The Best Robo Advisors In Canada and the USA – and Why You Should Give Them a Look

If you’re looking for the simplest, easiest way to get money from your pay cheque into an investing account such as an RRSP or TFSA – then new robo advisors such as Wealthsimple and Wealthfront (for our American readers) might be exactly what you’re looking for (see our 2017 Wealthsimple Review here).

DIY investing using basic vanilla ETFs is still the absolute cheapest way to invest.  You can create a whole portfolio with overall management fees in the .2% MER range (compared to roughly 2.5% for mutual funds).  When combined with Questrade’s free ETF trades, you can create an ultra-efficient index investing portfolio awhile cutting costs to the absolute bone.  Several years ago, if you would have asked me, “What is the best way for most people to invest their money,” I would have just kept repeating those two sentences to you over and over again until you did what I said or walked away.

The problem was (and continues to be) that most people walked away.

The Best Robo Advisors In Canada and the USA
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The evolution in my thought process can be summed up as: if people are going to miss out on the massive benefits of low-cost index investing because they are absolutely adamant they do not want to worry about setting up and rebalancing their own brokerage accounts – then it doesn’t much matter how cheap my preferred DIY style was.

I’ve come to accept that for a lot of people, investing will always be sort of intimidating and just never their thing.  What I will never accept, is that those poor souls should doom themselves to a life where compounded investment returns never help them retire earlier, or where they will leave themselves as vulnerable little sheep for the big bad wolves of big-name investment firms to prey on using mutual funds and their sky-high MER fees.

After writing several robo advisor reviews about the top robo advisors in Canada, I’ve come to the conclusion that I really like the value package that leading robo advisors like Nest WealthModern Advisor, and Wealthsimple (Wealthfront and Betterment in the USA) bring to the table.  Essentially, they will just create that basic ETF portfolio – and answer any of your basic questions – for a very low overall MER of somewhere in the .4-.7% MER range.  This obviously puts even the best robo advisors at a substantially higher cost than DIY investor could manage – but it is way way lower than what mutual funds will charge (especially in Canada – the country with the highest average mutual fund fees in the world!).

Top Robo Advisors In Canada

It is difficult to pick just one robo advisor to rule them all in the Canadian market.  The truth is that with many of these companies being so new, it’s impossible to decisively say that one of them is best in all situations.  That being said, Wealthsimple has quickly taken the lead amongst Canada robo advisors in terms of assets under management, and has found a large funding partner in Power Financial (over $100 million invested to date).  Other leaders include Nest Wealth, Modern Advisor, and Wealthbar.

Many of the Canadian robos charge charge a straight percentage MER, while others charge advertise a management MER plus the added cost of the underlying ETFs, while still other market leaders charge a monthly subscription fee based on asset tiers.  This make it difficult to compare apples to apples – and consequently you should look for a robo comparison calculator or something similar in order to find the best deal for your specific circumstances.  Once you’ve done that, most of the robo advisors in Canada will offer a limited time free trial with them where you can test the waters and see which company meets your standards when it comes to customer service and usability – in addition to obvious price considerations.

Top Robo Advisors In the USA

When it comes to the large US market two behemoths have absolutely dominant market share: Wealthfront and Betterment.  While Wealthsimple has recently launched an expansion into the American market (and the UK one as well) they will have a steep uphill climb if they hope to catch the two robo giants.  With billions of dollars under management before most of the Canadian robo advisors ever started up, Wealthfront and Betterment proved that the concept of a robo advisor was not only profitable – but that there was a huge market gap that could be exploited when it came to investors that didn’t want to be 100% responsible for picking stocks, bonds, and ETFs – but also didn’t want to pay the insane commissions that come with the traditional advisor + mutual fund model.

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