A Vancouver-based investment firm, WealthBar, is using a team of so-called robo-advisors in a bid to modernize the way you invest your money.
Instead of sitting down in a bank office to meet with a financial advisor in-person, services like WealthBar do their business online without any paperwork. The company uses algorithms to design a client’s investment portfolio. Clients fill out a survey, answering questions like how long they want to invest, what their objectives are, and their tolerance for risk.
“Then you're slotted into a portfolio which is designed by a chartered financial analyst and monitored by the same person, a portfolio manager,” said WealthBar CEO Tea Nicola. The company designed an algorithm that determines a client’s portfolio and risk tolerance.
Robo-advisors have been in Canada for about two years, and there are now about 11 firms offering similar services across the country.
Instead of using traditional financial services, this online system can potentially save you money. WealthBar invests your money in exchange traded funds or ETFs, which track indexes. This keeps the management fees low—about a third less than with mutual funds.
According to research from MarketWatch, index funds beat actively managed funds about 60 per cent of the time. But during a downturn in the market, that can shift, with actively managed funds beating the indexes more than 60 per cent of the time.
Samsara Marriott used to use a financial planner, but switched to WealthBar two years when she was going through a career change and her advisor retired.
“I’m very trusting of the process,” she said. Marriott has a moderate-risk portfolio, and while she doesn’t track the progress of her investments in detail, she says there has been growth.
The ability to deal with investments from home on a laptop or smartphone is one of a robo-advisor’s most appealing attributes, especially for busy people who just don’t have the time to schedule appointments at the bank.
“It’s very convenient to be able to do some of your finances on your computer or over the phone,” said Marriott. “And it’s very convenient to be able to do it at any time of day.”
It’s not just tech-savvy millennials who are using their services. Nicola says WealthBar’s largest client base is people in their 50s to their 70s, and some are even in their 80s.
With WealthBar, there is always a person behind every portfolio and someone who can answer your questions, but just not in-person.
And for clients like Marriott, that kind of arrangement works well and suits her lifestyle.
“I’m excited to see when I’m doing well, but if someone else wants to get excited about planning all the details, that’s great,” she said.
