New Investors: Are Robo-Advisors the Answer?

The 2007-2008 financial crisis spooked many investors out of the market.

However, the years that have followed have seen a long and dependable bull market. Liquidity has erupted since the COVID-19 pandemic, and interest rates remain at historic lows. This friendly market environment is drawing in many new investors. However, newcomers may be intimated by the market.

Banks and other financial entities are offering robo-advisor solutions to investors who desire a turnkey solution but want to avoid mutual fund fees. Moreover, face-to-face banking interactions have declined markedly in recent years. This was exacerbated by the pandemic. Many investors, especially in younger demographics, are more inclined to seek advice online. Robo-advisors are designed to meet this demand.

Wealthsimple boasts one of the most well-known and well-reviewed robo-advisory services. Fees range from 0.5% to 0.4% for the service depending on the size of the investor deposit.

It offers some of the lowest ETF MERs in the industry. Royal Bank launched RBC InvestEase across all of Canada in November 2018. The service offers to cover transfer fees up to $200 for clients who open a new account.

Moreover, RBC iShares ETFs offers the largest and most comprehensive ETF stable in the country. Bank of Montreal was one of the first big banks to launch a robo-advisory service with BMO SmartFolio. This somewhat defies the “robo-advisory” title as it has human advisors on the other end. However, fees are on the higher end between 0.4% and 0.7% per year.

Robo-advisors are not a bad place to start for new investors.