Robo Advisor Companies in the Canadian Marketplace

Part
01
of five
Part
01

Canadian Robo Advisor Companies: Competitive Landscape (1)

BMO SmartFolio and Invisor are top online investment management services in Canada. Both platforms offer tracking tools or users to set and manage investment goals.

BMO SMARTFOLIO

Products

  • BMO SmartFolio is a professional online portfolio service managed by BMO Nesbitt Burns, one of Canada's most trusted firms. It is owned by BMO, Canada's oldest bank.
  • The account types BMO SmartFolio offers are Tax-Free Savings Account, Registered Retirement Savings Plan, Registered Education Savings Account, Registered Retirement Income Fund, Joint Investment Accounts, and Non-registered investment accounts.
  • BMO SmartFolio provides five model ETF portfolios that are designed to cater to investors with different investment needs. They include Capital Preservation Portfolio (10% equities and 90% fixed income allocation), Income Portfolio (70% fixed income and 30% equities), Balanced Portfolio (50% equities and 50% fixed income), Long-term Growth Portfolio (70% equities and 30% fixed income), and Equity Growth Portfolio (90% equities and 10% fixed income).

Strengths

  • BMO SmartFolio's annual rate is 0.4% over $500,000 and between 0.5% to 0.7% under $500,000.
  • It has a team of 17 professionals who have a combined financial services experience of more than 300 years. On BMO SmartFolio's team, eight professionals are Chartered Professional Analysts, while five are accredited Portfolio Managers.
  • As the oldest bank in Canada, BMO is a name that is recognized by most people in this country.
  • BMO SmartFolio frequently releases the historical performance of its model portfolios. This allows users to see what their accounts may potentially realize in interests.
  • The platform "leverages the benefits of software algorithms with work performed by professional portfolio managers."

Weaknesses

Unique Brand Features

  • BMO SmartFolio has a “Manage My Finances tool” which allows users to track and budget external holdings with ease.
  • The platform has a goal-tracking tool that allows users to instantly track their progress on their investment goal.

Financial Data

  • BMO SmartFolio is managed by BMO Nesbitt Burns - the investment arm of BMO Financial Group. The 2018 revenue of BMO Nesbitt Burns was $6.29 billion.

INVISOR

Products

  • Invisor helps Canadians to professionally manage their money. It offers investments that fit their needs.
  • Its account types include Tax Free Savings Account, Locked in Retirement Account (LIRA), Registered Retirement Savings Plan, Spousal Registered Retirement Savings Plan, Registered Education Savings Plan (RESP), and Non-Registered Accounts.
  • Invisor offers users the option to invest in three different portfolios. They include the Vanguard Portfolio, the Invisor Portfolio, and the BlackRock Portfolio. Based on risk, each portfolio has six sub-segments.

Strengths

  • Although a robo-advisor, Invisor ensures that real professional advisors are involved in the customer experience.
  • It has significant partnerships with well-known wealth management firms like Vanguard and BlackRock. The partnerships allow Invisor to offer "the portfolios of these reputable companies to their clients, thus strengthening their product offering."
  • Invisor does not push products to customers for revenue purposes, it customizes client portfolios based on their financial goals and needs.
  • It is affiliated with Industrial Alliance Insurance & Financial Services Inc. ("IA"), one of the largest non-bank wealth distribution networks in Canada.
  • Invisor has no minimum investment requirements. The company offers a bonus of $100 for investments over $5,000.

Weaknesses

Unique Brand Features

  • Invisor has a tracking tool called InvisorGPS. It allows users to set long and short term goals, track progress, and view shortfalls in their investments.
  • The company has a "proprietary portfolio construction methodology and it considers all types of investment funds, including mutual funds and exchange traded funds; both actively and passively managed."

Financial Data

  • Invisor is a privately-held company that does not disclose its revenue to the public. Zoom Info mentions that its estimated revenue is $15.9 million.
Part
02
of five
Part
02

Canadian Robo Advisor Companies: Competitive Landscape (2)

Justwealth and ModernAdvisor are some of the top robo advisors in Canada. Both platforms have low annual fees and require a minimum investment. It appears Justwealth is more of a household name than ModernAdvisor.

JUSTWEALTH

Products

  • Justwealth describes itself as the most comprehensive online portfolio management platform in Canada.
  • It is a low-cost personalized portfolio management plan that cuts out any unnecessary middlemen.
  • The account types it offers are Registered Retirement Savings Plan (RRSP), Spousal Registered Retirement Savings Plan, Registered Retirement Income Fund (RRIF), Tax-Free Savings Account (TFSA), Life Income Funds (LIFs), Locked-In Retirement Account (LIRA), Registered Education Savings Plan (RESP), and a Non-Registered Account.

