We have more choices than ever about where to invest our money. Here are the best robo-advisors in Canada so you can get started in the stock market.
Robo-advisors are still fairly new but are gaining in popularity because of the value they provide for being so easy to use. Even people without any understanding of investing have no excuse not to get started! But now the main challenge is choice: who is the best robo-advisor in Canada?
|Account Minimum||Management Fee||Promo|
|Wealthsimple||$0||0.40% to 0.50%||$50 free when you open an account with at least $500|
|BMO Smartfolio||$1,000||0.40% to 0.70%||Get 0.5% cashback on the amount you invest ($5 per $1,000)|
|NestWealth||$0||$20 to $80 per month|
What is a robo-advisor?
The name can be misleading, but a robo-advisor is not actually a robot. Behind every Canadian robo advisor, there are actual people. The term “robo” is only there to emphasize that investing is happening automatically for you, using computer algorithms and portfolio managers.
A robo-advisor can be a great addition to your financial plan, regardless of your investing knowledge. If you’re a brand-new investor that doesn’t understand much about the stock market, a robo-advisor is the perfect place to start. By signing up with a robo-advisor, you will have the opportunity to learn and gain experience in the market.
Likewise, robo-advisors are perfect for people who want to invest but are not interested in learning the intricacies of creating or managing an investment portfolio. If you don’t have the time or the desire to research investments, a robo-advisor can take the load off!
How much does a robo-advisor cost?
There is one main cost to investing with a robo-advisor: the portfolio management fee. However, there are two additional costs, fund fees, and taxes, that are also costs in your portfolio. Here’s a breakdown of each.
Management & advising fees
Robo-advisors typically charge a percentage of your portfolio as an advising or management fee. However, some robo-advisors charge a flat monthly or yearly rate to manage your portfolio. However, most of these costs work out to less than 0.50%. This is a fraction of traditional mutual fund fees which are typically in the range of 2% to 3%, if not higher.
Expect to pay anywhere from 0.40% to 0.70% of your total portfolio value in roboadvisor management fees per year. These are typically deducted automatically on a monthly basis.
It is important to note that the advising or management fee charged by a robo-advisor does not include the fees of some of the funds they may invest in. E
xchange-Traded Funds (ETFs) are a popular investment choice of robo-advisors. ETFs have their own fees, called MER (Management Expense Ratio) ranging from 0.10% to 0.50%. If the robo-advisor you select invests in ETFs, you will pay the ETF’s associated MERs.
MER fees are charged directly by the ETF, so they will not be displayed in your account fees. The value of your portfolio you see in your roboadvisor is the balance net after MER fees.
Do I pay taxes with a robo advisor?
It’s worth noting that you can significantly tax-shelter your investments by opening a registered account like an RRSP or TFSA with a robo-advisor. However, this will not entirely eliminate your entire tax burden.
Withholding tax on foreign dividends
If the robo-advisor fund you select invests in international securities, you may have to pay withholding tax on foreign dividends depending on the type of account you have.
For example, dividends paid from US stocks with be subject to withholding tax if held in your TFSA or an unregistered account. However, because of the treaty agreement between the US and Canada, you do not pay withholding tax on US dividends in your RRSP.
Capital gains tax
If you invest outside of a registered account, you will have to pay income taxes on capital gains. If you buy a stock and then later sell it for a higher price, your profit is subject to capital gains tax.
The amount of income tax you pay on capital gains depends on your marginal tax rate, so it can differ for everyone.
Even though investing with a robo-advisor has costs, it’s still worth it! After all, the alternative is not investing. You can’t eliminate investing costs entirely, so your only goal should be to minimize them when possible.
Which Canadian robo-advisor is best?
When it comes to choosing a robo-advisor, you want to look for one that fits both your financial goals and your personal values. We ranked the best ones on the market based on fees, minimum balances, socially responsible investing, and more.
The Best Robo-Advisor Canada
Ultimately the best robo-advisor in Canada depends on what you want for your own portfolio. However, based on our criteria above, it was pretty easy to rank the major players!
First choice: Wealthsimple
Wealthsimple is the best overall robo-advisor in Canada. With no minimum balance required, anyone can get started investing in the stock market. You can get a free $50 if you open an account with at least $500 — that’s an instant 10% return on your ivnestment.
In addition to ease of getting started, Wealthsimple also boasts the most user-friendly platform. It’s easy to navigate both the desktop and mobile app to find everything you need to know about your money. From historical performance to future projections, Wealthsimple delivers it all in an easily digestible way.
Another great thing about Wealthsimple is they offer both socially responsible and Halal portfolios. One of the best ways to combat the impending climate crisis is to vote with your dollars as an investor.
Need more info? Check out our complete Wealthsimple Review here!
Runner Up: RBC InvestEase
The Big Banks don’t offer much in terms of affordable financial products, and that holds true in investing. But there is one exception: RBC InvestEase.
With registered accounts and a management fee of only 0.50%, RBC InvestEase is a competitive player with the rest. This management fee is waived for the first year, and they’ve recently scrapped the minimum balance requirement. This makes their overall offering nearly identical to Wealthsimple.
The availability of socially responsible portfolios makes them stand out compared to other banks. Additionally, if you’re already a banking client of RBC, opening an RBC InvestEase account might give you a multi-product rebate on your bank fees.
RBC InvestEase is not quite as hip as Wealthsimple and not quite as cheap as Questwealth, but they’re a great choice if you want to have your investments and day-to-day banking all in one place.
Want to learn more? Check out our post on RBC InvestEase: Simplicity and Convenience in Automated Investing!
Honorable mention: Questwealth
Questrade is the best discount online brokerage, so it’s no surprise they have a competitive robo-advisor offering as well. If fees are your main focus, the Questwealth can’t be beat. At only 0.20% to 0.25% per year, they’re actually half the cost of our leader, Wealthsimple.
The Questwealth portfolios are actually the best choice if you intend to do some self-directed investing as well. With Questrade, you’ll be able to see all your investment portfolios in one place: both your Questwealth investments as well as your Questrade accounts. This is a leg-up over Wealthsimple, who doesn’t offer the same with their own self-directed platform, Wealthsimple Trade.
However, if you’re not interested in managing any of your investments yourself, you might find Questrade has more features than you actually need. Their platform isn’t quite as easy to navigate as Wealthsimple’s, and it’s missing some of the “fun” features like future projections. Nevertheless, they do offer socially responsible portfolios which puts them ahead of other contenders.
Want to know more about Questrade? Check out our Questrade Review here!
Final thoughts on investing with a robo-advisor
We’ve said it before and we’ll say it before: you can’t afford not to invest. Investing in the stock market is the best way to ensure long-term financial security. Deliberating too long about when and how to invest can cost you, too!
We hope this guide to the best robo-advisor in Canada helped you find the fit for you and your money!
It’s definitely nice to see that RBC InvestEase has changed to lower minimum requirements, but one might want to mention that your funds won’t be invested until the account balance is $100, and then from $100-$1,499 balances it follows a “Small Balance Portfolio”, as they do not do fractional share purchases.
Still, this definitely beats the $1,000 CAD you used to have to go with to get started with them.
What about Mylo? Flat fee ($1). Good if youre over 10000$.