A BRIEF HISTORY OF CANADIAN ROBO-ADVISORS
As in a lot of cases, it took Canada a bit of time to catch up to their neighbour down south. While robo-advising blossomed in the U.S. in 2008-10, it didn’t arrive in Canada until 2014, via Canadian ShareOwner Investments Inc.
ShareOwner had been offering discount brokerage and investment education services since 1987, but in 2014 it debuted its "Model Portfolio Service", which offered American-style-robo-advisor automated investing in a bundle of low cost index ETFs optimized for an investor’s goals and preferences with periodic and automatic portfolio rebalancing.
While ShareOwner was the first to market, most Canadians will likely (as we did before researching this post) assume that Wealthsimple was the Canadian pioneer. While Wealthsimple may not have been first, it has become the Canadian leader.
Wealthsimple was founded in 2014 by Michael Katchen after returning from working in Silicon Valley. In 2015, Wealthsimple acquired ShareOwner. This acquisition resulted in Wealthsimple reaching $400 million in assets under management, a number which would grow to $1.9 billion by early 2018, an amount that makes it Canada’s largest robo-advisor, as of that juncture.
Along the way to becoming Canada’s largest robo-advisor, Wealthsimple has added access to socially responsible investment funds and has begun working on a zero-commission trading platform, which we hope to review at a later point in time.
But Wealthsimple isn’t the only player in the Canadian robo advisor sandbox. Since 2014, the options have ballooned.
The robo-advisor field is quickly expanding. There are already 12 players in the field of various sizes. It’s likely that in the coming 5 to 10 years there will be a contraction once (i) the market expands too big for Canada to support (seeing as we are already at 12+, and only 2 of the big banks have them now); (ii) the industry realizes, as most industries do in Canada (e.g. airlines, telecoms, banks), that consolidating to a small number and uniformly increasing fees as an oligopoly is much more profitable for them all; or (iii) a combination of (i) and (ii).
That said, presently the 12 prominent robo-advisors can be divided into 3 groups:
Those that are available in all provinces and territories (Wealthsimple, BMO Smartfolio, Questwealth Portfolios and RBC InvestEase);
Those that are available in all provinces (Justwealth, Modern Advisor, Nest Wealth and Wealthbar); and
Those that are available in some provinces (Smart Money Capital Management, RoboAdvisors +, Responsive Capital Management and Invisor)
A good synopsis of most of these can be found at https://www.ratehub.ca/investing/robo-advisors. The focus of Fiscal Frontiers will be to try these robots out for ourselves and compare them to one another, from the perspective of the user experience as well as their actual performance.
Fiscal Frontiers will start with the Canada-wide robots first. Seeing as Wealthsimple is the Canadian leader, we will review it first. We enrolled with Wealthsimple back in September 2018 and have been enjoying our time. We will offer our thoughts on the service in early 2019. Until then, we want to switch gears for a few weeks to focus on peer-to-peer lending, something else we have been dabbling in for the past few months.