Tag Archives: robo-advisers

WealthBar Q&A: How one Robo-advisor handles Retirement Income Planning

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WealthBar CEO Tea Nicola

What follows is a sponsored Q&A session between Hub CFO Jonathan Chevreau and Tea Nicola, Co-Founder and CEO of WealthBar, a robo-adviser.

WealthBar provides financial planning with low-fee ETF portfolios and actively managed Private Investment Portfolios.

Through their financial advisers, easy-to-use online dashboard and financial tools, they are making investing more accessible for Canadians from coast to coast.

 

 

 

Jon Chevreau

Jon Chevreau: Welcome, Tea. While many so-called robo-advisers seem to focus on young people building wealth, what about the end game? How do you handle the shift for older investors from accumulation into spending your savings in retirement? 

Tea Nicola: Once a client who is accumulating assets decides that retirement is on the horizon and they let us know, we lead them into the retirement transition process. At this stage, they probably have a pretty good idea as to what they would like to spend after taxes. Their goal is to understand now if their savings and all their sources of income will be enough to fund their retirement years.

The conventional wisdom is to collect all the sources of income that the client will have and analyze it year by year. This step is essential to make sure that the goals are met. That includes the monthly cash flow for basic expenses, the annual travel budgets and one-off purchases as well as any legacies that they may desire.

We then make sure their savings can meet all those goals. If there are shortfalls, we adjust the savings rate to meet the goals by the time they want to stop working. Then, we iterate this every six months or so, both before and after the retirement date. We do this to make sure the transition is smooth and that routines are appropriately established.

Jon: You’re talking about managing expectations?

Tea: I would call it being realistic about expectations. For instance, we need to be careful about talking about a monthly income when it comes to drawing down on retirement savings.

What we typically see is an uneven drawdown, with extra spending in the first few years of retirement. The client is in a rush to do all the things they held off on while working. So, they go on world tour, get a golf membership, enjoy some fine dining, or generally treat themselves to something special. But after a few years, their spending habits ‘normalize.’ The initial exuberance declines and their expenses follow suit. You get cases like one client in her 90s, who is literally worth millions, who now has monthly expenses of about $2,000 a month.

With that in mind, our financial plans help clients to achieve the goals they want to achieve, without necessarily boxing them into a lifestyle category that doesn’t really apply for most of their retirement. This involves very realistic, practical planning that I would say goes into a bit more depth than other robo-advisers, or even many traditional wealth management firms.

Jon: Sometimes you’ll hear a kind of magic number bandied about for how much people need to retire. $1 million. $2 million … Is there a guideline that really makes sense?

Tea: It depends on the person, which is why financial planning needs to be tailored for each individual. Just like with salaries, we know that someone making $75,000 can feel like they’ve got as much money as they could possibly need. Continue Reading…

Mid-year review of Aman Raina’s Robo Advisor portfolio

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By Aman Raina, SageInvestors

Special to the Financial Independence Hub

Aman Raina

As we cross the mid-pole mark in 2017, it seems like a good time to check in on my Robo Portfolio that I created two and half years ago.  For those jumping on for the first time, I wanted to try to find out if this new type of investment service which was taking the industry by storm a few years ago does any better job of creating wealth for investors compared to the traditional methods of investing (i.e. Do-It-Yourself or having a professional manage your money on your behalf).

I chose one Robo Advisor company here in Canada and invested $5,000 of my own money. When I set up the account I answered a series of questions about my financial literacy and risk tolerance. ROBO took my responses and crafted a portfolio that it felt reflected my profile.

As I am pretty experienced with investing and have a long-term investment horizon, ROBO determined that a portfolio mix of 85 per cent stocks and 15 per cent bonds would work for me. From there ROBO carved out allocations to a variety of equity and bond assets using ETFs to provide the appropriate exposure.

The objective of this exercise is to observe and blog about the whole experience and share with you any unique insights about the service. Most importantly I wanted to see what kind of returns this type of portfolio can generate. My experiment is by no means scientific but I think there is a lot that we can learn about this service if we go beyond the slick websites and marketing to truly look underneath the hood to see how these portfolios are managed.