Strengths

  • Justwealth is an affordable personal portfolio manager. The company's annual fees are more than 50% less than that of a typical mutual fund. Its annual management fee is 0.50% for $5,000 to $500,000 and 0.40% for over $500,000.
  • It offers investors a fully managed portfolio that they can securely access 24/7.
  • Justwealth considers customers a priority. Each client is provided with a dedicated Portfolio Manager and support team that will assist in managing their wealth.
  • Investments on Justwealth are protected by the Canadian Investor Protection Fund, up to $1 million. It develops a custom portfolio for accounts larger than $1 million.
  • It does not offer fees or minimums for Canadian students and recent graduates.

Weaknesses

  • Although based in Toronto, Canada, Justwealth does not operate in Quebec, Canada.
  • It requires a minimum of $5,000 for investment accounts. This is only waived for RESP holders, students, and recent graduates.
  • According to users, Justwealth's platform is a little difficult to navigate and understand.

Unique Brand Features

  • Justwealth uses a goals-based approach to construct portfolios for clients. It uses over 30 exchange-traded funds (ETFs) from almost ten different providers.
  • The platform allows both taxable and non-taxable portfolios in Canadian or US dollars. As a result, it offers almost 100 different portfolios engineered to preserve and grow wealth.
  • Justwealth has portfolios for every risk tolerance and age.

Financial Data

  • Justwealth is a privately-held company. As a result, it does not publish any financial data to the public. According to ZoomInfo, it has an estimated revenue of almost $900,000.

MODERNADVISOR

Products

  • ModernAdvisor is an innovative financial advisor that uses the latest software technologies to offer Canadians quality low-cost investment management.
  • The accounts offered by ModernAdvisor are Individual RRSP, Non-registered accounts, Individual and Family RESP, TFSA, Joint- Right of Survivorship, Individual and Family RESP, and Locked in Retirement Account (LIRA).

Strengths

Weaknesses

  • Compared to competitors like Wealthsimple which require no minimum account requirement, ModernAdvisor requires a minimum of at least $1,000.
  • It invests money in increments of $1,000.

Unique Brand Features

  • Its Springboard program allows customers to "demo the account with $1000 of ‘play’ money which can become “real” when [they] fund the account."
  • It offers well-designed and diversified socially responsible portfolios, also known as Environmental, Social, and Corporate Governance portfolios. Some of the ESG funds it invests in are DSI, ESGE, XEN, and REET.
  • It automatically rebalances the account of users that stray more than 5% from its target allocation.

Financial Data

Part
03
of five
Part
03

Canadian Robo Advisor Companies: Competitive Landscape (3)

Nest Wealth is the first B2B digital wealth managing platform to offer sophisticated financial planning along with professional investment solutions, but unlike some of its competitors, it does not yet offer tax-loss harvesting. Questrade, the parent company of Questwealth Portfolios, has been in the Canadian market for 20 years, but it has recently been involved in a legal case. A complete competitive analysis regarding these companies is presented below.

Nest Wealth

Strengths

  • With the acquisition of Razor Logic Systems, Nest Wealth became the first B2B digital wealth managing platform to provide professional investment solutions and sophisticated financial planning.
  • They offer the lowest monthly investment fee in Canada. This fee starts from $20 per month.
  • Through a partnership with Vanguard Investments Canada Inc., Morneau Shepell Ltd., and Canadian Western Trust, it allows companies to "offer their employees group RRSP plans with fees under 1% of assets administered through the plan," which is less than one third of the average cost.
  • The company "leverages technology and its customer acquisition model" to offer the lowest management expense ratio (MER) which, in return, lowers portfolio fees.
  • Its subscription pricing model is based on amount invested, which makes it simple and transparent to investors.
  • Nest Wealth uses software algorithms to create portfolios that are classified based on the investor’s savings goals and automatically rebalance portfolios. Their software automates reporting and compliance to reduce operational costs.

Weaknesses

Products

  • Nest Wealth Pro allows users to open accounts and add new clients in just 5 minutes, monitor key business metrics, and recognize and pro-actively engage with their clients through their Augmented Intelligence (A.I.) Also, it allows clients to review their progress, communicate with their advisor, and make changes through an easy-to-use portal.
  • Nest Wealth at Work is free for employers, with no setup, admin, or fees. Also, employees are only charged an "all-in fee of 0.95% of assets per year," which is less than 40% of the one charged by traditional mutual funds. Additionally, this product offers payroll integration, digital onboarding, and management of responsibilities.
  • Nest Wealth Plus provides the user's clients low cost customized ETF portfolios and a digital onboarding process. The product allows users to save their clients money (who will pay a maximum $80 a month, no matter the amount of investment), to add custom ETF portfolios to their product shelf for clients, and to get better insights of the financial plan created.

Unique Features

  • It assigns a personalized portfolio manager to each client and "has a conversation with each new client" before opening an account to assist in goal setting.

