Let's help you find the best robo-advisors

Robo-advisor Comparison Chart

The cost of a robo-advisor depends upon which firm you go with and what services you use. Below is a comparison table of some of Canada’s more prominent robo-advisors. The table below lists robo-advisors and their account minimum, ETF management fees, and annual management fees

Best Robo-advisors in Canada for 2023

Robo-advisors relieve individuals from paying a premium for a simple manoeuvre and instead make their broker work harder for their investment dollar. Until recently, you needed to get your advisor to switch around your investments to keep the portfolio within your target risk-reward range, but with the invention of robo-advisors, anyone can start investing in ETFs with limited investment knowledge and no hassle. 

Without the need for pricey investment pros to rebalance your portfolio, you pay less to keep your investments in the proper order and those advisors can spend their time doing something to really justify their fees.

Below, we provide a deep dive on some of the best robo-advisors in Canada so that you can compare the robo-advisor that best suits your investing needs.

Scotia iTrade

• Get up to $2,000 cash and $4.99 stock and ETF commission pricing Or up to 500 free stock and ETF trades*
• Get access to Scotiabank's in-depth research capabilities
• Pay bills, right from your online brokerage account
• Manage and transfer funds between your Scotia iTRADE online brokerage account and Scotiabank bank accounts.
• Set-up and make future dated transactions
• Access easy fund transfers (CAD and USD) between any bank account in Canada and Scotia iTRADE.
   

Best for: Investors who love flexibility

Company overview:

Started after Scotiabank's purchase of E*Trade Canada in 2008, Scotia iTrade provides new and seasoned investors with a variety of investment accounts, products, and platforms. While their trading commissions are on the higher-end, they also have the distinction of being one of the only online brokers in Canada to offer commission-free ETFs.

CI Direct Investing

• Flexibility to choose either passive ETF or actively managed portfolios
• Get assigned a non-commission, certified financial planner

• Additional insurance and tax optimization planning optional

• Will pay your transfer out fees

Originally founded in 2014 as WealthBar, CI Direct Investing was one of the original robo-advisors in Canada. CI Direct Investing recently became part of the CI Financial Group of companies, a Canadian owned global asset manager with $194 billion in total assets as of September 30, 2020.

Robo advisors versus mutual funds

Mutual funds have long been a favourite investment of Canadians - you may even own some yourself. According to The Investment Fund Institute of Canada (IFIC), Canadians have over $1.71-trillion invested in more than 4,000 mutual funds, managed by 140 different firms.

When you invest in a mutual fund, you’re pooling your money with others to buy a portfolio of investments that are taken care of by a management company. Rather than doing the work of picking investments yourself, you simply buy into the fund that is managed on your behalf. The fund manager buys and sells investments according to the fund’s ethos while you relax.

This may sound a lot like the value proposition of robo-advisors; your money is invested on your behalf and someone else takes care of the details. All you have to pick is which funds you want to invest in. The problem with this is that all mutual funds are not created equal. They all have different strategies, different asset mixes and different fees. It’s very unlikely that your investment needs will be met by a single mutual fund.

According to the WallStreet Journal, between 71% and 93% of U.S. stock mutual funds either closed or failed to beat their closest index funds over a ten year period.

Human financial advisors also take on a big role in helping Canadians navigate the world of mutual funds. By understanding your needs, they can recommend a mix of investments including mutual funds that will, hopefully, help you meet your financial goals. However, even the best financial advisors aren’t likely to know the details of literally thousands of different mutual fund products and rarely make the right moves to beat the stock market in the long term.

A key difference with robo-advisors is that they skip mutual funds and instead invest your money in a number of different ETFs. Rather than being actively managed by people, ETFs cover an entire segment of the market. For example, the Vanguard Total Stock Market ETF is invested in “approximately 100% of the investable U.S. stock market” The fund includes shares of practically every stock and holds on to them whether they’re going up or down. This takes advantage of an investing strategy that acknowledges that people who invest in the entire market have typically seen better returns than those who pick and choose their stocks.

Like a human financial advisor, the robo advisor’s job is to select and invest in ETFs on your behalf. Unlike a human financial advisor, who may review your portfolio as little as once a year, the robo-advisor continues to monitor your ETFs, buying and selling them automatically as needed to keep your portfolio balanced according to your risk tolerance.

Robo advisors versus human advisors

Handing your investments over to a “robot” may sound scary, but it offers several benefits over using a human advisor.

When it comes to costs, robo-advisors are much more affordable than humans. Traditional advisors make their money by selling you actively managed stocks and mutual fund investments that pay them a commission on the money you earn. These fees can add up and take a big bite out of your returns over time. The logic to this is that it’s in your advisors best interest to make you as much money as possible; the richer you get, the richer they get.

Robo advisors skip this expensive investment approach and focus primarily on exchange-traded funds (ETFs) that cost very little to manage. Rather than charging a commission on your earnings, robo advisors instead charge a small management fee based on the value of your portfolio. Since the overhead costs are much lower and investments are more efficient, robo-advisors can be very profitable while charging far lower fees, and a result, let you pocket higher returns.

When it comes to portfolio performance, the investment methodology behind robo-advisors (of passively managing ETFs) has also proven to outperform human advisors.

The theory of using human advisors goes as follows: people who’ve accumulated years of experience in the financial industry are equipped to strategically pick the right investments that will outperform and make you richer. The problem is, in reality, human advisors have a particularly poor track record of outperforming the market overall. In 2012, an experiment from the Observer Newspaper found that a cat (yes, a cat) actually beat a team of expert money managers when it came to picking stocks. In 2008, Warren Buffet took a $1 million wager that stashing money away in an index fund would outperform a team of expert hedge fund investors over a period of ten years. And, he won.

Human advisors (even experts in their field) are susceptible to making very human mistakes, and tend to underestimate the randomness involved in the stock market

Robo advisors get around this by using a well-diversified portfolio of ETFs to invest in entire markets, regardless of how the individual stocks or companies perform. The goal of robo advisors is to match the market, and while that may sound underwhelming at first, this methodology beats most human advisors, costs less in fees, and can earn lucrative returns of 10% annually over the long term (if past stock market performance is an indicator).