Before we get started, it’s important to note that robo advisors are not robots. While the process of investing is automated by an algorithm, that algorithm is created and monitored by financial professionals; human beings who are also there to handle customer service requests.

Robo investing is great for those who are looking for a ‘set it and forget it’ type of strategy to save for their retirement. There are a number of robo advisors in Canada including Justwealth; the subject of this Canadian robo advisor review.

Justwealth runs off the motto “investing the way it should be”. This Canadian robo advisor prides themselves in offering a diverse selection of investment services that are convenient, affordable, and fit the needs of their clients. In this Justwealth review, I’m going to help you determine if they are the right robo advisor for your needs.

Justwealth Accounts

Justwealth has a variety of accounts to choose from including the following:

• RRSP
• Spousal RRSP
• TFSA
• RESP
• Non-Registered taxable account
• RRIF
• Locked-In Retirement Account
• Life Income Fund
• RDSP
• FHSA

Once you choose the account that is best suited for your interests, you will be asked several questions to help determine your risk tolerance and goals. A personalized portfolio will be selected for you based on your answers and will be automatically adjusted as required.

Interested individuals should note that you will need to invest a minimum of $5000 to open an account with Justwealth, unless you are opening a RESP or FHSA which has no minimum.

Already have an RRSP or other investment accounts? Read on how you can transfer it here. Justwealth will even cover your institution’s transfer fees up to $150 for accounts of $25,000 or more.

Bonus: Money We Have readers can get up to $500 for free when you sign up for Justwealth through my referral link.

Justwealth Fees

One of the great things about Justwealth is that their fees are very straightforward and easy to understand.

• Accounts under $500,000 will be charged a 0.5% management fee
• Amounts over $500,000 will be charged a 0.4% management fee
• Minimum monthly fee of $4.99 if your annual 0.5% fee is less than $4.99 per month

Justwealth has a fee structure that’s a tiered system, similar to what Wealthsimple and other robos do. If you have over $500,000 invested, then the first $500K is charged a 0.5% management fee and any additional amounts above that are charged a 0.4% fee. The first $500K is always a 0.5% fee regardless of how much the client has invested.

On top of this, there is an MER fee on the ETFs in your portfolio of about 0.25%, which means your fee overall annual fee is roughly .60% – .70%.

The minimum monthly fee of $4.99 per month only applies if the 0.5% annual Justwealth fee (divided over 12 months) is less than $4.99 per month. The minimum monthly fee for RESP or FHSA accounts is $2.50/month.

Clients will be charged the minimum monthly fee OR the 0.5% annual fee, whichever one is greater.  However, clients will NEVER be charged both fees.  It is always one or the other.

This fee structure is incredibly low when you consider that the average mutual fund MER is 2%. It’s not as cheap as doing things yourself, but you’re basically paying a low fee for the convenience.

Justwealth review

Justwealth started in 2016, so it’s one of the longest-established robo-advisors in Canada. There are decades of hands-on experience behind the creation of this Canadian robo advisor, including many people who have diverse backgrounds. It’s a strong, knowledgeable team that is more than capable of handling and taking care of your financial needs.

Justwealth stands out from other Canadian robo advisors because each individual that signs up will receive a portfolio advisor and support team. In addition, you can request financial planning services for free if you’re a client. Portfolio reviews are also free to anyone, client or not. According to Justwealth, they offer the largest portfolio collection of any robo advisor available in Canada; they offer 80 portfolio options using 50 different ETFs. While this may seem like a lot, your dedicated portfolio advisor will help you choose what makes sense for your individual situation.

Justwealth’s strength lies in its Registered Education Savings Plan (RESP) portfolios, which use target dates.  Target-date portfolios gradually change their asset allocation over time. They are more heavily invested in equities in the early years to maximize growth, and over time, they gradually shift to safer investments as your child gets closer to their post-secondary education.

The same applies to their Retirement Target Date portfolios, but in reverse fashion as it gradually becomes more conservative as you’ll eventually need to draw down.

What may also interest people is Justwealth’s line of tax-efficient portfolios that have been optimized for after-tax performance in non-registered accounts.

Additionally, Justwealth has a fiduciary requirement. This means that the financial advisors at Justwealth are obligated to put their clients’ welfare and interest above all else. This is a huge benefit to have if you are looking for somewhere to help you manage your money and save for the future.

Pros and cons of Justwealth

Of course, like any other robo advisor, Justwealth isn’t perfect. Here’s a breakdown of the main pros and cons.

Justwealth pros

• Large selection of portfolio types
• Fiduciary requirement
• Personal advice options available
• Up to $500 cash bonus offer for Money We Have readers

Justwealth cons

• Minimum investment requirement of $5000
• More expensive than doing it yourself

How Justwealth compares to others

So, how does Justwealth compare to other Canadian robo advisors?

Well, Justwealth definitely takes the proverbial cake when it comes to portfolio options, which is definitely something to keep in mind when choosing the best robo advisor for your needs. Another huge benefit that makes Justwealth a standout is the fiduciary requirement – something that will definitely bring a little peace of mind to those new to investing or those who are on the fence about robo advisors.

As mentioned, their RESP options are excellent and are arguably the best of all Canadian robo advisors.

However, the biggest pitfall of Justwealth is the minimum requirement of $5000. While this sum likely isn’t a big deal if you are considering switching your RRSP, it’s a large amount for young investors or those just starting out. Especially when you consider that Wealthsimple and Nest Wealth have no minimum requirement and Questwealth Portfolios only require $1,000.

Transferring your TFSA and/or RRSP to Justwealth is easy as they can ensure you don’t pay any taxes.

Final thoughts

Clearly, my Justwealth review is positive. With its fiduciary requirement and a large selection of portfolio options, Justwealth proves itself to be one of the top contenders when it comes to Canadian robo advisors. It’s an especially great choice for those who want to take advantage of the low fees and simplicity of a robo advisor, but still want to have easy access to a support team.

While it’s true that index funds will only give you average returns, the reality is that 90% of actively managed funds don’t outperform similar indexes. By taking the passive approach with index funds, you’re accepting average returns, but at a much lower cost. The difference in the management fee is often huge when you compound it over your investing lifetime. Here’s how to invest in index funds.

What is an index fund?

Before getting into the details about how to invest in index funds, you’ll want to know what is an index fund. Think of index funds as a type of mutual fund or exchange traded fund that’s designed to track a specific stock market index. Some of the most common indexes include:

• S&P/TSX Composite Index (The benchmark index in Canada)
• S&P 500 Index (The benchmark index in the United States)
• Dow Jones Industrial Average (DJIA – tracks the largest 30 companies in the U.S.)
• Nasdaq Composite (Tracks 3,000+ technology companies)
• MSCI EAFE (Tracks stocks from countries outside of Canada and the U.S. including Europe, Australia, and the far east)

Index funds are passive which means the portfolio manager isn’t making any decisions based on gut or emotion. The index is really just an algorithm that’s meant to mirror the market. If the markets are up, index funds are up. If the markets go down, so do index funds. You’re getting average returns which have been relatively decent since the stock market has opened to the public.

Since index funds are a collection of many stocks, you don’t need to worry about picking individual stocks. More importantly, you’re not required to do any research. Index funds rebalance themselves based on market conditions, so there’s no need for you to worry about anything. Once you have your index funds portfolio, you can sit back and relax. Taking the passive approach can balance your own risk profile as well as any fluctuations in the market. 

What is an index fund vs. a mutual fund? 

Okay, so I’ve explained what index funds are, but I also said they’re a type of mutual fund. You’re probably still wondering what is an index fund vs. a mutual fund? There are two major differences when it comes to mutual funds: active management and fees

Active management 

The majority of mutual funds are actively managed. That means a portfolio manager is actively looking at the markets and making decisions based on what’s happening. While this may sound like a good thing since managers are able to gauge what’s going on in the world and make immediate changes to the funds, it rarely works out in their favour. Historically, about 80% of passive funds outperform actively managed funds (That’s a rough estimate). 

Sure, 20% of the funds will beat passive funds, but the odds of you choosing those ones are rare. Why’s that? Because most people who sell mutual funds will recommend funds that have performed historically well. The thing is, past performance is not indicative of future results. You might choose a fund that outperforms the index this year, but it might not the next year. Going with index funds can be a bit boring, but accepting average results is not a bad thing.

Management expense ratio

The management expense ratio (MER) is the other major difference when looking at index funds vs. mutual funds. Generally speaking, mutual funds have an MER between 2% – 2.5%. Index funds traditionally charge .20% – .50% (although there are some that charge more). That may not seem like a huge difference, but think about it over your investing lifetime. You’d be giving up tens of thousands of dollars.

