I found the headline on their site. OK, let’s say I borrowed the headline. It’s also the mission for this site.
And of course this is a category statement. Canadian investors are plagued by high fees. In fact Canadians pay the highest mutual fund fees in the developed world. Larry Bates, the author of Beat The Bank frames those fees as Wealth Destroyers. Here’s my book review Don’t Give Away Half of Your Investment Wealth – Beat The Bank.
The old way simply does not work. Too much money ends up in the wrong pockets. Actively managed mutual funds attempt to beat the market, they largely end up underperforming the market to an alarming degree. If you’re new to this better way to invest ‘thing’ please have a read of What is Index Investing?
The new way, index-based investing is simply superior and cheaper. And it’s largely superior because it’s cheaper; more cost-effective. More money stays in the right pockets – yours.
- Keep It Simple
- Keep It Cheap
You can Beat The Bank by moving to one of the many wonderful lower fee options available in Canada. If you want a managed portfolio and a lower fee option your best bet might be one of the Canadian Robo Advisors. And don’t get thrown off by that Robo word. These digital wealth managers are all quite human and very hands on, there’s help and human advice and support available at every turn. The technology advancements simply take care of many of the investment duties that technology is best suited to handle. The investment professionals are running the show.
ModernAdvisor Places A Heavy Emphasis On Client Support
They offer an in-house financial planner that will support clients and a team of CFA Chartholders. Those CFAs are of the highest designations within the financial industry. All client concerns are handled by Registered Portfolio Managers or the CFA’s.
With ModernAdvisor you have access to highly certified assistance that will help you get in the right managed portfolio, again using that superior index-based investment approach.
Compare that to …
In the land of high fee mutual funds you typically get poor advice or no advice and very high fees to go along with those inferior investments – Dale Roberts
The ModernAdvisor Investment Approach
When I asked them to give me the ‘elevator pitch’ they offered this wonderful synopsis.
Modern Advisor uses a value-driven index-based approach with 10 risk levels for either Core or Socially Responsible Portfolios. Because of our wider range of offerings our clients are more likely to find a portfolio that better suits their goals and target risk level.
And from there, the investment approach is quite sophisticated and much more nuanced than your typical digital wealth manager. They take great effort to create tax efficiencies and to manage the risk adjusted returns. And with a value-based investment approach they are attempting to boost the returns by way of asset selection and asset rotation.
Yes there is a paradox here. How do we use a passive index investing strategy that is usually framed as ‘we don’t try to beat the market, we just buy the market’ to then go out and uh, ‘beat the market’. With value investing the idea is to seek assets that are usually earning you more in the current state and that also offer greater long-term potential gains. A value investor wants to buy stocks or stock markets that ‘are on sale’. In today’s market and for ModernAdvisor that means loading up on more Canadian and International stock assets compared to the US market. When you buy the Canadian stock market today that basket of companies is cheaper based on their financial qualities compared to that US basket of companies. A value investor might say the Canadian market is cheap, while the US market is expensive.
ModernAdvisor also employs some proprietary tools and I could offer up words such as Digital Fixed Allocation Service and Mean Variance Optimization. We’ll leave that for another day. Let’s just say that ModernAdvisor has plenty of human eyes and digital eyes watching your portfolio.
How much does it cost?
ModernAdvisor offers two levels of service. Here’s the fee structure for the standard digital service. The fees are based on the total value of all of your accounts. If you have $50k in RSP and $50k plus a penny in RSP, you’re into that .40% fee band.
They are one of the most cost-effective Canadian ‘Robo’ Advisors.
There is also more advanced personal financial planning available by way of ModernAdvisor Personal. Here’s a list of the additional service offerings.
What I also like about that chart is the hourly rate for Comprehensive Financial Planning under the standard digital offering. That means you can pay only for the advice that you need (pay-for-service) and then move to the very cost-effective portfolios. You can check in at various stages of your financial journey, get expert advice, and pay by the hour.
And here’s the fee structure for ModernAdvisor Personal.
That’s more than a fair rate for robust financial planning. And we should never underestimate the value of great advice at the right price, as it can more than pay for itself. This service is for clients that require a more complex personal financial plan; that may include more advanced tax planning. ModernAdvisor Personal clients may also bring in legacy assets that they wish to keep and hold. The portfolio will be constructed around any legacy assets.
The ModernAdvisor Portfolios
Once again they are offered in Core and Socially Responsible Investing options, with 10 risk levels for each of Core and SRI. Investors can certainly hold a blend of Core and Socially Responsible investments.
Here’s a Core Balanced Portfolio I was offered after completing my investor profile.
It’s a wonderful and simple mix. They currently do currency hedge for US stocks and International developed market stocks. For international holdings the addition of emerging market stocks did play out nicely over the last few years, as well as for emerging market bonds. The rationale is that emerging market bonds add great portfolio diversification compared to US high yield bonds, and offer a current greater yield.
There is also a nice boost delivered by way of the Canadian real estate (REIT).
I like what I see in the portfolio returns history.
Other portfolio its and bits.
- The funds are rebalanced by a 5% threshold
- $1000 minimum
- $250 is required in account for additional investments
- Tax efficiency is addressed, including tax loss harvesting
- RESP funds are target-dated
Types of accounts: RRSP, TFSA, Individual RESP, Family RESP, LIRA, RRIF, Spousal RRSP and joint and individual taxable accounts can be opened through the website. Corporate accounts can be opened manually.
Get a free portfolio report or take them for a test drive.
On this link you can enter your mutual funds and get a report on your potential fee savings while you also have a look at the ModernAdvisor approach to portfolio construction. It’s simple and free, I gave it a go, it’s a great service. There’s nothing to lose, only the potential to gain by way of sensible lower fee investments.
You can also take ModernAdvisor for a test run with $1000 of ‘their money’. If you decide to sign up after the one-month test period, you can keep any gains. This might be a great way to try out that digital wealth experience. Once again, there’s nothing to lose.
With ModernAdvisor I really like the portfolio construction and various levels of advice and support. That’s a powerful combination.
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