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What’s a Robo-advisor and are they right for you?

ROBO-ADVISORS - DOES TRUSTING YOUR MONEY WITH COMPUTERS MAKE SENSE?

The term robo-advisor may paint a picture in your mind of a robot sitting at a desk dispensing financial advice. While that isn’t exactly what robo-advisors are, they are an advancement in technology that makes investing your money easier with, typically, fewer fees to pay.

 

So, what is a robo-advisor?

 

The term, adopted by the financial industry a little over 10 years ago, covers a broad continuum of financial services. At the core, however, is simply a technology-based platform that invests and rebalances your portfolio based on risk tolerance and savings goals. The extent to which computers and sophisticated investing algorithms are involved in combination with real people varies between service providers. There are a lot of options out there, including VirtualWealth digital advice service, offered by Connect First Credit Union, so understanding how robo-advisors work can help you decide if it would be a good fit for you.

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WHY WOULD YOU USE A ROBO-ADVISOR?

One of the biggest draws to this type of investing is lower fees. As a digital offering, robo-advisors leverage technology to deliver investment guidance and management without the overhead of brick-and-mortar locations and the costs associated with supporting face-to-face contact with investors. As well, the majority of robo-advisors invest client portfolios in exchange-traded funds (ETFs) or mutual funds that act as a basket of investments, such as stocks, commodities, or bonds that require less human intervention to manage.

 

"Digital investment and advice services are about the ease of delivery,” says Christine Zalzal, Senior Vice-President and Head of Qtrade­® Investor and VirtualWealth for Aviso Wealth. “There are still highly qualified human investment experts involved, but technology allows them to bring the service straight to investors with an easy-to-use digital interface.”

 

Digital advice services also offer the convenience of “hands-off” or passive investing. Once you answer detailed questions about your goals, timeline, and comfort zone for risk, your money is invested in an appropriate portfolio and you are provided a simple, low-cost way to build wealth without having to select, monitor and rebalance your investments.

 

 

THINGS TO CONSIDER BEFORE INVESTING WITH A ROBO-ADVISOR

 

Robo-advisors are a great low-fee choice if you have a straightforward financial picture and a set timeframe to invest, especially if you are starting a new savings goal.

 

“Young families are often an excellent fit for digital investment services,” says Christine Zalzal. “They are starting to accumulate long-term retirement savings or beginning to save for their children’s education. They want to make the right choices for investing, but also lack the time to manage their own investments or meet face-to-face with an advisor.”

 

A robo-advisor can also make sense if you’re not interested in doing the research and monitoring to ensure your portfolio remains balanced and performs as it should. If you don’t know how your investments performed last year, or the year before, and you don’t have a financial advisor actively managing your portfolio, you might want to think about getting some robo-help.

 

On the other hand, if you enjoy investing on your own and like the DIY approach to wealth management, or your financial requirements are complex – debt management, tax and estate planning, home or business ownership and insurance – going all-in with a digital investment service may be too hands-off for you. You need to figure out how much “human” is the right amount for you.

 

“One of the advantages of VirtualWealth is that you have access to knowledgeable investment representatives to answer your questions,” says Christine. “If your financial circumstances or investment objectives change, we can help you review your profile and propose adjustments."

 

Before you make the switch to a robo-advisor, know where you are starting from. If you have a complex portfolio with a mix of investments, it may not make sense to liquidate and start from scratch. Develop a solid understanding of any fees or tax implications involved in moving from one investment to another, so you don’t have any surprises.

 

ROBO-ADVICE VS. ONLINE BROKERAGE VS. FINANCIAL ADVICE SERVICES

Robo-Advisor

Digital offering that provides a low-cost, low-touch way to manage investments that are automatically rebalanced to match an investor’s risk profile and goals.

Online Brokerage

Digital platform for investors who want to directly manage their own portfolios with a range of investment options and a lower fee structure.

Financial Advice

Personalized service from an experienced professional who actively manages an investor’s portfolio and usually provides a wider range of services beyond investments (e.g. estate planning, insurance). Higher fees related to personalized, high-touch management of investments.

 

HOW CAN YOU GET STARTED?

 

  1. With Connect First Credit Union’s VirtualWealth digital advice service, there is no minimum amount to open an account however funds are not invested into the investors' recommended portfolio until the balance reaches $2,000. You can apply for an account online or speak to a Mountain View financial specialist about opening an account.

  2. Answer a goals-based online questionnaire to identify risk tolerance and savings goals. The service proposes a portfolio with an asset allocation that is appropriate for the investor’s profile. Investors can update their personal information and portfolio questionnaire to reflect their changing circumstances at any time.

  3. Upload ID documents and provide your eSignature online.

  4. Fund your account using Electronic Funds Transfer (with the upload of an image of a voided personalized cheque) or bill payment. You can select to establish a Pre-Authorized Contribution of $50 or more a month. New applicants can also eTransfer in investment accounts from another financial institution.

  5. Once transferred in, funds are allocated to your recommended portfolio and you’ll be able to monitor their investment and performance online. There is even an easy-to-use VirtualWealth app available through the App Store and Google Play Store.

 

We’re always here to help! If you have questions about investing and whether a robo-advisor might make sense for you.

 

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The Legal Stuff:

 

Online brokerage services are offered through Qtrade Investor. Mutual funds, other securities and securities related financial planning services are offered through Credential Securities. Qtrade Investor and Credential Securities are divisions of Credential Qtrade Securities Inc. VirtualWealth is a trade name of Credential Qtrade Securities Inc. VirtualWealth is powered by Aviso Wealth, a national financial services company that oversees more than $55 billion in assets under administration and management. Aviso includes Qtrade Investor, Canada's top-ranked online brokerage, and NEI Investments, Canada's leading manager of Responsible Investments. Aviso is owned by the provincial credit union Centrals, CUMIS and Desjardins. Connect First Wealth offers life insurance through an insurance agency licensed with the Alberta Insurance Council. Mutual Funds and securities related financial planning services are also offered through Credential Asset Management Inc., Member MFDA. Connect First Wealth Ltd. is a wholly owned subsidiary of Connect First Credit Union Ltd., offering financial planning, life insurance and investments to our members and their communities. Trademark(s) of Connect First Wealth are used under license by Connect First Credit Union Ltd. The advice on our website is prepared without knowing your personal objectives, financial situation or needs. Before you act on this or any advice, please consider if it's right for you, and reach out to our teams to help determine if the product is appropriate for you. Legal Terms of Use apply