For example, let’s say you have $100,000 invested. A mutual fund with a 2.5% MER would cost you $2,500 a year. An index fund with an MER of .25% would only cost you $250. This is per year! The increased fee cuts into your profit margins. Now think about the costs of a larger portfolio. If you had $1,000,000 invested in mutual funds, you’d be paying $25,000 a year. Some people may think they’ll never have a million dollars saved, but after working 20-30 years, it’s totally achievable. 

Anyone who works at a bank will try to sell you on actively managed mutual funds since that’s what makes their employer (and sometimes them) the most money, but it’s rarely the best decision for you. Index funds have such a good track record that some mutual funds track indexes, but they still charge you the higher MER. 

Note that if you choose to use a robo advisor, they charge an additional management fee which averages about .50%. When you combine that with the fund MER, you’ll still pay less than .80%, so you’re saving quite a bit.

Avoiding high fees should be something you aim for when investing. Think about, let’s say the stock market index returned 7% for the year, but you’ve invested in a mutual fund that charges a 2.30% MER. That mutual would need to outperform the market by about 2% just to match an index fund. The odds of that happening are low. Don’t let fees destroy your returns, go the passive route with index funds.

How the management expense ratio affects your return

If you’re still on the fence about how fees affect your portfolio, let’s take a look at how some mutual funds compare to index funds. I’ve purposely chosen big bank funds so it’s a fair assessment. In fact, these funds are pretty much identical, but one is classified as a mutual fund and the other is an index fund. The performance difference from March 2011 – March 2021 will likely shock you.

As you can see, in every scenario, index funds outperform mutual funds. It’s worth noting that I purposely compared bank index funds to their equivalent mutual funds so it’s a fair assessment. What you may have noticed is that only TD and RBC have a relatively low MER. If you were to use an exchange traded fund (ETF), your MER would likely be much lower. For reference, I use Vanguard All-Equity ETF Portfolio (VEQT) and it has an MER of just .25%.

It’s absolutely ridiculous that financial institutions try to convince investors that you shouldn’t settle for average returns with index funds. They also try to convince you that you’re getting human interaction. Well, guess what? I spent about 12 years working with actively managed funds and they didn’t outperform the index. I’d argue I was in an even worse spot because the “financial advisors” I worked with really didn’t know what they were doing. The mutual funds they chose for me did not make any sense for my profile. Of course, I didn’t realize that was the case at the time because I trusted them.

Switching to index funds was the best decision I ever made. Not only did I reduce my fees and increase my returns, but I also learned how to manage my own finances. If I can do it, so can you!

Understand your investor profile

Before I get into how to invest in index funds, I need to talk about your investor profile as this will affect your investment strategy. When you invest, there are two types of assets you need to consider: fixed income and equities.

Fixed income investments are things such as bonds, term deposits, and money market funds. It’s highly unlikely they’ll go down in value, but as a result, the returns are quite low. Equities include stocks and are considered riskier, but they can also give you a higher return. Finding the right balance between the two is one of the core principles of investing and is known as your asset allocation.

Someone who’s in their early 20’s can afford to take more risks because they won’t need the money until they retire. However, if they plan on buying a home in the next five years, they should keep their money in fixed income since they likely don’t want to lose their down payment.

Understandably, some people who are new to investing don’t want to take many risks, so they may be tempted to stick to fixed income investments. That may not be practical since fixed income only returns about 2% a year and inflation is typically higher than that. You need to have some fixed income in your portfolio.

Traditionally, many advisors recommend that you use your age to determine how much fixed income you have. So if you’re 30, you should have a portfolio that’s 30% fixed income and 70% equities. I personally think that’s a bit outdated. I turn 42 this year, and I only have 20% dedicated to fixed income in my retirement account.

I should also mention that many people say they have an appetite for risk, but they panic when markets drop. You’ll have no idea how you really feel about your portfolio until you see it drop 25% – 40% in a month. If that happens and you stay the course, then you’re good.

How to invest in index funds 

Okay, you’re ready to get started. But you still want to know how to invest in index funds. It’s actually pretty simple as there are three ways to go about it.

• Use Tangerine’s investment funds or global ETF portfolios
• Use a robo advisor
• Go the do-it-yourself route with a discount brokerage

Which option you choose depends on your comfort zone, but understand that you can always make a switch later. I started with Tangerine index funds before I switched to TD e-series funds. I eventually went the DIY route since it was the cheapest way to invest.

Keep in mind that there were no robo advisors when I started investing, so I had fewer choices. These days, there are so many tools to get you started regardless of how much money you have. Here’s a quick look at your options.

Tangerine funds

Tangerine has two index fund options: Investment funds and global ETF portfolios. There are five different investment funds that are suitable for different investor profiles. All of the funds have a management and admin fee of 1.07%. The global ETF portfolios are relatively new, so there are only three choices, but they have a management and admin fee of .77%. Clearly choosing the cheaper option in the Global ETFs is better, but this assumes there’s a portfolio that fits your investment profile. 

Like robo advisors, Tangerine’s funds are fully automated so there’s nothing for you to do. The .77% fee you pay covers the MER and admin costs, you don’t pay any brokerage fees whenever you invest. Overall, Tangerine is a good solution for people who already bank with them and want to keep their money with a single financial institution. The fees you pay are similar to robo advisors, so they’re a great way to start investing. Note that you must have a Tangerine account to invest with them.

Robo advisors

Robo advisors are arguably the best of both worlds. They mainly use algorithms for their investment decisions, but there are still real people behind the scenes that are available to customers. When you set up an account, you’ll be asked a series of questions. Based on your answers, you’ll be recommended a portfolio.

The major advantage of robo advisors is that you have many more options. Not only are there multiple robo advisors, but most of them have a variety of portfolios. Some robo advisors have portfolios that focus on responsible investing, while others are great if you’re opening a Registered Education Savings Plan. When it comes to fees, all robo advisors charge about the same (.40 – .80ish), so you should pick one that best suits your needs.

If you’re new to investing and don’t have any brand loyalty, then going with a robo advisor is the way to go. Some of them even offer some sweet incentives when you sign up. Here are some of my favourite robo advisors:

• Justwealth – Get up to $500 when you join
• Wealthsimple – Get $50 when you join
• CI Direct Investing – Get $10,000 managed free for a year
• RBC InvestEase – Good if you already bank with RBC
• Nest Wealth – Lowest fees for high net worth individuals 

Do-it-yourself / discount brokerage

While doing things on your own may sound a bit intimidating, you may already be ready after reading this article. There are many all-in-one ETFs that you can purchase on your own. These ETFs are used by robo advisors, so you’re cutting out the middleman, which saves you about .50% in management fees. The advantage here is that you’re lowering your overall costs. 

As a DIY investor, you only pay the MER and any brokerage fees. I personally only make about two purchases a year, so my fees are just $20 ($10 a trade) a year with TD Direct Investing. Other discount brokerages charge similar fees, so you really can’t go wrong regardless of who you sign up with. If you’re making monthly contributions, using Questrade is your best bet since they allow you to purchase ETFs at no cost. You only pay when you sell. 

All-in-one ETFs also rebalance themselves, so there’s really no maintenance on your end. Just choose an ETF that makes sense for you. As in, look for one that has an asset allocation that fits your investor profile. Some of the most popular all-in-one ETFs include

• VEQT – 100% in equities (good for investors with a long time frame)
• VGRO – 80% equities, 20% fixed income (arguably the best choice for new investors)
• VBAL – 60% equities, 40% fixed income (a solid pick for those looking for less risks)

Which index fund should I invest in?

Generally speaking, many new investors go with VGRO. This is a balanced ETF that has an 80% equities and 20% fixed income mix. It’s a good balance for most people. You can literally just keep buying VGRO and not have to worry about anything else for some time.

That said, there are a few things to consider. As you know, your risk tolerance and time frame should also factor into your decision. Someone in their early 20s could start with VEQT if they’re sure they can stomach any market drops. For those closer to retirement, going with VBAL is beneficial since it has more fixed income.

You also need to think about your personal situation. Let’s say you have a defined benefit pension through your employer. That acts like one giant bond, so you could go 100% equities (VEQT) when investing since you’d still have guaranteed money when you retire.

I use VEQT in my TFSA since I consider that a long term account and have no intentions of withdrawing from it. However, in my RRSP and taxable trading account, I use VGRO. These choices make the most sense for my investment style and risk tolerance. 

Even though there are multiple companies that provide all-in-one ETFs, it’s best to not overthink things. Just choose one and start investing. Try to avoid getting creative by choosing multiple ETFs (especially niche ones) as part of your portfolio. If you’re still feeling a bit overwhelmed, check out Boomer and Echo’s post on the top ETFs and model portfolios.

Do index funds give dividends?

ETFs do pay dividends. If you’re unfamiliar with dividends, it’s what companies pay shareholders. Since ETFs hold many shares, you would get paid dividends. The dividend payout differs for each ETF, but they can be monthly, quarterly, or annually. 

