somewhere between 0.20% and 0.25%, which is roughly half of what most other robo services charge, and about a tenth of what most retail mutual funds charge.
Questrade Wealth Management was one of three early entrants to the Canadian robo advisor space in 2014 (along with NestWealth.com and Wealthsimple). Until now, its robo service was called Portfolio IQ (PIQ henceforth) but the latter has been rebranded, relaunched and indeed replaced as of Saturday under the new trademarked name Questwealth Portfolios. Questwealth replaces PIQ accounts, according to a press release issued on Nov. 3.
The management fee is 0.25% for Questwealth Portfolios between $1,000 and $99,999, dropping to a very competitive 0.20% for $100,000 or more. These fees are significantly lower than for PIQ, which charged 0.7% under $100,000, 0.6% between $100,000 and $249,000, 0.5% up to $500,000, 0.4% up to $1 million and 0.35% for accounts of a million dollars or more. The average asset-weighted PIQ fee was 0.62%, versus 0.23% for Questwealth Portfolios, lower by a whopping 63%.
For consumers it’s good news that Questrade is slashing its own fees and putting more pressure on the rest of the industry, which is evident from its edgy TV commercials. (With the launch it is releasing a new batch of these often-humorous ads. The screen shot at the top of this blog is from the earlier ads.
How Questwealth Portfolios compare to other Robo services
As I note in the MoneySense column it’s not hard to show how ETFs and robe-based portfolios of ETFs can undercut the notoriously high MERs of Canada’s mutual funds, so the real contest is how the Questwealth Portfolios stack up against the rest of the robo advisors (or indeed, against DIY ETF portfolios held at discount brokers like Questrade itself or any of its (mostly) bank-owned online brokerage arms.
An appendix to Questrade’s media backgrounder compares Questwealth Portfolio fees to Wealthsimple, WealthBar, Modern Advisor and the two major bank-managed robo services, BMO Smartfolio and RBC InvestEase. For $100,000 or more, Questwealth charges 0.2%; on the same amount Wealthsimple charges 0.4% while RBC charges 0.5% across portfolios of any size. BMO Smartfolio is 0.7% on the first $100,000, falling to 0.6% on the next $150,000, 0.5% on the $250,000 above that and 0.4% above $500,000.
Questrade’s data also shows that on small portfolios, WealthBar charges nothing at all on the first $5,000 and Modern Advisor charges nothing on the first $10,000. WealthBar then charges 0.6% on the next $145,000; 0.4% on the $350,000 after that and 0.35% and 0.35% above $500,000. Modern Advisor is similar, charging 0.5% between $10,000 and $100,000, 0.4% on $100,000 to $500,000 and 0.35% above $500,000.
While it’s not included in Questrade’s comparison, affluent investors with more than $500,000 should also check out NestWealth.com, since it charges a Netflix-like monthly subscription fee rather than charging a percentage of assets.
The new fees and portfolios will be updated at www.questrade.com as of Nov. 3, 2018.