Revenue

Questwealth Portfolios (Questrade)

Strengths

  • Questrade, its parent company, has been in the Canadian market for 20 years. This makes the company more experienced than its competitors (e.g. Nest Wealth was founded in 2014).
  • The company opens 50,000 accounts annually and currently has $9 billion in assets under administration.
  • Questrade is "Canada's fastest growing online brokerage," has been the winner of Canada’s best managed company for 7 times, and won Best Corporate Culture and Canada's Top 100 Small and Medium Businesses in 2018.
  • Additionally, it was named Canada’s Best Online Broker in 2019 by MoneySense. One reason for its selection is their continuity to invest and innovate.
  • Questrade serves its customers mainly online, but it has an award-winning customer service department that can support telephone, email, or chat. According to MoneySense, "no other online broker makes it easier to reach a live representative for assistance if needed" than Questrade.
  • Questrade process all new accounts and trades through an online portal, which makes account creation fast, as it can be completed in minutes.

Weaknesses

  • Unlike Wealthsimple or Nest Wealth, its competitors, Questwealth Portfolios invests users' money only when they reach $1,000 in deposits.
  • Questrade has recently been involved in a legal case in which it agreed to pay a settlement of $2.9 million to the Ontario Securities Commission, after it "acted contrary to the public interest" by purchasing $15 million in WisdomTree exchange-traded funds for Questrade’s Portfolio IQ" (now Questwealth Portfolios).

Products

  • Questrade offers two major products: Self-Directed Investing and Questwealth Portfolios.
  • Self-Directed Investing offers no account opening or closing fees, no annual RRSP or TFSA account fees, low commissions, and access to ETFs with free commission. Investment choices include stocks, ETFs, IPOs, mutual funds, and GICs, among others. It also offers three different platforms: Questrade Trading, Questrade app, and IQ Edge.
  • Questwealth Portfolios offer the support of over 100 agents to help users "every step of the way." Each portfolio is continuously managed by experts who analyze the market and adjust the portfolio if needed, aiming to limit losses and improve returns. This product also offers real-time rebalancing, lower taxes, proven returns, and reinvested dividends.

Unique Features

  • Four out of five of their actively managed portfolios have over 10 years of historical performance. Also, when switching to Questwealth, the user's transfer fees of up to $150 per account are rebated.

Revenue

  • Questrade has an estimated annual revenue of $70 million.
Part
04
of five
Part
04

Canadian Robo Advisor Companies: Competitive Landscape (4)

Wealthbar and RBC InvestEase occupy two vastly different competitive positions, with Wealthbar benefiting from its first-mover advantage in the robo-advisory market and unique service offerings, while RBC InvestEase relies on the convenience of its service and backing by RBC to gain momentum despite its late entry into the industry.

Wealthbar

Strengths

  • Wealthbar has a myriad of strengths, beginning with the fact that the company "pioneered the robo-advisor" model in Canada, and thereby gained a distinct first-mover advantage.
  • Moreover, the company was built using an online platform and business model that was significantly more accessible than traditional wealth management firms, giving the company access to potentially untapped customer segments.
  • In particular, Wealthbar offers "easy" online investing portfolios for clients, as well as low-fee ETFs and "unlimited, commission-free advice."
  • Meanwhile, Wealthbar introduced its more "democratized" investing platform alongside strong ties with more traditional wealth management brands, such as the founder's ties to Nicola Wealth Management.
  • Both this historic connection, as well and the companies new ongoing partnerships with other institutions add to Wealthbar's brand and legitimacy.
  • Ultimately, these key strengths have resulted in Wealthbar being consistently recognized across numerous Canadian outlets as a top robo-advisor in the country.

Weaknesses

  • However, Wealthbar now operates in a much more competitive environment, and its apparent failure to better match its competitors' fee structures represents a critical weakness.
  • Although Wealthbar still benefits from brand recognition, it is now associated with higher fees and considered a more expensive option than many peers.
  • For example, the company requires a minimum account balance of $1,000, whereas numerous other wealth advisors offer access to their services with no initial investment.
  • In addition, Wealthbar's sliding scale fee model does not provide lower management fees until clients reach investment levels of $500,000 or more.

Products Overview

  • However, the company continues to match its competitors as well as differentiate itself with its product offerings.
  • According to some financial industry experts in Canada, a "key differentiator" for Wealthbar is the fact that it provides financial planning services.
  • In addition to its offering of non-commission financial advisers, the company also offers clients unique access to planning options for estate, tax and insurance.
  • Meanwhile, Wealthbar provides a variety of other more standard product offerings, including CIFP insurance and numerous choices for investments.