If you’re using Tangerine or a robo advisor, those dividends are automatically reinvested. However, if you’re using a discount brokerage, you’ll need to set up your account with a dividend reinvestment plan (DRIP). This is pretty simple as all you need to do is call in and tell customer service to set your account to DRIP.

Note that when doing this, you should ask them to DRIP all your accounts AND all purchases. Some discount brokerages are weird. Even though your account may be set up to DRIP, it may not automatically do it when you purchase a new ETF. 

Reinvesting your dividends is beneficial since you don’t pay any brokerage fees even though you’re buying more shares. Plus, by reinvesting any dividends, you’re letting your investments compound. That will just further grow your portfolio.

Can you lose money in an index fund?

Like any other investment, index funds can go down in value. However, since index funds track hundreds of different stocks, if one drops, it’ll have very little effect on your portfolio. There will be times where ETFs drop in value by 10%+, but that’s normal and arguably a good thing.

Think of it this way, when prices drop, you can buy them on sale. When they eventually go back up in price, you’ll see some big gains. Most investors will typically buy high and sell low because they’re emotionally wired to do so. 

Think about the latest investment trends. That could be cryptocurrency, Gamestock, weed stocks or anything else. By the time you’ve heard about them, they’re probably overvalued. As soon as they lose value, inexperienced investors sell. That’s not a good long-term strategy. 

If you stick to index funds, you’ll “only” get average returns, but you also won’t need to track your portfolio constantly. Just set up some automatic purchases, and forget about it.

Final thoughts

Index funds may be boring, but it’s a solid strategy for anyone new to investing. It’s also great for experienced investors since it requires minimal work. With the availability of robo advisors and all-in-one ETFs, you can literally get started in just a few minutes. Start index investing now, and you could save thousands of dollars.

At first glance, switching your Registered Retirement Savings Plan may appear difficult. If you’re not careful, you could end up making withdrawals that could trigger tax implications. You would also likely have to pay a fee when you close your accounts. However, porting your Registered Retirement Savings Plan to somewhere else is a surprisingly easy process. Generally, all you need to do is sign one form with your new financial institution, and they’ll take care of the rest. It’s that easy!

How to transfer your RRSP

• Open a new RRSP at another financial institution or discount brokerage
• Fill out the paperwork and have the new financial institution request an RRSP transfer from your old financial institution
• Choose between transfer in kind or transfer in cash
• Initiate the transfer
• Wait for the funds to arrive at your new financial institution

To get your RRSP transferred to another financial institution or discount brokerage, all you need to do is fill out the paperwork to authorize them to move the funds over. This sounds simple enough, but you should do a few other things to prepare for the transfer.

First, grab the most recent statement from your investments and bring it to the new financial institution. They’ll basically want to know if you want to do a transfer “in kind,” where you can literally just move your investments to them as is (when available) or if you want them to “sell” all your investments so you can start fresh with the “cash” from the sale. An “in cash” sale is mandatory if you’re moving your money to a financial institution that doesn’t offer the same investments as your previous one. You’d basically sell your old investments at fair market value and then reinvest in something else at your new financial institution.

This in kind or in cash transfer is arguably the most important part. Since the new financial institution is requesting a transfer from your old RRSP to your new RRSP, no taxes will apply. What that means is that you can’t just withdraw your finds on your own and then redeposit it into your new accounts. There’s a specific process that needs to be followed. If you did it any other way, it would trigger withholding taxes that would affect your income tax return.

Now the institution you’re leaving won’t be happy once they find out you’ve triggered the transfer, but they really have no say at this point. What they can do is charge you a transfer fee which should be posted on their website. The good thing is that the receiving institution will usually cover that fee for you up to a certain amount so ask them about it before you sign.

The transfer can take some time but you still want to ask your new financial institution about when you should expect your funds to arrive. Monitor your account and if your money hasn’t arrived by the time they said it would; make a follow-up call. While rare, your old financial institution may be holding things up.

Once your money is in your new account, you can start investing. Alternatively, your new institution can start investing on your behalf. Be mindful of the RRSP deadline if you want to transfer things in advance. The deadline is 60 days after the start of the new year, but transfers can take weeks to complete.

Note that since you’re just transferring funds, your available RRSP contribution room is irrelevant. You’re not adding any new funds to your RRSP, so there’s no to worry about how much space you have left.

Should you transfer your RRSP?

People who are seriously considering transferring their RRSP (or any investments, for that matter) usually aren’t satisfied with how their money is currently being handled. Making a switch just because your investments haven’t been performing well is probably a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan).

Admittedly, changing financial institutions just to lower your management expense ratio (MER) is often worth it. For example, let’s say you’re paying an average MER of 2.5% for a mutual fund. If you switched to an all-in-one ETF, the MER is usually below .50%. That’s a 2% savings that could translate to tens, if not hundreds, of thousands of dollars over the course of your investment life.

Questrade’s entire marketing campaign is based around lower fees, and I admit, it’s probably worth making the switch. That said, you need to have the right mindset before you make any changes. Switching just because your investments haven’t been performing well in the last few months is a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan). However, if your investments are constantly performing below market averages, then you should switch.

Another instance where you may need to transfer your RRSP is when you’re changing employers. If you were part of their group plans, you likely wouldn’t have access anymore if you leave the company. This would require you to move your money out. Fortunately, as you’ve already, it’s easy to make a transfer since it can be done in a lump-sum.

Note that if you’re looking to transfer your Registered Pension Plan (RPP) to your RRSP or you want to convert your RRSP to a Registered Retirement Income Fund (RRIF), it’s a slightly different process that requires a bit more paperwork. Basically, when you leave an employer with a defined benefit pension plan, your plan administrator will provide you with different options for your money. How much you can transfer to your RRSP/RRIF/LIRA will depend on your years of service, a formula that determines your pension income, and what contribution room you have available. The paperwork you get after leaving will be quite clear, so there shouldn’t be any confusion. 

When should you transfer your RRSP?

Let’s assume that you’ve already decided you want to switch. There’s really no reason to delay things. Don’t try to time the market so you’re selling high and then buying low after the switch. Just stick to your investment plan, whatever that may be.

One thing that might hold you back is any fees associated with transferring your funds. Some mutual funds have deferred sales charges which will cost you a percentage of your portfolio when you make the transfer. There’s no denying that these fees suck, but the amount you’ll save in the MER difference could pay for itself after a few years. Note that DSC fees have been banned in Canada, so they’re no longer a major concern.

If you’re switching from an employer plan, you may have a set deadline to move things out, which is why you don’t want to delay things.

Before you make the switch, you’ll need to decide where you’re sending the money. Is your goal to use a robo-advisor since it’s a low-maintenance, no fee solution? Justwealth has become one of the most popular robo advisors in Canada, and they’ll even give you up to $500 for free if you sign up with my referral link. Wealthsimple gives people $50 when they sign up. What’s great about robo advisors is that they’re transparent and don’t require any effort on your end.

Some people will prefer to manage their finances on their own, but that will require you to know what you’re doing. This may sound intimidating, but if I learned to manage my finances on my own, so can you.

When not to transfer your RRSP

In a few situations, you might not want to transfer your RRSP or you might not be allowed to at all.

If your employer offers some kind of RRSP matching program or has a group rate for investments, there’s a good chance that you’ll be forced to keep your money invested with a specific financial institution or brokerage. This may be annoying, but considering you’re getting a match or access to funds which cost less, I think you’re actually coming out ahead.

As mentioned above, you shouldn’t transfer your RRSP just because you’re disappointed with the performance. I did this years ago before doing my research and ended up with an advisor with a financial institution that put me in overpriced mutual funds.

Finally, if you recently purchased investments that have a holding period, you shouldn’t make a transfer right away. Just wait for the holding period to end so you can avoid paying any additional fees. For example, with the Home Buyers Plan, you need to have your money in your RRSP for at least 90 days for it to qualify. If you need that money, you’re better off leaving it in.

Final thoughts

Transferring your RRSP to another financial institution is simple; you just want to make sure you’re doing it for the right reasons. Once you’ve committed, take the time to ensure that everything is the way you want it to be so you don’t end up switching again in a few years. Note that if you’re looking to transfer your TFSA to another financial institution, it works in a very similar way, but you have a few additional options.

So why does your MER matter? Canada has the highest average management expense ratio in developed markets at 2.14%. For most of us, paying an average of just 2.14% for a mutual fund sounds like good value, but over your investment lifetime, those fees could up costing you tens of thousands of dollars, if not hundreds of thousands. That’s why you need to know what is a management expense ratio and how you can reduce it.

What is a management expense ratio?

A management expense ratio is a fee that investors need to pay to the investment provider for running certain investments such as mutual funds or exchange-traded funds (ETFs). A quick example would be if you invested in a mutual fund with a 2.5% expense ratio, your cost would be $25 for every $1,000 invested. Sounds pretty straightforward forward but it’s a little more complicated than that.

