There’s no ‘I’ in team but there might now be one in RRSP season; and there might now be an I in your retirement plans. The Canadian Robo Advisors have arrived and while they have not taken over yet, they are gaining in popularity. This RRSP season they are battling it out with the traditional high fee mutual fund industry for eyeballs and dollars.
The Robo Retirement Investment Portfolio
The Robo Advisors have landed and likely will take over one day because Canadians pay some of the highest mutual fund fees in the developed world. Those fees are wealth destroyers as Larry Bates describes in Beat The Bank: The Canadian Guide To Simply Successful Investing. I’d suggest you check out the T-REX score tool on Larry’s site. You enter the fees that you pay and the online calculator will give you that bad news – how much money is going into the wrong pockets over the years and decades. To say it can add up is an understatement.
This RRSP season consider moving to a better way to invest. Here’s a graphic from my latest Robo Review of ModernAdvisor.
Put the ‘I’ in RRSP season, after all, it’s your money.
I’d strongly suggest the new way. You’ll likely cut your fees by some 60-70% or more. And don’t worry about that ‘Robo’ word. These digital wealth managers are all quite human, and friendly, and there is support and help and advisors available at all of the ‘Robo Advisors’.
Humans when you want them, digital when you don’t.
And saving that 60-70% or more on fees could be a life changer, a retirement changer. You might go from that camper on the lake to the French or Italian Riviera. I prefer Italian in case you’re wondering.
From my review of Justwealth here’s a chart that demonstrates the life-changing effect of lower fees. The following is based on an initial investment of $100,000.
The new way could potentially put hundred of thousands of additional dollars in your pocket. Imagine retiring with an additional $10,000 or $20,000 of annual retirement income. That’s a potential and likely outcome IMHO, and from my experience.
And speaking of life changing events, this review is entitled (not by coincidence) Nest Wealth Shows You How Those Lower Fees Can Be Life Changing.
Nest Wealth offers a subscriber-based fee structure. You get complete managed portfolios and access to advice for …
That $80 monthly fee is capped, even if you have $1,000,000. Keep in mind that with a Robo Advisor you will also pay the Management Fees/ MERs for the portfolios, typically in the area of .16% to .25%. On a larger portfolio the fee savings could be in the area of $10,000, $15,000, $20,000 or more – every year.
For those with portfolios in the range of $400,000 or below, the most cost-effective digital wealth manager is Questwealth offered by Questrade. Here’s my review Questwealth Portfolios. A New Name and a New Low-Fee Robo Advisor Champion in Canada.
Yup, that was a game changer. And settle your eyes on those numbers for a minute. Compare that to mutual fund fees that can be in the range of 2.2% – 2.5% annual.
And of course, no discussion of the Canadian Robo Advisor world is complete without mention of Wealthsimple. They certainly make the most noise out there and should be thanked for raising awareness in Canada. They let Canadians know just how simple and cost effective wealth building can be and should be.
The Robo landscape is diverse. At WealthBar you’ll get treated like you’re rich, even when you’re not. There are Robo offerings for Canadians who are starting their investment journey, and for those with considerable assets. Digital wealth managers make for a wonderful home for retires as well. WealthBar specializes on that front.
Should You Even Make an RRSP or RRIP Contribution This Year?
Planswell offers free financial plans. It’s a digital service (questionnaire) you then have a follow-up conversation with a financial advisor. There is no cost or obligation. Canadians have completed over 100,000 free financial plans at Planswell.
Planswell has found that they would recommend an RRSP contribution to less than 50% of the Canadians who have completed the financial plan.
These are very important considerations.
That Said Don’t Ignore RRSPs – They Can Get a Bad Rap.
Knowing ‘what goes where’ with respect to RRSP vs TFSA vs Non Registered investments can be tricky business, so seek help if you’re not sure. But most Canadians are still better off utilizing the RRSP program. Here’s a wonderful primer on that from Jonathan Chevreau for the Financial Post. Here’s Three Reasons Why RRSPs Still Matter – And One of Them You Probably Didn’t Know.
I had a young investor tell me that he was ignoring RSPs because of the high taxes on withdrawal. Sure, but consider the potential to get back 30%, 40% or 50% by way of lower taxable income – that tax break. Consider the decades of tax free compounding.
As a starting point you can check out Tangerine’s RRSP vs TFSA online calculator. Tangerine also offers lower fee index-based mutual funds.
The tipping point appears to be around a $50,000 salary range where it becomes an advantage to use the RRSP program. Keep in mind there are many moving parts throughout our personal financial journey. This needs to be re-evaluated periodically.
Get Rich Slow – Keep Your Fees Low
A key to successful financial planning is to start with a simple but effective plan. Invest your longer term monies for growth within your risk tolerance level. I think the Robo Advisors can help you there. And keep your fees low. Pay off high interest debt first before you invest. Build up that emergency fund and keep those monies safe and secure in a higher interest savings account.
The Robo’s are a great option, and you’ll find more options on my Robo Advisor and Funds page. You might choose to create your own ETF Portfolio. There are also the game-changing One Ticket Solutions from Vanguard and iShares. With this option, you have access to complete, globally diversified and rebalanced portfolios for about .20%.
This should all add up to the end of the high-fee mutual fund industry in Canada. There’s simply a better way to invest. There are many better ways to invest, and that might also include by way of a fee-for-service advisor.
Say Goodbye to High Fees and Salespersons Disguised as Advisors
I’m happy to help. Dale firstname.lastname@example.org
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