Tag Archives: Robo Advisors

A Wake-up Call for those choosing Mutual Fund fees over Robo-Advisors

Image courtesy Questrade/iStock

By Scarlett Swain

(Special to Financial Independence Hub)

It’s that time of year. The leaves have started to shift to brilliant shades of crimson, orange, and yellow. The days are getting shorter. And, suddenly, it’s “jacket weather” again. For many Canadian families, the transition into cooler months signals a time to begin the process of reviewing their finances from the past year with the goal of being better prepared in the years ahead.

With the cost of living in Canada incrementally higher than it has been in recent memory, there is a renewed opportunity for families to ask a familiar question: what is a simple, one-step investment strategy that they can use to help stretch the most out of their money, both now and for the long haul?

Well, like the changing seasons, it may be a good time for families to consider changing up a dated investment approach in favour of one that will take their money a little further. That is, using a low-fee, low-touch, robo-advisor in place of costly mutual fund investments … and, here are a few reasons why:


Robo-advisors have ushered in a new era of accessible investing. Designed to be user-friendly from the get-go, they are an excellent choice for both novice and experienced investors. With just a few clicks, investors can select a portfolio that matches their risk tolerance and fund it with little to no hassle.


A well-constructed portfolio needs variety. Robo-advisors excel at this by spreading investments across different asset classes, thus reducing risk. Mutual funds, while also diversified, often lack the customizability and personalization offered by low-fee robo-advisors.

Automated Rebalancing

Investing with a robo-advisor provides nimble, automated rebalancing, ensuring that investments stay aligned to goals, even as market conditions shift. Mutual fund investors often need to manually (and worse, reactively) adjust their portfolios, potentially missing out on market opportunities or exposing them to unnecessary risk. Continue Reading…

The superiority of Canadian “Robo Advisors” over mutual funds

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.

Continue Reading…

Artificial Intelligence can help investors and advisors alike

By Fuad Miah and Justin Hacker

Special to the Financial Independence Hub

Financial and wealth-management advisors tend not to be big fans of robo-investing. No surprise there because service and understanding the client are front and centre in what they do.

But for many investors today, especially younger ones, robo-investing may be seen as a low-cost, low-maintenance way to grow their wealth. Robo-investing relies on algorithms to make investments automatically and this is with minimal human supervision at best. But there is no ‘expert’ service involved and that is not good.

On the other hand, how about using Artificial Intelligence (AI) to assist advisors in better serving their clients and, in the process, help those clients build better portfolios? Don’t look now but the technology is here and it can start with meetings. Nowadays people are slowly but surely returning to the office and financial advisors are even getting back to meeting face-to-face with their clients. But a face-to-face meeting is not always required.

A new world of hybrid meetings

Today, however, we are in a new world of meetings where firms big and small are adopting a mix of online, in-person and ‘hybrid’ meetings which utilize both the virtual and in-person variety. With AI an advisor can make this choice wisely.

It involves human-like AI that enhances the meeting experience for both the host and the attendees by allowing participants to focus on the meeting and forget about labour-intensive tasks like note-taking. How? A full transcript and recording of what transpired are automatically created and then crafted into a concise executive summary. And the technology can do even more by using what is called ‘collected telemetry’ (the conversation data that pertains to everything from context to emotion) to build an advanced analysis of performance and even  sentiment. Continue Reading…

6 investment tips for Millennials

Source: Unsplash (Edited on Canva)

By Hari Subramanian

Special to the Financial Independence Hub

From the ‘safety-first’ attitude of baby boomers to the ‘putting themselves out there’ nature of Gen Z, generational cohorts offer great insights into the evolution of the human psyche based on different experiences.  

Millennials are not exactly what you call ‘risk takers’ but are more open towards new opportunities, compared to previous generations. This characteristic of millennials can be seen in the way they invest their money: they are willing to move away from fixed deposits and RRSPs that the boomers swore by and are looking to invest in stocks, cryptocurrency, and other financial avenues. 

Why should Millennials invest?

While more and more millennials are dabbling into investing in different portfolios, almost 50% of the cohort is still waiting to invest until they earn more money. This data contradicts the popular belief that the best time to invest is yesterday, and those who wait are losing precious time to grow their money. 

If you are one of those who procrastinate about investing money for later or think you need a 6-digit income to substantially boost your financial growth, you couldn’t be more wrong. Start your investment journey as early as you can as your returns compound  with time, and you’ll learn the tricks of the trade to become a more component investor in the future. And, you can start investing with just a handful of dollars.   

Investment Tips for 2022

If you are a millennial just beginning to build your investment portfolio or a seasoned millennial investor, these 6 financial tips will help you stand in good stead for 2022:    

Robo Advisors to the rescue

Trading in stocks requires constant scrutiny of rising and falling stock prices and earnings, and a good understanding of how the stock market functions. In the recent phenomenon of a surge in GameStop shares created by a group of Reddit investors, many retail investors and short-selling hedge funds that were betting for the company to fail lost billions of dollars. 

While it is only human to jump on the bandwagon of a stock market frenzy in an attempt to earn substantial profits, it entails high risks and can cause a lot of damage to your finances.   