MERs usually consist of a few different things with the management fee for the portfolio manager usually being the largest fund expense. Since someone actually has to run the fund, that’s where the management fee comes in. What gets tricky is sometimes your advisor may tell you they get a very small percentage for their services; well that price is part of the larger management expense ratio that you pay which obviously adds up over time.

The MER also includes operating expenses such as transaction costs, office supplies, record keeping, administrative costs, legal fees etc. Although the MER covers most expenses, there can be separate fees that we pay such as front or back-end loaded funds which are commissions paid separately from the MER. This doesn’t apply to all funds so always ask for the details.

Management expense ratios are different from management fees. MERs are what the fund charge while other companies such as robo advisors may charge you another management fee on top of the MER. This management fee usually isn’t more than about .50%, but if you combine that with an index fund that charges a .50 MER, your total fees for that found would be 1%. That’s still much lower than mutual funds.

How does the management expense ratio affect me?

Some of us still believe that we’re getting value for paying a small percentage of our investments, but let’s take a look at how the MER eats into our returns. The following chart assumes the following:

• $100,000 initial investment
• $5,000 annual contribution
• 5% annual rate of return

Obviously, the lower your MER, the more money you have in the end. The MER percentages I’ve chosen are actually the average of the most common investments and are broken down as follows:

• 2.5% – Average mutual fund MER
• 1% – About the cost of using a robo-advisor or Tangerine investment funds
• .50% – About the cost of using TD e-Series index funds
• .20% – About the cost of a self-directed ETF portfolio

As mentioned, there are a few other costs associated, and if you’re a self-directed investor you will incur some trading fees so the above chart isn’t an exact science. The idea is to give us a general idea of why we should pay attention to our MER.

The difference between paying 2.5% and .20% MER over the course of 25 years would be $168,452.00 in our above scenario. Think about how far that money could go in our retirement years.

It’s also worth mentioning that the most expensive funds don’t necessarily mean you’ll get better returns for your funds’ investment portfolios.

When people see the potential savings, they start thinking about transferring their TFSA and RRSP.

How much am I paying?

Now let’s look at it strictly from a fee perspective. The following chart shows how much money we pay for our management expense ratio.

An average mutual fund will cost you $182,909.94 in 25 years, is that not insane? It’s impossible to get our MER down to zero, but you can see what a HUGE difference it makes on our bottom line. Most of our investment timelines last longer than 25 years, so by the time we retire we could have paid hundreds of thousands of dollars in fees if we stuck to regular mutual funds.

I’m not expecting everyone to become DIY-investors, but there are so many different options such as robo advisors and Tangerine investment funds, there’s no reason we can’t reduce our management ratio. Seriously, it’s so easy to transfer your RRSP to a robo advisor such as RBC InvestEase, Justwealth and Wealthsimple.

How do I find out my MER?

Every mutual fund and ETF has a prospectus available to potential shareholders that lists the MER. In addition, you’ll also find the following information on the prospectus:

• ​Fund name
• Portfolio manager names (if any)
• Fund’s assets
• Net asset values
• Summary of fund goals
• Historical data on the fund
• Distribution fees

The prospectus will give you a clear idea of what the funds’ goals are and how it’s performed since its inception. Note that the MER is automatically factored into the gains. For example, if the fund is showing a return of 5% in the last year, the MER has already been subtracted.

If you’re new to mutual funds and WTFs, a good place to start is Morningstar. They provide market research for investment products. You’ll quickly be able to research different equity funds, total fund assets, any transaction fees, and even what the administrative fee is for different brokers. 

Should you switch funds because of the MER?

Since mutual funds have an average expense ratio of 2% to 2.5%, you should definitely consider switching to funds with lower expense ratios. Better yet, switch to an ETF since there will be no sales charges or sales loads to pay.

There are so many all-in-one ETFs these days from reputable companies such as Vanguard that charge an MER of less than 0.50%. Why pay a high mutual fund expense ratio when you don’t have to? As I’ve already pointed out, the savings can be considerable. That said, you do need to do some basic research first to understand why buying index funds with a low MER is the ideal solution. You would also have to open an account with a discount brokerage so you can purchase the funds on your own. For reference, all of my investment accounts have a single ETF.

However, if you’re a high-net-worth individual who gets additional services from your financial advisor such as estate and tax planning, then the additional fees may be worth it. That said, if you’re getting those kinds of services, you’re probably better off paying a fee-only planner.

Final thoughts

I understand that the majority of people have no interest in managing their money, but I do believe most people would prefer to have more money when they retire. Now that you know what is a management expense ratio, don’t you want to start saving money? The purchases you make and a fund’s expense ratio can have a huge impact on your investment objectives. By reducing your fund fees, you could potentially increase your net worth.

Are you looking for an easy way to invest but not sure where to begin? Do you want a method that will save you time, stress, and even money? Then maybe it’s time that you considered a robo advisor. Despite the name, it’s important to note that robo advisors are not robots. The process is automated but the companies are run by very knowledgeable professionals who select the investments, develop and maintain the algorithms, and provide customer service and financial advice.

While still relatively new, robo investing is becoming steadily more popular in Canada thanks to the fact that they provide a ‘set it and forget it’ strategy for long-term investing. It’s an easy way to help Canadians reach their financial goals without having to worry about managing it themselves or paying hefty fees to have someone else do it for them. 

Based in Toronto, Wealthsimple is the largest robo advisor in Canada and a firm favourite when it comes to robo investing. They are lauded for their simple on-boarding process and easy to use website and app which makes it ideal for those new to investing. Additionally, Wealthsimple is considered to be one of the best financial services in the world.

In this Wealthsimple review, we’re sharing everything you need to know about this Canadian robo advisor to determine if they are the right choice for you.

Bonus: Money We Have readers will get $50 for free when investing $500 thanks to my Wealthsimple affiliate deal. 

Wealthsimple Accounts

Wealthsimple has a variety of accounts that customers to choose from though RRSPs and TFSAs are the most popular account choices. For those who choose to go with one of these accounts, you will be asked to take a risk tolerance survey. Upon completion of this survey, your funds will be split into a variety of ETFs to create a diversified portfolio based on your goals and risk tolerance.

Other types of accounts offered by Wealthsimple include:

• HISA
• RRIF
• LIRA
• Joint savings and investing accounts
• Corporate Accounts
• Personal Taxable Account
• RESP

Keep in mind that Wealthsimple has no account minimum which means anyone can get started in investing. 

Wealthsimple Portfolios and Features 

Wealthsimple offers three basic types of portfolios depending on how much risk you are willing to take with your investments: Conservative (30% stocks, 70% bonds), Balanced (50% stocks, 50% bonds), and Growth (75-90% stocks, 10-25% bonds). 

Additionally, there are plenty of helpful and attractive features. 

To start with, there are no minimum deposit requirements to open your Wealthsimple account. Your account is also personalized and tailored to fit your comfort level and needs. If you need any assistance or advice along the way, you can get in touch with the Wealthsimple in-house advisors for any questions or concerns you may have. 

Wealthsimple accounts also benefit from automatic rebalancing and dividend reinvesting. Keep in mind that because this is a robo advisor, both things are automatically done for you. You don’t have to worry about it at all. Plus, if you qualify for Wealthsimple Black or Wealthsimple Generation, you get access to tax-loss harvesting and full-service financial planning.

Some investors may also be interested to learn that Wealthsimple investment portfolios do have socially responsible investing (SRI) options as well. This means that you can choose to invest in companies with positive social and environmental impacts such as low carbon and gender diversity while avoiding others with ties to less desirable products such as tobacco or gambling. For Muslim investors, Wealthsimple also offers a halal investing portfolio that complies with Islamic Law.

Wealthsimple Review 

So what makes Wealthsimple a good pick for Canadians considering robo advisors? Well, Wealthsimple is known in Canada and around the world as a trusted financial service.

As for strategy, well if you are an investing enthusiast you may find Wealthsimple’s technique boring, but that’s kind of the point. New (and old) investors shouldn’t be looking for something flashy when it comes to investing, they should be looking for strategies that work and have low fees. Wealthsimple provides that.

Wealthsimple uses low-cost ETFs to keep your fees low so that your money can be better put towards building your long-term savings. Once you have determined your risk tolerance, they will build you a portfolio made up of a diversified mix of both stocks and bonds. Then, using an algorithm, your portfolio with be adjusted over time as you move closer to retirement.

Wealthsimple has three tiers based on your investment amounts.

• Basic: Up to $100,000
• Black: $100,000-$500,000
• Generation: $500,000+

As mentioned under the fees section, your fees will decrease once you hit the $100,000 mark. At this point, you are also eligible for additional perks. But, don’t let this fool you. Wealthsimple is a great choice for those just starting out as well. There is no minimum balance requirement.

