Samantha Way

Samantha Gowers

Every month it seems there is a new and unique way to utilize technology to make our lives easier – from the robot vacuum that will give you a spotless floor, to a water bottle that simply reminds you to take a sip. When it comes to your personal finances, however, robotic management is a reasonably new concept, that may seem like a big leap of faith.

You may be asking yourself “What is a robo-advisor, exactly?” and the answer is fairly straightforward.

After completing a questionnaire that determines your risk tolerance, goals and current financial picture, a robo-advisor utilizes specialized software and algorithms to form its recommendations. These services strive to help you determine what type of investments you should reasonably be making, and help you maintain them over time. One common theme among robo-advisory services is that they cost less; the regular management fees are lower, and some even perform automatic portfolio rebalances for free which can be costly through traditional investment advisors.  

Another appealing benefit of using a robo-advisor is their level of accessibility. There are typically no minimum balances, meaning anyone over the age of 18 can invest, and since the companies operate entirely virtually, you can access advice and account updates 24/7. Though some people are comfortable with this set up, you need to consider both sides; no face-to-face meetings to set up a portfolio and a lack of personalization can be enough of a drawback for some to choose to stick with a traditional investment advisor. 

The real question to ask yourself is “Will a robo-advisor be the right fit for me?”. The answer is less simple, as there are a lot of personal factors to consider:

  • Are you disciplined enough to keep yourself in the market when it gets nutty?
  • Will you alter the risk in your portfolio as you become more risk adverse?
  • Do you have someone on your financial team that could give you advice on what vehicles may be best for you (RRSP, TFSA, non-registered account) so that you know you are investing efficiently?

At the end of the day, shop around to see what is available and find out if there is a better fit available to you. Your money is no different than any other purchase in your life: make sure the money you spend delivers the greatest value. When shopping around, do remember that value isn’t just about getting the most for the least; rather, it is about getting the services you need at a fair price.