If you are new to the stock investment game or don’t have enough time to monitor the peaks and troughs of the stock market, then you should explore robo advisors to help you achieve your financial goals with minimal risks. 

For the uninitiated, robo advisors are digital portals that control and optimize your investment portfolios through the use of algorithms and data-driven strategies. Robo advisors are very easy to use, as they automate your investments based on your investment budget and long-term financial goals. 

They also are pretty inexpensive with an affordable minimal balance to open investment accounts for investors from all walks of life. With minimal human supervision, a robo advisor can adjust your investments automatically based on market fluctuations while focussing on your monetary goals. Thus, if you wish for steady growth of your investments without any undue risk, you can explore the web to find the right robo advisor for you.  

ESG Investments can make you a better investor

Source: Pixabay

As more and more millennials are standing up for environmental, social, and socio-political causes, it is time for their investments to reflect their thought process. ESG investments are defined as investments based on non-financial factors such as environmental, social, and governance impact of a company on society.

In ESG investments, millennials pour in money on the company stocks they believe will make a difference to the world they live in. Through ESGs, millennials extend their support to companies whose beliefs align with theirs and hope that it creates a sustainable future for their children. 

ESG investments also provide a great learning curve for investors. Since personal beliefs, values, and socio-environmental impact are involved, you as an investor tend to go the extra mile to learn everything about the company including its financial health and revenue model instead of just blindly buying stocks that are on the rise.

ESGs can help you understand how and why a company’s stock performs in a certain way and can teach you a lesson in becoming better investors.      

Ditch individual Stock Picking

Before we delve into why stock picking is not a good investment option, it is imperative to understand what stock picking is. Based on market research and analysis, stock picking is a strategy to find the stocks that are most likely to deliver favourable investment returns.  Continue Reading…

Tackling changes to your Retirement Income Plan

Spending money is easy. Saving and investing is supposed to be the difficult part. But there’s a reason why Nobel laureate William Sharpe called “decumulation,” or spending down your retirement savings, the nastiest, hardest problem in finance.

Indeed, retirement planning would be easy if we knew the following information in advance:

  • Future market returns and volatility
  • Future rate of inflation
  • Future tax rates and changes
  • Future interest rates
  • Future healthcare needs
  • Future spending needs
  • Your expiration date

You get the idea.

We can use some reasonable assumptions about market returns, inflation, and interest rates using historical data. FP Standards Council issues guidelines for financial planners each year with its annual projection assumptions. For instance, the 2020 guidelines suggest using a 2% inflation rate, a 2.9% return for fixed income, and a 6.1% return for Canadian equities (before fees).

We also have rules of thumb such as the 4% safe withdrawal rule. But how useful is this rule when, for example, at age 71 Canadian retirees face mandatory minimum withdrawals from their RRIF starting at 5.28%?

What about fees? Retirees who invest in mutual funds with a bank or investment firm often find their investment fees are the single largest annual expense in retirement. Sure, you may not be writing a cheque to your advisor every year. But a $500,000 portfolio of mutual funds that charge fees of 2% will cost an investor $10,000 per year in fees. That’s a large vacation, a TFSA contribution, and maybe a top-up of your grandchild’s RESP. Every. Single. Year.

For those who manage their own portfolio of individual stocks or ETFs, how well equipped are you to flip the switch from saving to spending in retirement? And, how long do you expect to have the skill, desire, and mental capacity to continue managing your investments in retirement?

Finally, do you expect your spending rate will stay constant throughout retirement? Will it change based on market returns? Will you fly by the seat of your pants and hope everything pans out? What about one-time purchases, like a new car, home renovation, an exotic trip, or a monetary gift to your kids or grandkids?

Now are you convinced that Professor Sharpe was onto something with this whole retirement planning thing?

One solution is a Robo Advisor

One solution to the retirement income puzzle is to work with a robo advisor. You’ll typically pay lower fees, invest in a risk appropriate and globally diversified portfolio, and have access to a portfolio manager (that’s right, a human advisor) who has a fiduciary duty to act in your best interests.

Last year I partnered with the robo advisor Wealthsimple on a retirement income case study to see exactly how they manage a client’s retirement income withdrawals and investment portfolio.

This article has proven to be one of the most popular posts of all time as it showed readers how newly retired Allison and Ted moved their investments to Wealthsimple and began to drawdown their sizeable ($1.7M) portfolio.

Today, we’re checking in again with Allison and Ted as they pondered some material changes to their financial goals. I worked with Damir Alnsour, a portfolio manager at Wealthsimple, to provide the financial details to share with you.

Allison and Ted recently got in touch with Wealthsimple to discuss new objectives to incorporate into their retirement income plan.

Ted was looking to spend $50,000 on home renovations this fall, while Allison wanted to help their daughter Tory with her wedding expenses next year by gifting her $20,000. Additionally, Ted’s vehicle was on its last legs, so he will need $30,000 to purchase a new vehicle next spring.

Both Allison and Ted were worried how the latest market pullback due to COVID-19 had affected their retirement income plan and whether they should do something about their ongoing RRIF withdrawals or portfolio risk level.

Furthermore, they took some additional time to reflect on their legacy bequests. They were wondering what their plan would look like if they were to solely leave their principal residence to their children, rather than the originally planned $500,000. Continue Reading…