Of course, while Wealthsimple is absolutely one of the best robo advisors in Canada, it’s not without its disadvantages. Here’s a quick rundown of the main pros and cons of Wealthsimple.

Pros

• Simple and easy to use
• No minimum investment required
• Experienced team behind the company
• Varied selection of investment options
• Very low ETF MERs
• App compatible with both apple iOS, android, and google play.

Cons

• Higher fees compared to DIY investing
• Limited portfolio options

Wealthsimple fees

Robo advisors are generally a cheaper option than financial advisors; however, they do come with fees as well. Wealthsimple management fees are pretty easy to understand since this is what you’ll pay:

• Accounts under $100,000 will be charged a 0.5% management fee
• Accounts over $100,000 will be charged a 0.4% management fee

Note that this is a tiered system so the first $100,000 is charged the 0.5% management fee while any amount over that is charged 0.4%.

Wealthsimple clients also need to be aware of additional fees such as the management expense ratio of the ETFs in your portfolio, which are charged by the fund company or MERs. With Wealthsimple, MERs are approximately 0.2%.

Furthermore, you will be required to pay taxes (GST) on the fees that you owe to Wealthsimple. However, even with these fees, Wealthsimple’s associated costs still tend to come out cheaper than what you would pay with a financial advisor.

It’s worth noting that when you reach $100,000 you’ve reached the Wealthsimple Black level. At this point, besides the lower fee, you’ll get a few additional perks such as regular goal-based financial planning sessions to keep you on track, and VIP access to airport lounges in 400 cities across the world.

Money We Have readers get $50 for free when they sign up for Wealthsimple using my referral link and invest a minimum of $500.

If you’re thinking about transferring your RRSP or any other investment account over to a robo advisor, Wealthsimple will cover the associated transfer fees for accounts with a balance of $5,000+. Read more about transferring your RRSP here.

How Wealthsimple compares to others

So, how does Wealthsimple compare to other robo advisors in Canada?

Well, it’s the largest robo advisor and, therefore, one of the most trusted. 

Wealthsimple has limited portfolio options in comparison to other robos. Justwealth has around 70 portfolios and offers up to $500 when you sign up. There’s also RBC InvestEase which many Canadians choose because of the security and trust that comes with the name of one of Canada’s biggest banks. 

That being said, the fact that Wealthsimple has no minimum requirement and is known for its user-friendly website makes it a strong pick for those new to robo advisors or new to investing in general. Plus, Wealthsimple is continually expanding with the addition of products such as the halal portfolios and SRI portfolios.

Other Wealthsimple Products 

As it has gained in popularity, Wealthsimple has increased the types of products they offer to better fit the needs and interests of Canadian clients. Personal finance products on offer include the following: 

• Wealthsimple Invest, which is the robo advisor that this review focuses on
• Wealthsimple Trade for individuals who are interested in DIY investing 
• Wealthsimple Cash is a peer-to-peer payment platform and comes with a no foreign exchange fee prepaid credit card.
• Wealthsimple Save which is their saving account
• Wealthsimple Crypto for those with an interest in cryptocurrency such as bitcoin or ethereum
• Wealthsimple tax which is their tax software program

Final thoughts

My Wealthsimple review is positive. Without a doubt, Wealthsimple deserves its place as one of the top robo advisor options in Canada. The easy to use platform and trustworthy tactics make them an ideal fit for both new and experienced investors. The fact that you can invest with them with confidence makes it easier and less stressful to save for your future.

When people see and hear these ads, it can quickly get their attention. Switch to Questrade and they can instantly have more savings that could pay for a home down payment or increase their retirement fund. It seems like a no brainer, right? Yes and no. Switching to Questrade can be worth it, but you need to have a strategy in place and what you’re getting yourself into. Here’s what you need to know about Questrade and if the hype is worth it.

Is Questrade really cheaper?

If you watched the ads linked above, you will see that Questrade’s messaging really targets their low fees. But, is Questrade really cheaper?

Here’s the thing. Self-directed investing, in general, will be cheaper than both robo advisors and mutual funds. Why? Because you are doing the work yourself. You are knocking out either the human financial advisor or the use of the algorithm. By not having to pay for those ‘privileges’, often charged as management fees, you can reduce your rates significantly.

Now, robo advisors do have management fees. But they are still significantly cheaper than mutual funds because robos don’t have the same overhead costs. They don’t have the brick-and-mortar buildings to pay for and they don’t have the same required human touch that a financial advisor offers. As such, robo advisors can decrease your fees significantly.

I’ll discuss both Questrade direct investing and Questwealth Portfolios, which is their robo advisor, as well as their respective fees in more detail below.

What is Questrade?

Questrade Canada is a multi-award winning company and Canada’s fastest growing brokerage with more than 200,000 new accounts opened every year. Established in 1999, Questrade currently has $20 billion in assets under its management and is considered to be one of the most trustworthy investment firms in the country.

Questrade is a self-directed online brokerage that allows you to build your own portfolio to save on fees. You can invest in products such as stocks, ETFs, Options, Bonds, GICs, precious metals, and more. Account options include RESP, RRSP, TFSA, margin, entity, Forex & CFDs.

The self-directed investment approach allows you, the investor, to save money by cutting fees. Now, that’s not to say that investing with Questrade is without fees, however, by doing the work yourself you can save quite a bit of money by not having to pay things like management fees. When it comes to Questrade fees, you can expect to pay $4.95-$9.95 per trade to buy stocks and $0 per trade to buy ETFs.

Questrade has no annual fees for the basic account, however, if you do want to upgrade there are two paid options.

 The Enhanced account: $19.95/month

• level 1 live streaming data
• live streaming for Intraday Trader
• additional perks
• If you spend more than $48.95 in trading commissions, you will be automatically rebated $19.95

Advanced Account: $89.95 per month

• Active trader pricing unlocked
• Advanced Canadian level 1 & level 2 live streaming data
• Select US level 1 live streaming date
• Individual data add-ons are available
• If you spend more than $48.95 in trading commissions, you will be automatically rebated $19.95
• If you spend more than $399.95 in trading commissions, the monthly fee will be rebated

Questrade is undoubtedly the lowest-cost option for investing, however, self-direct investing does mean you have to do everything on your own.

What is Questwealth Portfolios?

If the idea of self-direct investing sounds too intimidating for you, then consider Questwealth portfolios. Questwealth portfolios is Questrade’s robo advisor service and offers easy investing for beginners (or those who just don’t want to do the work).

Now, keep in mind that as a robo advisor, you will pay more in fees with Questwealth Portfolios than you will with Questrade. There is a management fee (0.20-0.25%) as well as the MERs associated with the ETFs you’re invested in (typically 0.17-0.22). However, it is still significantly cheaper than mutual funds, which typically cost around 2.5%, due to the fact that, as a robo advisor, Questwealth Portfolio doesn’t have the same overhead costs.

For those looking to open an account with Questwealth Portfolios, you’ll have a choice of several account types including TFSA, RRSP, RESP, LIRA, RIF, LIF, and cash. Questwealth Portfolios also offers free tax-loss harvesting if required and socially responsible investing options (SRIs).

Questwealth Portfolios, as a robo advisor, will be more expensive than the self-directed investing offered by Questrade. However, if you don’t feel comfortable doing the work and trading on your own, then this is a great investment option that will still cost you significantly less than mutual funds.

Are there other options?

There are plenty of other options when it comes to both self-directed trading and robo advisors in Canada. The key is to choose which route is best for you (self-direct or robo) and then compare from there.

As I said above, Questrade is considered to be the best in Canada for self-directed trading. The platform is simple and clear to use, customer service has fantastic reviews, and the fees are about as low as you can get.

When it comes to robos, Questwealth Portfolios does have the lowest fees as well. However, there are plenty of options out there and several other factors to consider. It’s worth taking a look at a few other robos such as Wealthsimple, CI Direct Investing, Justwealth, and Nest Wealth.

Another option to look at is Tangerine funds. While more expensive than robo advisors (and subsequentially more expensive than self-direct investing), many people already use Tangerine for their online banking, so they can be a convenient choice.

Is it worth switching to Questrade?

So, is it worth switching to Questrade? Well, are you paying higher fees elsewhere? If yes, then it might be worth the switch. Again, Questrade is considered to be the best self-directed investment company in Canada right now so unless you are incredibly happy with whomever you are investing with now, it might be worth considering a switch. There’s a reason why Questrade has won so many awards over the years- maybe it’s time for you to see why.

The amount you save in fees could be worth tens, if not, hundreds of thousands of dollars over your investing years. If you’re looking to switch your RESP, your child could end up with a few thousand dollars extra compared to mutual funds. Fees really do make a significant difference.

