I’m very happy to finally be able to announce something I’ve been working on for months: a new Robo-Advisor Comparison Calculator at autoinvest.ca!!
I think the robo-advisor model looks like a great choice for a lot of Canadians. Many will save even more money with a do-it-yourself approach (and I have a book and course to help show them how to do that). But for those who don’t have the interest in DIY (or who will DIY all the parts that involve decisions, and use as service for the purchasing and rebalancing parts), having a low-cost option to handle your investments is wonderful.
Why a Calculator is Needed
Of course, there are a lot of robo-advisors out there these days, and trying to find the one that’s best for you can be a challenge. There certainly isn’t a clear winner across the board, and even comparing them at a glance with a table is quite the challenge. For starters, there are several pricing models in play. I love the flat-fee model that firms like NestWealth use, but for many people with smaller accounts paying a percentage of assets is still the cheaper way to go. However, even there each firm has their own rate and their own thresholds for where their percentages change — and some are marginal (like 0.5% on the first $X no matter how much you have) and some are thresholds (X% on the whole amount as soon as you cross a threshold).
On top of that, each firm has a different set of investments that they will put you in to, with their own underlying costs. Even finding what these costs are can be a challenge sometimes, and they’re going to be different depending on your risk profile. Sometimes even by how much you have to invest, as you may get access to cheaper underlying ETFs when your account gets larger (or conversely, there may be more slicing-and-dicing for larger accounts).
So Sandi Martin made a nifty tool a while ago to help with this comparison. It was popular, but that popularity led to some issues: people were colliding when too many tried to use it at once, and every now and then people would use cut & paste (instead of copy & paste) which broke the cell references. It was time for something better.
A Better Calculator
She had the idea of building a better, dedicated calculator on its own website, and I jumped on board to partner with her on making it happen. While we were at it we added some nifty new features, including the ability to filter the results according to whether they offered certain services, account types (like the RESP, or RESP with BC/Sask provincial grants), or investing styles.
A part I really like is how she broke down planning services – lots of them have planning or concierge or other advisory services, where you can speak with a person in some capacity about your particular situation. But whether the advice is limited to your portfolio, or savings, or your more general financial situation can vary. So Sandi has broken the advice up into several categories with representative questions.
It’s fast, doesn’t have the issues of the spreadsheet, and looks cool. I’m super proud of this.
Things to Remember as You Use It
This will help you compare the costs of different robo-advisor services for your situation. However, the cheapest one may not necessarily be the best one for you. Having the pricing information helps you better compare the other features, so you can see if you’re willing to pay $X more to get certain kinds of advice, portfolio options, or whatever feature it is that interests you.
We haven’t put in a DIY with ETFs option to compare to the robo-advisors. There are some good reasons for that: because it would always be cheaper, because I have DIY stuff to sell and we don’t want the perception of a conflict-of-interest, and because we don’t want people who may be looking for a robo-advisor because they’re uncomfortable with DIY to feel pressured to go down that road. But if you’re DIY inclined, then approx. 0.14% + some trading commissions (depending on your broker, but ~$10-100/yr is not far outside the ballpark, depending on how you arrange your investing) would be a decent comparison figure.