Performance still reasonable

When we last checked in with my ROBO portfolio in late January, it was chugging along rather nicely, generating somewhat decent returns. It appears to be continuing the trend. Since the start of the year, the ROBO portfolio is up 5.5 per cent. Since I set up the account, the portfolio is up 14.2 per cent. The portfolio is up $298.71 this year, of which $53.59 was in dividend payments. Again, pretty reasonable for me. When you look at portfolio breakdown most of the returns have come from US stocks, Foreign stocks, and Emerging Market stocks.

ROBO Portfolio - 6 month performance chart

ROBO Portfolio – 6 month performance chart

ROBO portfolio - Asset Allocation breakdown - July 3, 2017

ROBO portfolio – Asset Allocation breakdown – July 3, 2017

Asset Allocation: Breaking News! 

It all seems decent enough; however, shortly after I posted my report in February, the portfolio has gone through some changes. Continue Reading…

The evolution of Robo advice

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By Josh Miszk, CFA, CFP

Special to the Financial Independence Hub

Alongside the rapid growth of the online wealth management space is the speed with which firms are evolving to investors’ demands.

Some of the first online investment managers in Canada have evolved their initial investing models to include services like financial planning, advisory firm partnerships, and now, a platform offering portfolios from multiple management firms.

One of the challenges in evaluating cost, performance, and reputation across multiple “robo-advice” platforms is looking at their similarities and differences to get a real sense of how each portfolio compares. In addition, many firms are relatively new and, while investors like the experience of working with an online advisor, they’re restricted to portfolios designed solely by the same firm they feel provides that great experience.

A simple way of choosing the right portfolio

In response to the demand for greater choice, we’ve created a platform that offers clients multiple portfolio options created by two of the largest and most reputable institutional money managers in the industry; BlackRock and Vanguard. In working with these two firms, we are not only leveraging the quality of their investment products, but also their expertise in providing great portfolio solutions.

This addition will allow potential clients to compare and select portfolios based on our recommendations for them, as well as the elements of a portfolio they value most, like performance, asset allocation, and cost.

Continue Reading…

Aman Raina’s Robo portfolio — 2 years later

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Aman Raina

By Aman Raina, Sage Investors

Two years ago I decided to set up an account with an online wealth management company that manages portfolios using algorithms and computer code. At the time, these Robo Advisers were just getting out there but there was a fair bit of buzz on how they could threaten traditional wealth management services.
I was intrigued by the model, but there was one thing that many marketing materials, blogs, and mainstream media was avoiding … do these things make money for investors?

 

I was having a hard finding an answer to this so I decided to try to find out myself.  I set up an account with one of the big Robo Adviser firms. My goal was to go through the process and blog about my experience and more importantly, the results. We’ve now crossed the two-year anniversary of my ROBO account, so let’s take a look at how it’s doing now.

When we last checked in with our ROBO portfolio in January it was taking some hits along with the overall stock market. Since then the market has recovered quite nicely. Let’s take a look under the hood to see if the Robo Portfolio has bounced back.

Performance Continue Reading…

Wealthsimple moves its Robo Adviser service upmarket

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Wealth simple founder and CEO Michael Kitchen

My latest Financial Post blog looks at Tuesday’s announcement by Wealthsimple of a new premium service it calls Wealthsimple Black. See Robo-adviser Wealthsimple targeting more sophisticated investors with premium service.

Wealthsimple Black is aimed at investors who have accumulated at least $100,000 in assets with them and brings down the previous annual management fee of 0.5% to 0.4%: a threshold previously reserved for those with $250,000 invested in the automated online investment service (popularly known as Robo Advisers).

The new “premium” service includes personalized financial planning, tax-loss harvesting, tax-efficient accounts and access to more than a thousand airline lounges around the world.

The company now calls the previous version of the service available to investors with less than $100,000 “Wealthsimple Basic.” It charges the 0.5% management fee but manages the first $5,000 for free, and provides automatic portfolio rebalancing and dividend reinvestment, plus “on-demand” advice from portfolio managers.

Wealthsimple is largely a company founded by and targeting Millennials but the new premium service makes it clear it won’t say no to more affluent investors, including soon-to-retire Baby Boomers who are shifting from wealth accumulation mode to so-called Decumulation. In a press release, Wealthsimple founder and CEO Michael Kitchen (pictured above) made it clear the company is now targeting not just young beginning investors but “all investors, no matter how far along they are toward reaching their financial goals.”