How to switch to Questrade or another financial institution

If you decide you do want to switch to a different financial institution you can, but you want to make sure you do it properly to avoid any potential penalties. For example, you can’t just withdraw money from your TFSA, put it in your bank account, and then do an online transfer to another institution. That will count as a withdrawal and you will lose the contribution room until next year.

Instead, you need to create a new account with the new financial institution you wish to move to and ask them to transfer the funds for you. This way, there is no actual ‘withdrawal’ from your TFSA. To learn more on how to do this, read my article on how to transfer your TFSA.

There is a similar process to follow for RRSPs. If you are planning on doing a Questrade RRSP transfer (or to another financial institution) you can take a look at how to do that in my guide for transferring your RRSP.

Are you looking into robo advisors and investing but don’t know where to start? Although robo advisors are becoming more and more popular across Canada, some people still are a little wary of the concept, mostly because of the name.

Before we start with this RBC InvestEase review, let’s make it clear that robo advisors are not robots (even though the name makes it sound like they are). While the investing process is automated by an algorithm, that same algorithm is both created and monitored by financial experts and professionals who are also available to answer any questions and handle customer service requests.

Robo advisors are meant to help make the investing process easier. They are the ideal option for those looking for a ‘set it and forget it’ strategy when it comes to saving for their retirement. In addition, robo advisors have low fees, making them ideal for all types of investors from beginners to those who are experienced.  

With so many robo advisor options out there, some people may prefer to go with a major bank. In this RBC InvestEase review, I’ll cover what the RBC robo advisor has to offer and what makes it stand out in comparison to other robo advisors in Canada. Here’s everything you need to know about RBC InvestEase.

RBC InvestEase Accounts

RBC InvestEase has three main types of accounts that investors can choose from:

• Tax-Free Savings Account (TFSA)
• Registered Retirement Savings Plan (RRSP)
• Non-Registered Investment Account

Getting started with RBC InvestEase is simple and can be done in three easy steps. First, you’ll fill out a small questionnaire about your age, investment timeline, how much you want to invest, why you want to invest, and the level of risk you are willing to take. After submitting this questionnaire, RBC will recommend an investment plan based on your answers with portfolios comprised of carefully-selected ETFs. If you like the recommendation, then your final step is to open your online account. It’s that easy, the entire process can be done from the comfort of your own home.

As you deposit funds into your accounts, RBC InvestEase will automatically start investing on your behalf. They’ll make the fund purchases and any rebalancing will also be taken care by them. You can, of course, check the performance of your portfolio at any time by simply login into your account. Best of all, there’s only a minimum account requirement of $100 for you to get started. 

RBC InvestEase Fees

The management fee for RBC InvestEase is a flat fee of 0.5% per year, no matter the size of your portfolio. Some other robo advisors offer tiered fees but since RBC InvestEase uses a flat fee, it will be easier to understand for new investors. Even as your investment grows, you’ll only pay 0.5% in management fees which is attractive.

Of course, you will need to remember that on top of the management fee (0.5%), you will have to pay the management expense ratios (MERs) included in the ETFs your account invests in. According to the RBC website, MERs range from 0.11%-0.30% which means that you can expect your total annual portfolio fee to be around 0.61%-0.80%. That’s significantly lower than the fees you would pay for a typical mutual fund.

RBC InvestEase Responsible Investing Portfolios

One of the stand-out features of the RBC robo advisor is their Responsible Investing Portfolios which is a very attractive option for those who prefer to be sustainable investors.

So, what exactly is Responsible Investing? Responsible Investing focuses on companies and their ESG risks. ESG stands for Environmental (such as carbon emissions and water management), Social (such as workplace health and safety and labour management), and Governance (including tax transparency) risks. With RBC Responsible Investing, your portfolio will focus on ETFs that include companies with high ESG factors and remove companies involved in major controversy, tobacco businesses, and any companies linked to weapons and civilian firearms.

While the idea behind responsible investing is nothing new, there are limited choices and some people fear that their investments could be hurt by adopting this strategy. However, RBC InvestEase takes pride in their selection of companies with high ESG factors and stands by the belief that long-term, responsible investing shouldn’t result in lower returns (after fees) in comparison to a standard portfolio. As such, management fees stay the same (0.5%), however, the ETF MERs do tend to be a little higher.

In the end, the choice is up to you. The end goal of RBC’s InvestEase Responsible Investing Portfolios is the same as their standard portfolios: to help clients reach their financial goals.

RBC InvestEase Review

RBC InvestEase has created a platform that Canadians have been asking for and are ready to deliver as one of the best robo advisors in Canada.

While RBC InvestEase may not have hundreds of account options to choose from, they are differentiated from other robo advisors with their responsible investing portfolios. Although this option may not be of interest to all investors, it is a great choice for individuals who are passionate about the environment and human rights. And still, with a dynamic range of portfolio options from conservative to growth, RBC InvestEase offers a selection that meets almost all client needs.

RBC InvestEase Pros

• Flat rate management Fee of 0.5% no matter your investment amount (ideal for new investors)
• Low-cost ETF MERs
• No trading fees
• Option to use responsible investing portfolios
• Different portfolio options for all types of investors

RBC InvestEase Cons

• RBC InvestEase portfolios may be considered too conservative for more aggressive investors
• Not the cheapest robo advisor in Canada (also not the most expensive)

One thing to note, although RBC InvestEase uses RBC iShares ETFs, they’re some of the cheapest and most recognized securities on the market. That said, if you were hoping to use ETFs from another brand, that’s not possible.

How does RBC InvestEase compare to other robos?

RBC InvestEase has some good things going for it, but how does it stack up against the competition?

Let’s start with fees. While not the cheapest on the market, RBC InvestEase is actually pretty on-par with management fees from other popular robo advisors. The downfall is that there is no tiered system, so when your investments go over $100,000, you don’t get a discount on management fees that some other robos offer. MERs on ETFs are also in the same ballpark except for the MERs for SRI. You may be surprised to know that RBC has better rates for this than some of the other top robo advisors out there.

A couple of pitfalls that RBC InvestEase falls short on include account types. RBC InvestEase only offers three types of accounts while many other robos have several options. Also, RBC InvestEase doesn’t have its own app. While you can see your dashboard from the general RBC banking app, it would be much more straightforward if it had its own app.

Finally, we can’t ignore the history and reputation behind RBC. RBC is one of Canada’s leading big banks which builds a lot of trust. This is a pretty significant factor when it comes to choosing a financial institution to handle your money. 

Final thoughts

When it comes to robo advisors in Canada, some people have been attracted to ads and promotions. While robo advisors may not be for everyone, they (and RBC InvestEase) are a great choice for a variety of investors including those interested in taking a responsible approach to investing.

The new Tangerine Global ETF Portfolios are clearly designed to compete against robo advisors. You can purchase a single fund and have a diversified portfolio at a low cost. Although index investing can be a very simple process, you still need to understand what you’re getting into before you make any decisions with your money. Keep reading my Tangerine ETF review now to find out what they’re all about.

What are Tangerine ETFs?

An ETF is an investment product that can consist of stocks, bonds, and other investments. These products are chosen by an investment advisor, but ETFs follow a passive approach. What that means is that the investment decisions are based on the overall performance of an index. For example, an ETF could have a portion that tracks the S&P/TSX Composite Index (The benchmark index in Canada).

Since most of the decision making is made with algorithms, the cost to maintain the fund is quite low. That savings is passed onto consumers in the form of a lower management expense ratio (MER). For example, all Tangerine Global ETF Portfolios have an MER of just .77% (note when they were launched, they were advertised at .65%). Regular mutual funds have an average MER of 2.50%. Heck, even Tangerine’s investment funds have an MER of 1.07%. Switching to ETFs can save you a fair amount.

Tangerine Global ETF Portfolios actually combines various Scotiabank ETFs into a single product. This shouldn’t be a surprise since Scotiabank owns Tangerine. In essence, you’re actually buying Scotiabank ETFs, they’re just branded as Tangerine. This should matter very little to you as Scotiabank ETFs are a solid product. It’s also worth noting that despite the name, Tangerine ETFs are actually mutual funds as outlined on the landing page.

Right now there are three Tangerine ETFs available that are designed for different risk levels.

If you’re a new investor, all you really need to know is that portfolios with more equities come with more risk. That’s because equities invest in riskier products such as stocks. Whereas fixed income is safer products such as bonds and term deposits. By taking on more risk, you have a greater chance at higher return. As I’ll explain below, picking a portfolio shouldn’t be just about your risk profile as you need to look at your individual situation.

Tangerine Equity Growth ETF Portfolio

The Tangerine Equity Growth ETF Portfolio has no bonds at all, so it’s the riskiest portfolio. While this may worry some new investors, it’s actually a good fit depending on your situation. Let’s say you’re in your early 20’s and you don’t plan on touching this money until you retire. Investing in an all equities portfolio at the start isn’t a terrible idea since you’ll have more than enough time to recover over the years. As you get older, you could switch to a more conservative portfolio.

