The worst-branded product in investing might be robo-advisers.
Streaming services aren’t called robo-music, or robo-TV. Spotify and Netflix would have died at birth with those names. Robo-advisers aren’t dying, but it’s hard to argue that they’re thriving at a time of unprecedented mass interest in investing.
The most significant event in the robo-adviser business of the past 24 months is Wealthsimple’s move into zero-commission stock trading with its Wealthsimple Trade app. There’s still a Wealthsimple robo adviser, but it’s now just another tree in the forest of investing products. The other nine or so robo-advisers are there, too.
Hot stock markets have lessened the appeal of robo-advisers, which build and manage a portfolio of low-cost exchange-traded funds for a reasonable fee. Ironically, robos have never been more relevant as a solution to the problems of investors. That’s one of the reasons why I continue to produce an annual Globe and Mail Robo-Adviser Guide, with comparative information on returns, fees and more.
Here are three examples of robo-advisers providing solutions to the problems of investors:
-You know investing will eventually get a lot harder than it is now:
Investors have had a lot of success with stock-picking in the past 18 months, but the markets will eventually become much more difficult to navigate. If you’d like to speculate on stocks with some of your money while also investing prudently, consider a robo for the prudent portion.
-You are completely lost trying to build a portfolio of ETFs: There are more than 1,000 ETFs listed on the Toronto Stock Exchange, with more arriving almost daily. You only need half a dozen ETFs to build a portfolio, or you could go with a portfolio-in-a-box option called the asset allocation ETF. But which funds suit you now, and what about a few years from now? Robos handle all that for you.
-You use or would like to use a fee-for-service financial planner and need some help with the investments that will drive your plan: Part of the branding problem with robo-advisers is that their name promises more than they deliver. You get advice in building and managing a portfolio of ETFs, but that’s it for the most part. Some robos offer additional financial planning, but this isn’t part of the core mandate for robos. Managing investments is. You can work with reality by hiring a fee-for-service planner who charges and hourly or flat rate fee and answers all your questions about retirement, registered retirement savings plans versus tax-free savings accounts, housing affordability, debts and more. As it happens, many fee-for-service planners don’t manage investments. Robos solve that problem.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
Landlord letdown
Remember falling rents during the pandemic? That’s so 2020. Now, rising demand for rentals in Toronto has given landlords the upper hand again. And, they are using it.
Would this caboose fit your housing budget?
For sale on the real estate website Zoocasa: Caboose, classic red, located in Milton, Ont. Fully insulated with 100-amp electrical service. $45,000.
Buy now, pay later, stay in debt
A credit counselling agency offers three reasons why a new option to pay for things in installments – buy now, pay later – could be a debt trap.
The latest in McRewards
A deep dive into the new McDonald’s customer loyalty program.
Attention podcast fans
Is a hot housing market pricing first-time Canadians out of their small towns? In Episode One of the new season of Stress Test, a personal finance podcast for Gen Z and millennials, Globe editor Roma Luciw and I travel to Belleville Ontario to find out. Listen here.
Tell Rob
“You asked for examples of price increases during the pandemic. My box of four pudding cups started at $1. A box now costs $1.57 at Wal-Mart.”
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Do you have money concerns related to cancer in areas like drug reimbursement, out-of-pocket expenses or long-term disability? The Money Matters program from a non-profit agency called Wellspring might be able to help. There’s no charge, and no referrals are needed.
The Money-Free Zone
This is fun – the music website Pitchfork rescores 19 albums it rated in the past. Some get bumped higher, some get knocked down a bit.
Tweet of the week
Helpful thoughts on receiving investment advice from friends and family.
In case you missed these Globe and Mail personal finance-related stories
- I was scammed out of $15,000. Why didn’t I spot the red flags?
- Toronto startup Key Living helps renters get into real estate market by co-owning property
- Feeling FOMO after the pandemic stock gains? It might be time to rethink your investing approach
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
