What Are Robo-Advisors?
How They Work
| Component |
What They Do |
| Risk assessment |
Questionnaire determines profile |
| Portfolio construction |
Automated ETF selection |
| Automatic rebalancing |
Maintains target allocation |
| Tax-loss harvesting |
Some platforms |
| Contributions |
Automatic deposits |
Typical Portfolios
| Risk Level |
Stock % |
Bond % |
| Conservative |
35-45 |
55-65 |
| Balanced |
60 |
40 |
| Growth |
80 |
20 |
| Aggressive |
90+ |
10 or less |
Cost Comparison
Fee Breakdown
| Option |
Management Fee |
ETF MER |
Total Cost |
| Robo-advisor |
0.40-0.50% |
0.10-0.20% |
0.50-0.70% |
| DIY ETF |
$0 |
0.10-0.25% |
0.10-0.25% |
| Mutual fund advisor |
0% |
2.0-2.5% |
2.0-2.5% |
| Fee-only advisor |
1.0% |
0.15% |
1.15% |
Dollar Impact ($100,000 Portfolio)
| Option |
Annual Cost |
10-Year Cost |
| Robo (0.6% all-in) |
$600 |
~$6,500 |
| DIY ETF (0.2%) |
$200 |
~$2,100 |
| Mutual funds (2.2%) |
$2,200 |
~$26,000 |
25-Year Projection ($100K + $500/month)
| Option |
End Value |
Fees Paid |
| DIY ETF (0.2%) |
~$680,000 |
~$18,000 |
| Robo (0.6%) |
~$640,000 |
~$55,000 |
| Mutual funds (2.2%) |
~$520,000 |
~$150,000 |
Assuming 7% gross returns.
Canadian Robo-Advisor Comparison
| Platform |
Mgmt Fee |
Minimum |
Key Features |
| Wealthsimple Invest |
0.50% (0.40% over $100K) |
$0 |
Largest, SRI options |
| Questwealth |
0.25% |
$1,000 |
Lowest fees |
| CI Direct |
0.35-0.60% |
$0 |
Tax-loss harvesting |
| Justwealth |
0.50% |
$5,000 |
Target-date portfolios |
| BMO SmartFolio |
0.70% |
$1,000 |
Bank-backed |
| RBC InvestEase |
0.50% |
$100 |
Bank-backed |
Feature Comparison
| Feature |
Wealthsimple |
Questwealth |
CI Direct |
| TFSA |
✅ |
✅ |
✅ |
| RRSP |
✅ |
✅ |
✅ |
| FHSA |
✅ |
✅ |
✅ |
| RESP |
✅ |
✅ |
✅ |
| Tax-loss harvesting |
✅ (Premium) |
❌ |
✅ |
| Halal portfolio |
✅ |
❌ |
❌ |
| SRI/ESG options |
✅ |
✅ |
✅ |
When Robo-Advisors Make Sense
Best For
| Situation |
Why Robo Works |
| Beginners |
Simple, no knowledge needed |
| Busy professionals |
Time savings |
| Emotional investors |
Removes decision-making |
| Small portfolios |
Low minimums |
| Want to automate |
Set it and forget it |
Skip Robo-Advisors If
| Situation |
Better Option |
| Enjoy DIY investing |
Self-directed |
| Large portfolio ($500K+) |
Fee savings matter more |
| Want individual stocks |
Self-directed |
| Complex tax situation |
Fee-only advisor |
| Need financial planning |
Full-service advisor |
Robo vs DIY ETF Investing
DIY Advantages
| Advantage |
Details |
| Lower fees |
Save 0.3-0.5% annually |
| Full control |
Choose exact ETFs |
| Tax flexibility |
Optimize timing |
| Learning |
Build knowledge |
DIY Challenges
| Challenge |
Impact |
| Must learn |
Time investment |
| Discipline required |
Avoid panic selling |
| Rebalancing |
Manual process |
| Time |
Research and management |
Simple DIY Portfolio
| ETF |
Allocation |
MER |
| XEQT (all-equity) |
100% |
0.20% |
| OR |
|
|
| VBAL (balanced) |
100% |
0.24% |
One-fund solution: similar to robo at fraction of cost.
Robo vs Traditional Advisor
When Traditional Wins
| Situation |
Why |
| Complex estate needs |
Planning expertise |
| Business owner |
Tax optimization |
| High net worth |
Comprehensive service |
| Want relationship |
Human touch |
When Robo Wins
| Situation |
Why |
| Straightforward situation |
No need for complexity |
| Cost-conscious |
Save 1%+ annually |
| Prefer digital |
App-based management |
| Smaller portfolio |
May not qualify for advisor |
Switching to Robo
From Mutual Funds
| Step |
Action |
| 1 |
Open robo account |
| 2 |
Initiate transfer |
| 3 |
Provide old account details |
| 4 |
Robo handles paperwork |
| 5 |
May take 2-4 weeks |
Transfer Fees
| Situation |
Fee Coverage |
| Most robos |
Reimburse transfer fees |
| Typical |
Cover up to $150 |
| Large transfers |
Negotiate more |
What to Expect
| Factor |
Reality |
| Returns |
Track market (minus fees) |
| Volatility |
Will have down years |
| Long-term |
5-8% historically |
| Guarantee |
None (market risk) |
Realistic Timeline
| Period |
Expectation |
| 1 year |
Could be up or down 20% |
| 5 years |
Usually positive |
| 10+ years |
Historically solid returns |
Who Should Use What
Decision Framework
| Portfolio Size |
Complexity |
Best Option |
| Under $10K |
Simple |
Robo-advisor |
| $10K-$100K |
Simple |
Robo or DIY |
| $10K-$100K |
Complex |
Fee-only advisor |
| $100K-$500K |
Simple |
DIY or robo |
| $100K-$500K |
Complex |
Fee-only advisor |
| $500K+ |
Any |
DIY or fee-only |
The Verdict
| For Most Canadians |
Recommendation |
| New investors |
Robo-advisor |
| Want simplicity |
Robo-advisor |
| Want lowest cost |
DIY with all-in-one ETF |
| Need advice |
Fee-only advisor |
| Current mutual funds |
Switch to robo (save 1.5%+) |