Another instance when using the Tangerine Equity Growth ETF Portfolio makes sense is if you have a defined benefit pension from your employer. Since your pension acts as a portfolio of fixed income, you can afford to go 100% equities with your other investments. I personally use a 100% equities ETF in my TFSA, but in my RRSP, I have VGRO which is 75% equities and 25% fixed income.

In case you’re curious, as of March 31, 201 the Tangerine Equity Growth ETF Portfolio had the following holdings:

• Scotia U.S.U S Equity Index Tracker ETF – 57.41%
• Scotia International Equity Index Tracker ETF – 26.40%
• iShares Core MSCI Emerging Markets IMI Index ETF – 13.03%
• Scotia Canadian Large Cap Equity Index Tracker ETF – 2.84%
• Cash – 0.32%

Tangerine Balanced Growth ETF Portfolio

For most people reading my Tangerine ETF review, the Tangerine Balanced Growth ETF Portfolio will likely be all you need. With an asset mix of 75% equities and 25% fixed income, it’s the perfect balanced portfolio. You could invest in this fund and not have to worry about making any changes for decades.

Balanced portfolios are popular for an obvious reason; they’re balanced. With 100% equity portfolios, you can see huge drops during market downturns. If you went the low risk route, your returns would likely be low which is not ideal for younger investors. A balanced portfolio gives you the best of both worlds. You may not get the highest returns, but you’ll be well positioned if there’s ever a huge drop in stocks around the world. I personally recommend balanced portfolios to new investors who want to get started right away, but aren’t sure which fund to choose.

For those interested, as of March 31, 201 the Tangerine Balanced Growth ETF Portfolio had the following holdings:

• Scotia U.S.U S Equity Index Tracker ETF – 42.87%
• Scotia Canadian Bond Index Tracker ETF – 24.94%
• Scotia International Equity Index Tracker ETF – 19.71%
• iShares Core MSCI Emerging Markets IMI Index ETF – 9.73%
• Scotia Canadian Large Cap Equity Index Tracker ETF – 2.12%
• Cash – 0.62%

Tangerine Balanced ETF Portfolio

Finally, there’s the Tangerine Balanced ETF Portfolio which is the most conservative with an asset allocation of 60% equities and 40% fixed income. Some new investors may be attracted to this portfolio since it’s a low risk option, but that may not be the best idea. Most people who invest in ETFs are doing it for the long term, if you choose portfolios that aren’t very risky, then your gains will likely be lower. If you stick to this plan, you may not reach your saving goals.

While risk tolerance is certainly important, you need to think about when you actually need the money. If you don’t need it until you retire, then a low risk portfolio is not the best choice. That said, if you’re in your late 50s or 60s, then the Tangerine Balanced ETF Portfolio is definitely a good choice. When you invest, you need to think about what stage of life you’re in and what your personal financial standing is. 

As of March 31, 201 the Tangerine Balanced ETF Portfolio had the following holdings:

• Scotia Canadian Bond Index Tracker ETF 40.09%
• Scotia U.S.U S Equity Index Tracker ETF 34.46%
• Scotia International Equity Index Tracker ETF 15.84%
• iShares Core MSCI Emerging Markets IMI Index ETF 7.82%
• Scotia Canadian Large Cap Equity Index Tracker ETF 1.71%
• Cash 0.08%

How much do Tangerine ETFs cost?

As mentioned, all of the Tangerine Global ETF Portfolios have an MER of .77%. While that’s not the cheapest option available, it’s significantly lower than mutual funds. Here’s how much you would pay on average every year if you were to invest in mutual funds, Tangerine ETFs, or on your own with ETFs.

As you can see, mutual funds are pretty expensive. That’s part of the reason why ETFs have become so popular over the years. Investors are tired of paying high fees, so ETFs are a good low cost alternative. If you took the time to invest on your own, you could lower your MER, but that would require a bit more work on your end.

It’s also worth noting that with Tangerine ETFs, you don’t pay any brokerage fees when you buy or sell. You only pay the MER. This could easily save you $10 every time you buy or sell some of your ETFs. 

How Tangerine ETFs compare to others

Let’s be real for a second, the Tangerine Global ETF Portfolios were designed to compete with robo advisors such as Justwealth, Wealthsimple, and Nest Wealth. Robo advisors typically have an MER between .45%-.90%, so Tangerine ETFs are highly competitive. That said, Tangerine has fewer portfolio options than robo advisors.

To be fair, every robo advisor is more or less the same. However, they typically have one thing they excel at. Justwealth has a great option for those who want to set up a Registered Education Savings Plan. Over at RBC InvestEase, you can get socially responsible portfolios. With Tangerine ETFs, you’re getting a product that’s designed for their core users.

Now, if you’re comparing things to do-it-yourself investing, then Tangerine’s prices are still high. I use Vanguard’s All-Equity ETF Portfolio (VEQT) which is pretty much the same as Tangerine Equity Growth ETF Portfolio but has an MER of .25%. That’s ⅓ of what Tangerine charges. That said, I also need to factor in any brokerage fees.

How to invest in Tangerine ETFs

Tangerine global ETFs are available exclusively to Tangerine clients. That means you need to have a Tangerine account to purchase these funds. This shouldn’t be a deal breaker since it’s free to join Tangerine and you don’t pay any account fees. Once you’ve signed up, you can purchase Tangerine ETFs in the following accounts:

• Registered Retirement Savings Plan (RRSP)
• Tax-Free Savings Account (TFSA)
• Registered Retirement Income Fund (RRIF)
• Non registered account

There is a $25 minimum investment requirement and this also applies to any automatic contributions. Since the Tangerine global ETFs are technically mutual funds, you can actually purchase fractional shares which is convenient.

It’s also worth mentioning that if you’re currently invested in Tangerine’s Investment Funds, you can convert them to the equivalent ETF. Since the investment funds have an MER of 1.07%, it’s in your best interest to make the switch since it would save you .30%.

Final thoughts

My Tangerine ETF review is positive. To be honest, ever since Tangerine was acquired by Scotiabank, things haven’t been the same. The interest rates they now offer are hardly competitive, but these new Tangerine Global ETF Portfolios are definitely a winner. The MER is very reasonable so they’re a great choice for Tangerine users who want to make smarter investing decisions.

Admittedly, Tangerine investment funds are more expensive compared to robo advisors or ETFs, but I still think they’re a great product. Keep reading my Tangerine investment funds review and find out why they may be a good fit for you.

What are index funds?

Index funds are funds where its holdings are meant to match a certain market index. Since an index comprises of the stock of thousands of companies, it allows an investor to be well diversified. There are many different indexes, but the Tangerine investment funds try to mimic the following indexes.

• FTSE TMX Canada Universe Bond Index – Canadian Bonds
• S&P/TSX 60 Index – Canadian Stocks
• S&P 500 Index – US Stocks
• MSCI EAFE (Europe, Australasia and Far East) Index – International Stocks

Don’t worry if you didn’t understand a word of the above, all you need to know is that index investing allows you to own the entire market as opposed to individual stocks. This benefits you as an investor since it has been proven that 80% of the time active management doesn’t beat the indexes.

It’s true that 20% of the time mutual funds do beat the index, but there’s no guarantee that you’ll be invested in the right fund. Plus past performance is not an indicator of future outcomes. Some investment advisors claim that their active style will guarantee returns or prevent any losses, but in reality, no one can predict the future.

Becoming an index investor over the years has become quite popular since people are starting to understand how fees can eat at your returns over time. For reference, all of Tangerine’s investment funds have a management expense ratio (MER) of 1.07%, whereas mutual funds charge an average MER of 2.5%. That’s a huge saving over your investment lifetime. Like tens if not hundreds of thousands of dollars.

There are five diversified portfolios available to investors with Tangerinewhich range from safe to risky. To find out which portfolio is right for you, you’ll be asked a series of questions to determine your investor profile before a recommendation is made. If you’re curious about how they all stack up, here’s my Tangerine investment funds review.

Tangerine Balanced Income Portfolio

• Fund code: INI210
• MER: 1.07%
• Risk Factor: Low

Of all the investment funds available from Tangerine, the Balanced Income Fund is the safest for investors since it has 70% in bonds. There is still some minor growth potential since 30% of your portfolio is invested in equities but this fund is aimed at people who aren’t looking for many risks.

New investors who may not be knowledgeable might lean towards a safe portfolio, but if you’re young, you really should be using a portfolio that has a higher allocation towards stocks. Even if the markets drop, you’ll have plenty of time to recover.

Tangerine Balanced Portfolio

• Fund code: INI220
• MER: 1.07%
• Risk Factor: Low – Moderate

As the name implies, the Balanced portfolio offers a balance between fixed income and equities. This will allow your portfolio to grow while still maintaining stability.

