Nest Wealth is one of the leading Canadian Robo Advisors. Once again keep in mind that these digital investment platforms are all quite human and simple and easy to manage, and there’s (real live and friendly human) help available by phone or web. You’ll have access to a personal portfolio manager and customer care representatives.
As the robo saying goes – you’re investing for yourself not by yourself.
For many the most important benefit of a ‘Robo Advisor’ is that you will get advice and a managed portfolio with much lower fees compared to mutual funds and traditional advice. On the fee structure Nest Wealth leads the way with a rock-bottom Netflix-like monthly subscriber fee model.
There are also additional custodian fees that are clearly disclosed on the site. Of course, there are fees for when the portfolio will buy and sell the ETFs (the portfolio funds) and Nest Wealth with cap trading costs at $100 annual. Nest Wealth will cover your annual account fees for your first account. The custodian fees are charged on a quarterly basis.
Nest Wealth clients who were onboarded before November 5th, 2018 will pay the NBIB fees. Clients who are onboarded after November 5, 2018 will pay the FCC fees. For full pricing details please click on this link.
While Nest Wealth is one of the lowest-fee providers in Canada for those with more considerable assets it is not cost effective for those who are starting out or those with modest portfolios below $50,000. Nest Wealth starts to become competitive in the $100,000 – $125,000 portfolio range*. They can be one of the most cost effective (or the most cost effective) at $350,000 and above. Keep in mind that Nest Wealth’s subscription based fee model increases by account balance thresholds, and the fees are based on the month-end balance. That means, for example, they can be very competitive at $74,999 and then not as competitive when the account balance moves to $75,000. At that point the monthly fee increases from $20 to $40. That said, by the time the portfolio value reaches $100,000-$150,000 they are again one of the lowest cost options.
Investors should take a long-term approach to investing and fees. You are looking to find your wealth-building partner. Given that, these fee bands of ‘competitive to not competitive’ might not be of consideration. If you’re looking to build wealth over the longer term and eventually build that portfolio to $100,000, $200,000, $300,000 and above, you might choose Nest Wealth as your wealth-building partner from the get go, or when you move above $50,000.
Also, you can have your portfolio managed for free for the first 3 months.
*Nest Wealth fees are per client and capped.
And here is a very important distinction with respect to fees; they are applied and capped per client. They are not applied per account. That means for example, if you have an RSP account and a non-registered account, both with portfolio values above $150k, your total monthly fee will be $80. If your multiple account value reaches $150k and above, your fee is $80 per month. If multiple accounts are in the $75k-$150 range your monthly fee is $40. If multiple account totals are below $75k your total monthly fee is $20 monthly.
Of course investment fees are a massive problem and a wealth destroyer in Canada. Canadians pay the highest mutual funds fees in the developed world with an average of 2.2%. We can see that Nest Wealth has kindly done the math for you on the potential monthly savings. Those who do not want to save hundreds upon hundreds of dollars EVERY MONTH – forever hold your mutual fund transfer form.
Have some fun with the online calculator that will break down your fee savings with each investment goal. Here’s an example where I had input a retirement goal. The calculator then projects the added annual income that can be delivered in retirement courtesy of lower fees and more monies staying in your portfolio pocket.
I’ll ask another question. Who wants to potentially retire with an additional $5,000, $10,000, $20,000 or more in additional annual income? Yes, lower fees can be life changing. That could mean additional income or the ability to retire many years earlier compared to the high fee mutual fund scenario where the monies end up in the wrong pockets. Don’t put money in the wrong pockets.
I like this image and overview from their site.
I couldn’t have said it better myself, so we’ll just leave it ‘at that’.
Your portfolio will be well-diversified across these asset classes.
Nest Wealth uses 3 ETF providers – iShares, Vanguard and BMO. On the equity side of the ledger they will include a US Real Estate Fund, Vanguard’s VNQ. On the fixed income side they will add a little more diversification beyond plain vanilla indexing with real-return bonds that offer an inflation hedge. The bond component is all Canadian. Here’s an example of a Balanced Portfolio Asset Allocation. We see that they will overweight to the US stocks, while keeping Canadian and International stocks in a similar range. The online questionnaire will also prompt you on how much cash you might require over various periods. We should always remember that an emergency fund, liquid and available in a non registered or TFSA account is a personal financial planning staple.
The average Management Expense Ratio MER for the portfolios is from .13%. These are the fees that are embedded within the ETFs. The Nest Wealth strategy is to look for and use the lowest cost ETF providers. Compare that .13% average to traditional actively managed Canadian Mutual Funds at 2.2% or more.
The portfolios will be rebalanced by threshold. For example, if the US stocks have been on a tear and are outside of their prescribed weighting, the US stocks will be sold and the monies will be moved to an underweighted asset. This will help keep your portfolio risk level in check.
The most conservative portfolio is 80% fixed income and 20% stocks. The most aggressive portfolio is 85% stocks and 15% fixed income. Portfolio models are then available and offered in 1% increments (in between those two risk goalposts).
Of course, you will be right mix of stocks and bonds at the appropriate risk level after completing the online questionnaire. Think of this as a digital advice platform. But again, if at any time you are unsure and you want a human hand or helping hand you can have a chat with your portfolio manager or customer care representative.
The risk-profiling gets to the heart of the matter. How would you feel, what would you do, if or when your portfolio declines in value? This is one of the most important parts of the process – we must invest within our risk tolerance level.
Risk 1. The online questionnaire will ask.
Risk 2. The questionnaire goes on to frame the risk with specific portfolio declines.
I like that transparency and clarity. That said, based on the profile I completed the portfolio was a little too aggressive for my risk tolerance level. But that risk of investing outside of my comfort level would likely be removed as all applications and client investor profiles land on the desk of a Nest Wealth financial planner. You will be contacted by email or phone. If contacted by email you will be given the opportunity to request a call from your portfolio manager.
For those with taxable accounts in the mix, the advisor will ensure that you are in the most tax-efficient portfolio(s).
Not very robo, is it?
Once again, that’s not very ‘robo sounding’ is it. Most of the robo’s are very (human) hands on. One day perhaps, we will stop using the term Robo Advisor.
Types of Accounts Available:
- Spousal RRSP
- Non Registered (including joint)
- LIRA (Locked in plans)
Nest Wealth is also available for investment firms and individual advisors. There is also Nest Wealth @ Work – RRSP Group Plans for large, medium and small businesses. I will be back with reviews of those offerings.
Nest Wealth is registered with the applicable securities commissions as a Portfolio Manager in AB, SK, BC, QC, MB, PE, NS, NB, NL and in ON. Plans are insured to $1,000,000*.
*All client accounts are held at a financial custodians that are members of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). This covers each client account up to $1,000,000 against insolvency or bankruptcy of the custodian
The net, net of Nest Wealth. It’s the fees.
For those who are starting out, or for those with modest portfolios the leader in Canada is Questwealth from Questrade. They charge fees as a percentage of assets at .25% and .20% for portfolios above $100,000.
Given the monthly fee model Nest Wealth becomes very competitive in the mid to upper ranges of their fee bands. At $200,000 they are in elite company as one of the lowest fee providers and at larger portfolio values of $350,000 and above Nest Wealth can be the most cost-effective Robo in Canada.
Always keep in mind that there can be many important considerations beyond fees. Make sure you know your robo’s so that you can find ‘the robo that’s right for you.’
If you feel Nest Wealth is right for you, you can take advantage of a promotional offer for Cut The Crap Investing readers. When you sign up through this link you will have your first 3 months managed for free.
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