It never gets easier for robo-advisers.

They were tested in a stock market crash in 2020 and passed. Now they are facing a bull market where the success of investments has pleased almost everyone. Why pay a robo-advisor to run a portfolio of exchange-traded funds for you when you can buy stocks for free and watch them soar?

The 2021-2022 edition of the Globe and Mail Robo-Adviser Guide shows you why. The robo-advisor portfolios have mostly generated competitive returns over the last one and three year periods, even after their modest fees.

Robots build a CV as a stable and profitable way to invest if you want help managing a portfolio, but there are big differences between players in areas like fees, portfolio construction, and returns. .

The Robo-Adviser guide covers these areas and more for 10 different players. Each was asked to provide details on a growth portfolio with a strong emphasis on stocks rather than bonds. A growth portfolio would suit a younger investor or someone who can handle stock market volatility and has a time horizon of 10 years or more.

A quick and easy benchmark for comparing growth portfolios robo is a growth-oriented asset allocation ETF, such as the iShares Core Growth ETF (XGRO-T) portfolio. XGRO’s total return (price changes plus dividends and interest income) was 18.4% for the 12 months to September 30, 10.1% on a three-year annualized basis and 9.1% over five years.

Note that XGRO’s returns reflect the cost of its individual ETF holdings and its 0.2% management expense ratio, but not the advisory fees that bots charge for building and managing your portfolio. Never choose a robot based solely on past feedback. Also focus on the fees and style of building the portfolio.

Here are five observations on the data from this year’s guide:

  1. The fees vary by a surprising amount: Questwealth portfolios in most cases have the lowest costs by far on an aggregate basis, which means ETF fees plus advisory fees.
  2. Canadian equity weights are a big differentiator in robot-building portfolios: some make Canadian stocks their number one holding, while others don’t even rank them among their top three holdings.
  3. Almost all companies have been around long enough to post five-year returns – value those more than shorter-term results.
  4. The minimum account size varies, but is generally quite small: Robos clearly welcome small accounts in a way that other parts of the investing world do not.
  5. Most companies offer a full range of account types; the only one to offer registered disability savings plans is ModernAdvisor.

Now for a quick introduction to robot advisers:

  • What do you get A robot will assess your investment needs and tolerance for risk, then build you a suitable portfolio of low-cost ETFs. Ongoing management ensures rebalancing so that you stay with the prescribed mix of investments.
  • How much does it cost? Robots charge a portfolio management fee, which is typically applied monthly; There are also fees for owning ETFs, but these are deducted from your returns by the ETF companies (ETF returns are reported after the fees). ETF buy and sell commissions are included in portfolio management fees. The exception is Smart Money Invest, which charges one cent per share.
  • How are you tracking your results? On a mobile application or on your computer. Robots tend to stay ahead of other investment firms by clearly displaying personalized returns, fees, and other information.
  • To help: You can call or teleconference with the staff; some companies assign a designated portfolio manager to clients.
  • Security: Assets are generally held by third party or related investment dealers who are members of the Canadian Investor Protection Fund, which protects eligible accounts up to $ 1 million in losses caused by broker insolvency.
  • Alternatives to robots: Asset allocation ETFs have fees as low as 0.2% and come in a variety of portfolio combinations. You can pay brokerage commissions to buy and sell them.

Click here to download an Excel version of the guide.

Source: Data provided by each robot-advisor. Data processing by Audrey Carleton.

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