In October of 2018 Questrade, Canada’s fastest-growing discount brokerage, changed the name of their Portfolio IQ Robo Advisor service to Questwealth Portfolios. At the same time they shocked and rocked the Canadian Robo Advisor world with the lowest fee structures for portfolios below the $400,000 range.
Here’s that rock ’em sock ’em fee chart. Keep in mind that the fees are not based per account but per Family Balance.
Those fees are so low that on a portfolio of $350,000 the investor would pay total fees of $700 annual (@.20% of assets) plus $735 for the management expenses of the ETFs. The management expenses of the funds that make up the portfolios (ETFs) are applied at or ‘paid for’ by the holdings of the individual funds. That equates to .41% in total fees using an ETF MER of .21%. That’s simply way more money that stays in your portfolio pocket.
Total Annual Fees = $1435
Compare that to a typical Canadian mutual fund that might ‘offer’ an MER of 2.2% (Canadians pay the highest mutual fund fees in the developed world) and perhaps fund trading fees (TER) of .10%. On a $350,000 portfolio that could amount to annual fees of $8050.
Total Fees = $8050.
Questwealth vs High Fee Mutual Fund Scorecard – $1435 vs $8050
OK, who wants to pay an additional $6615 every year in additional fees? As you can imagine cutting your investment fees to that degree is a life-changing event.
And put it this way, that 2.3% mutual fund fee might be an understatement. We can look at our averages in Canada, and we can look at the studies, but the reality of how Canadians are invested, and the actual fees that they are charged might have little to do with the studies and mathematical averages. When I was an advisor on lower-fee index portfolios I worked as a Portfolio Analyst. Canadians showed me how the big banks and the big mutual fund companies (through their sales ‘advisory’ channels) had them invested. It was not pretty. It is more common to see Canadians paying above 2.5% annual. That’s a national wealth destroyer. It’s so bad, it’s a social issue. That’s why I love the hard-hitting commercials that Questrade creates. Have a look at their youtube channel. Then sit down with your advisor and ask the tough questions.
And again, the lowest fee tag team in Canada includes Questwealth Portfolios and Nest Wealth. The hand off for lowest fee option based on portfolio size is in the area of $400,000. You can have a read of Who Is Now The Lowest Cost Robo Advisor in Canada?
Do You Know What You’re Paying in Fees?
OK, so it’s no contest. Do you have high fee mutual funds? Do you know what you’re paying in fees? Do you want to know where you can find the transfer form for registered (RRSP and TFSA) investments? The answer to the last question should be YES!
And while Questwealth is a wonderful option, it is important to know your Canadian Robo Advisors. Fees, while important, are not always the most important consideration. You might find another low fee option that better suits your personal financial situation.
That said, if your financial situation is relatively ‘straight forward’ and you’re mostly in registered accounts such as TFSA and RSP or RIFF, finding the lowest fee option might be the best option. And if you do have considerable assets and a more complicated tax situation you might consult with a fee-for-service advisor that will detail your most optimal allocation of funds (RSP vs TFSA vs taxable) and you can then head off to your digital wealth manager of choice to invest in that low fee environment.
The Questwealth Investment Approach
As with all digital advice platforms Questwealth will place you in the most appropriate well-diversified ETF Model Portfolio designed to match your goals and risk tolerance level. You will complete an online portfolio questionnaire and personal profile.
At the time of your portfolio recommendation you have the option to ‘make it an SRI portfolio’. SRI = Socially Responsible Investment.
And as with all Canadian Robo Advisors, help from real live humans is not far away. You can access customer support and advisors by way of chat, email and over the phone. Once again, the Robo Advisor moniker is somewhat misleading as you do not invest alone.
Passive ETF Investing Meets Active Asset Allocation
Questwealth uses a sub-advisor, One Capital to create and manage the portfolios. The model portfolios are actively managed with respect to the asset allocation. There are eyes overlooking the financial landscape and they’re ready to react and change the assets and portfolios if and when they see fit based on economic and market conditions.
For example, the advisor recently moved to a shorter duration bond component in anticipation of higher interest rates. They were trying to get ‘ahead of the curve’. As you may know higher rates can lead to lower prices for bonds. Think of it as active asset allocation with passive investments – the ETFs.
Questwealth currently has 5 different risk buckets.
Conservative, Income, Balanced, Growth and Aggressive.
Within each of the risk buckets there are three different Portfolios.
– Portfolios for account sizes below than $50,000
– Portfolios for account sizes above $50,000
Here’s an example of the asset allocation for Balanced Portfolios within those 2 bands.
And for Portfolios above $50,000
We can see that there is another layer of ‘sophistication’ with respect to the portfolios above $50,000. On a personal note I like the asset allocation and the use of Dividends for the Canadian market, the addition of the iShares mid and small cap funds for the US component and the use of the Wisdom Tree Emerging Market funds. You’ll also see Real Estate (REITs) in all of the portfolio models. There is a very strong growth engine with respect to the Questwealth Portfolios. And once again, the active managers are there with the goal to better manage the risks and to capitalize on any asset allocation moves that might create better returns, or better risk adjusted returns.
The returns history is impressive. And I’ll certainly be back with articles on performance comparisons of the Canadian Robo Advisors.
You can invest in RSP, TFSA, Taxable, LIRA and RESP and Family RESP accounts. And of course you can bring in your RIFF or LIF account that will pay you out on a regular schedule. Yes you can use the Digital Wealth Managers for your retirement funds.
For more on the ‘its and bits’ you can visit the Questwealth home page. For Canadian investors all Digital Wealth Managers are insured, with Questwealth it’s to the tune of $10,000,000 – you can find that info on their site.
Thanks for reading. If you have any questions on Questwealth or any of the Canadian ‘Robo’ Advisors please leave a comment or send a note to cutthecrapinvesting.com.
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