RBC InvestEase

Strengths

  • Although RBC InvestEast is a much newer player within the robo-advisor landscape in Canada, it benefits from a variety of strengths, including the convenience of its business model, lower fees and ties to industry heavyweight RBC.
  • According to Stuart Rutledge, senior vice-president of personal savings and investments at RBC, RBC InvestEast was launched with the goal of making automated investing and financial advice more convenient for the busy Canadian customer.
  • With this in mind, RBC InvestEast launched an easy to use platform in 2018 that aids new customers in establishing an investment strategy through "three easy steps."
  • Additionally, new customers can join the service for a minimum account balance of between $0 and $100, and pay no fees until after their first year with RBC InvestEase.
  • Meanwhile, similar to Wealthbar, RBC InvestEase is able to provide this relatively straightforward and affordable robo-advisory service with confidence, given that it is backed by one of "Canada's oldest and most reliable" financial institutions.

Weaknesses

  • Despite the fact that financial experts in Canada are beginning to highlight RBC InvestEase as one of the best robo-advisors in Canada, the company is being overlooked by others as one of many competitors in a saturated market.
  • Most notably, RBC InvestEast is one of the newest players in the robo-advisor space, putting it at a significant disadvantage.
  • Additionally, while the company is unique in offering an easy to use service that is also backed by a major bank, many of its fees and products are insufficiently differentiated.
  • For example, while RBC InvestEast offers pricing that is below competitors such as Wealthbar, it is not the most affordable robo-advisor in the country.
  • Additionally, some industry experts claim that the company's product offerings "fall behind...the most established players," and that they may be too conservative for some Canadians.

Products Overview

  • Overall, RBC InvestEase's product offerings are divided into three primary types of accounts: tax-free savings accounts, registered retirement savings plans and non-registered investment accounts.
  • Notably, a customer doesn't have to engage the services of RBC to participate in one of these RBC InvestEase accounts.
  • Similarly, customers of RBC are not required to use RBC InvestEase as a robo-advisor.
  • Meanwhile, accounts are further divided into two tiers: standard portfolios and "responsible investing portfolios."
  • While these products themselves are not particularly unique in the marketplace, the more conservative nature of these offerings as well as their association with RBC represent two key brand features.
Part
05
of five
Part
05

Robo Advisor Industry in Canada: Trends

Some additional recent, emerging trends that are impacting the robo advisor industry in Canada include lower fees and compressed margins, and an increase in regulations. Below are explicit details on the request.

Lower Fees and Compressed Margins

  • One of the benefits that robo advisors have over traditional advisors is their ability to charge lower fees. Also, to stay more competitive against other robo advisors, such as attracting and maintaining clients, a platform must charge lower fees compared to its competitors.
  • Since robo advisors require minimal involvement of humans, they are less cheap compared to traditional advisors. This has made them popular among Canadian consumers when it comes to managing their finances and investments.
  • Some robo advisors have no account minimum for a client to invest; this is, someone can start investing with little as $1.

How it is Impacting the Market

  • According to a Nest Wealth article, over 50% of Canadians consider "low fees" as the biggest driver of using robo advisors.
  • Currently, robo advisory companies in Canada are pursuing the clients of traditional full-service financial advisors to show them a better way, which involves helping them build a better investment portfolio at much lower fees.
  • Due to lower fees, traditional financial advisors are set to lose their clients to robots. This is because consumers want to save costs when investing.

Companies Driving the Trend


An Increase in Regulations

  • New and existing laws impact both robo advisors and financial planners equally; however, robo advisors differ from traditional financial planners in some ways, and the government is refocusing some regulations in order to account for these differences.
  • The rise of fintech in Canada, especially robo advisors, is making financial services firms and financial advisors to embrace client-facing technology. However, regulatory hurdles are making it harder for them to implement these new tools into their practices. To make it easier for them, a self-regulatory organization (SRO) is helping them integrate their services with these technological tools, including robo advisors.
  • The Investment Industry Regulatory Organization of Canada (IIROC), an organization that oversees investment dealers and their advisors, conducted a study titled "Enabling the Evolution of Advice in Canada" with Accenture Consulting. This report aimed to look at ways the wealth-management business is changing and how the SRO will need to “clarify how dealers may use technology to assist them in complying with existing rules” in order for registrants to pursue innovative ideas".
  • Also, most investors want a regulatory environment that values their protection and transparency since they have displaced the traditional relationship, which involved a registered financial advisor and his/her clients. However, the regulatory system in Canada is still built on the conventional one-on-one dynamic, and this has to change.
  • Initially, regulators wanted robo advisors to conduct/call everyone who has opened an account with them to go over the answers they gave; however, this was time-consuming. Currently, the regulatory system still expects full "know-your-client" suitability analysis.

How it is Impacting the Market

Companies Driving the Trend

  • Some robo advisory companies that support regulations being set by the Investment Industry Regulatory Organization of Canada (IIROC) include Invisor, Wealthbar, Weathsimple, and Justwealth.


Sources
Sources

From Part 03