Traditionally, this portfolio would appeal to people who are in their 40’s as one rule of thumb is that the bonds in your portfolio should match your age. However, since people are living longer, and you could still be investing for 20+ years when you retire, this asset allocation is becoming a more popular choice for people in their 50’s or 60’s.

Tangerine Balanced Growth Portfolio

• Fund code: INI230
• MER: 1.07%
• Risk Factor: Moderate

With an even allocation between Canadian bonds, Canadian stocks, U.S. stocks, and International stocks, this is the perfect portfolio for investors in their 20’s and 30’s. You’re getting a lot of exposure to stocks so there’s a lot of potential for growth. This portfolio also has an equity allocation spread around the world so there’s no home base bias.

Tangerine Equity Growth Portfolio

• Fund code: INI240
• MER: 1.07%
• Risk Factor: Risky

This is Tangerine’s riskiest fund. There are no bonds to balance the fund out during down markets. Risky might be a loose term as it still makes sense for a lot of people.

Someone in their 20’s who has 40+ years to invest will likely have no problem starting with this portfolio. Alternatively, if you have a pension plan from work or you want to take a more aggressive approach in your TFSA, this portfolio could be a good choice.

Tangerine Dividend Portfolio

• Fund code: INI235
• MER: 1.07%
• Risk Factor: N/A

This is Tangerine’s ‘newest’ fund. It started in late November of 2016, so it doesn’t have much history. However, it tracks the MSCI Canada High Dividend Yield Index, the MSCI USA High Dividend Yield Index, and the MSCI EAFE High Dividend Yield Index which have been around for a while.

If you’re looking for a dividend paying Tangerine fund, this is the one for you. Distributions are paid out annually in December.

Tangerine investment funds review

PROS

• Low Management Expense Ratio (MER)
• No account or trading fees
• No minimum investment required.
• Auto Rebalancing

CONS

• Not the cheapest option (MER)
• Limited to 5 Investments funds
• Unable to modify asset allocation

The Tangerine investment funds are attractive to new investors since all you need to do is deposit your money and Tangerine will take care of everything. You can also set up an automatic saving plan with the funds, so you can just set it and forget it. There are no additional fees and you can purchase the Tangerine investment funds in your RRSP, TFSA, and regular account.

The recent change to the equity growth fund and the addition of the dividend portfolio has addressed the concerns of investors. All things considered, the 1.07% MER is reasonable for people who want to index without becoming a do-it-yourself investor.

How do Tangerine investment funds compare to others

If you invest on your own and use the Couch potato strategy, you could easily bring your MER down to .2% using ETFs or .5% with TD e-Series funds. These options require a little more work, but you get complete control over your asset allocation. You may end up paying trading and account fees, but the overall lower MER still make it worth your while. Basically, you could replicate the Tangerine investment funds at a fraction of the cost.

For many people, investing their own money is not something they’re interested in at all. Fortunately, robo advisors are a good option. Many of the top robo advisors in Canada including Justwealth, Wealthsimple, WealthBar (now CI Direct Investing), Nest Wealth and RBC InvestEase charge fees in the .50 -.90 range so if you invest with them, you could save a bit more on your MER. In addition, most of those robo advisors have a special promo where you can some of your portfolio managed for free when using my referral link.

If robo advisors are cheaper, then why do people use Tangerine investment funds? Well, since Tangerine is owned by Scotiabank, many people prefer to use them. They like to know that their money is with a major Canadian bank. The other obvious comparison is the new Tangerine ETFs which are Tangerine’s version of all-in-one ETFs.

I personally don’t think it matters if you DIY, use a robo advisor or Tangerine investment funds. They’re all good options since the fees you pay will be much lower than traditional mutual funds.

Final thoughts

All things considered, my Tangerine investment funds review is positive. If you’re looking for an easy way to invest but are not confident in becoming a DIY investor, then the Tangerine funds are a very good option. If you have an interest in investing and prefer a little more control over then go with TD e-Series, Questrade, or robo-advisors.

Remember you could always start with Tangerine and then switch later, the point is to start investing early and avoid high-cost mutual funds. If you want to start investing in the Tangerine investment funds, use my referral to open an account and start saving now. Even if you decide to go with a different company for your investments, don’t forget that Tangerine has one of the best rates for high interest savings accounts in Canada.

So what exactly is a robo advisor? Despite the name, it’s important to know that a robo advisor is not a robot. The investing process is taken care of by an algorithm, however, that algorithm is both created and monitored by professional human beings who are also available to handle customer service.

Robo investing is best for those who are considering a ‘set it and forget it’ kind of strategy. There are several robo advisors in Canada, each one offering their own unique perks and strategies. I’ll be digging further into one of these robo advisors in this Nest Wealth review.

Nest Wealth prides themselves in creating personalized portfolios for each of their customers based on your investing style, goals, and risk tolerance. It has a unique fee structure compared to other Canadian robo advisors and is a favourite among mature investors. Here’s what you need to know about Nest Wealth to determine if it’s the right robo advisor for you.

Bonus: Money We Have readers get their fees waived for the first three months when they sign up using my referral link.

Nest Wealth accounts

Nest Wealth has several account options including the following:

• RRSP
• Spousal RRSP
• TFSA
• RESP
• LIRA
• RIF
• Joint Account
• Trust Account
• Corporate Account

With Nest Wealth, there is no minimum requirement for investing. Another great perk for Nest Wealth is that by opening an account with them, you have access to professional support from a registered advisor who can be available to speak with you via email, chat, or phone.

Considering transferring your RRSP? Learn how Nest Wealth

Nest Wealth fees

When it comes to Nest Wealth fees, this robo advisor has a different set up than other Canadian robo advisors. Instead of an annual percentage based on your portfolio, Nest Wealth charges a monthly fee. The fee breakdown looks like this:

• Under $75,000: $20 per month
• Between $75,000-$150,000: $40 per month
• Over $150,000: $80 per month

Of course, on top of these monthly fees, investors will also have to pay MERs which equal to about 0.13%. They also charge custodian fees which vary a little since they use two custodians: National Bank Independent Network (NBIN) and Fidelity Clearing Canada ULC. With custodians, you pay for each trade, but they cap at $100 a year. They also charge an account fee, but Nestwealth covers the custodian fee for your first account. Here’s how the custodian fees break down.

Fidelity Clearing Canada 

• $7.99 per trade
• $36 annually – registered accounts
• $25 annually – non-registered accounts 

National Bank Independent Network

• $0.99 per trade
• $100 annually – registered accounts
• $75 annually – non-registered accounts 

Remember, if you sign up via Nest Wealth, you can have the management fees for your first three months waived as a bonus for being a Money We Have reader.

Nest Wealth review

Nest Wealth was started by Randy Cass, a name you may recognize for being a host on BNN for Market Sense. Mr. Cass has over 15 years of experience in the finance sector and a background in managing huge portfolios successfully. Using his experience, he has assembled a great team of fellow professionals from the finance and tech words to run this Canadian robo advisor.

For those who are on the fence about robo advisors, you may also be interested to know that National Bank owns a minority stake in the company. While they aren’t in control, the fact that one of the big banks in Canada has an interest in this robo advisor may help put some of your worries to ease.

Nest Wealth is available to everyone, but definitely targets those with larger amounts to invest or those who are further along in life and thinking closely of retirement. Their unique fee structure best benefits these types, as do their EFTs and portfolio options which are more suitable for those who have a low-risk tolerance.

Like everything else, Nest Wealth isn’t perfect and does have its downsides. Here is a breakdown of the main pros and cons of Nest Wealth robo advisor.

Nest Wealth pros

• Good options of low risk investments with low fees
• Fee schedule is ideal for those with larger accounts
• No minimum investment required
• Money We Have readers get Nest Wealth

Nest Wealth cons

• Fee schedule is expensive for smaller accounts
• Investment options are lacking for those interested in high risk portfolios

How Nest Wealth compares to others

So, how does Nest Wealth compare to other popular Canadian robo advisors?

The fact that there is no minimum requirement makes it an attractive choice to those getting started in investing. However, the fee system isn’t great for those with small accounts and is better structured for individuals with larger amounts. Individuals with smaller investments would be better off with a robo who takes an annual percentage, such as Wealthsimple or Justwealth, rather than on who charges a monthly rate.

One of the biggest draws of Nest Wealth is the fact that there are so many low risk options. This is ideal for those who are at a later stage of life, but not for someone who likes to have high risk options; in this case you would be better off with another robo with more portfolio options such as Justwealth, Wealthsimple, or Questwealth Portfolios.

Final thoughts

My Nest Wealth review is positive. They definitely deserve a spot as one of Canada’s top robo advisors, the benefits of this robo advisor are really more tailored towards larger accounts or mature investors who are closer to their retirement.