What is an Online (Robo) Financial Advisor?

What is an Online (Robo) Financial Advisor?

What is an Online (Robo) Financial Advisor?

Lately, there has been plenty of talk on the emergence of “robo-investing”, or automated online investing.

The website will take an investor’s preferences, time horizon, risk tolerance, and other information into account, and create a wealth management plan using its algorithms. It works 24/7 to manage a client’s money, and makes adjustments on the fly based on what is happening with the account and the market.

Firms specializing in these services have popped up frequently since the Financial Crisis. Wealthfront is one of the largest in the United States, currently managing over $2 billion of assets as of today. They have been slower to emerge in Canada, but Wealthbar and Wealthsimple are two that have recently launched.

Here’s a screenshot of Wealthfront’s portfolio allocation suggestion based on one users’ retirement and risk preferences.

Wealthfront Example

You’ll notice there are plenty of Vanguard and iShares ETFs, and this is a common feature among online wealth management tools. To keep costs down they will almost always use such low-cost pooled funds. Also, they must play along with securities regulations and the “Know Your Client” concept and keep from out-stepping any grey areas. This is a benefit for a very conservative investor, but for anyone who wants to invest in blue chip stocks, growing companies, or speculative opportunities, obviously it won’t be the right cup of tea.

Original graphic from: Paladin Registry


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  • Pete

    I was thinking of going with a robo recently for an rrsp account. What is the advantage of using a robo vs saying buying 3-5 etfs a la canadiancouchpotato.com?

    • Mallory

      Hi Pete! My name is Mallory and I’m the Community Manager here at Wealthsimple. There are many benefits of using an online investment manager vs. investing on your own. A major advantage is the advisor piece – at Wealthsimple, you have access to a dedicated wealth concierge to speak about your investment goals/retirement. Using an online investment manager also removes the emotional piece of investing – we encourage our clients to ‘set it and forget it’ and we will handle the rest.

      Using a robo-advisor gives you the time to enjoy your life without worrying about your investments – you won’t have to take the time to rebalance, tax loss harvest or make continuous trades. And keep in mind that whenever you make a trade, you pay a fee. At Wealthsimple, we’ve eliminated unnecessary fees so your savings end up in your pocket! I would love to chat more about this if you’re interested to learn more. You can send me an email at [email protected]

      • coldheartedtrader


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