Is Tangerine a Robo Advisor?

If you use Google to search for the top Canadian Robo Advisors you will not find Tangerine in the search findings. When you read the top Robo Advisor reviews, you will not find mention of Tangerine Investments. Is Google wrong? Are the Canadian personal finance writers getting it wrong? Is Tangerine a Robo Advisor?

Now certainly if you hit the Robo Advisors/Funds tab on Cut The Crap Investing, you’ll find Tangerine. But perhaps I’ve put them in a special category. And as you may know I was an investment advisor at Tangerine for over 5 years. An investment and index investing junkie, I started a new career at Tangerine in 2013 at age 50. I left that job that I loved in June of 2018 to start this blog.

The definition of a Robo Advisor.

Here’s a common definition …

 A robo-advisor is a company that uses software and tools to digitally manage their clients’ financial investments. 

We can look to good ‘ol wikipedia…

And here’s how Charles Schwab describes it in, with friendly graphics. Here’s the link to their take on things. It’s a good post.

Schwab will then add…

Robo-advisors vary from firm to firm, but are generally online services that provide automated portfolios based on your preferences.

We give the digital platform some personal information and the technology goes to work to recommend a suitable portfolio.

And we can check in with Wealthsimple one of the leading Robo Advisors in Canada. Here’s my review of Canada’s most famous Robo Advisor.

From the Wealthsimple blog…

Here’s how Tangerine Investments works.

For background you can have a read of my Tangerine Investments review.

Tangerine clients can access the portfolios through the online portal after logging in. Paper applications are also an option. Just as per the definitions above the investor then fills out a questionnaire that includes a more than important risk profile. The investor is then offered a suitable portfolio. With the click of a button or three the Tangerine client can then fund that account with some monies that they hold with Tangerine, or by way of an external bank account link. Investors can also transfer funds from another institution.

There is no human contact necessary But certainly many of my friends/advisors are ready to help. Keep in mind these helpful and friendly folks are investment advisors. If you need financial planning advice you might seek out an advice-only planner.

The investments.

Clients are placed in index-based couch potato portfolios.

The portfolios are managed for the clients. They can add new monies online, even through their mobile app. Clients can even set up an automatic investment plan.

The process so far appears to click the right boxes on the Robo definition. As per Schwab:

• Online.
• Automated portfolios.
• Based on client preferences.

Where is Tangerine different from ‘traditional?’

From the client experience perspective Tangerine might feel quite similar to that of a traditional Robo. They go online, answer some questions and then they receive an index-based, managed portfolio. It is digital wealth management.

But Tangerine is a mutual fund, they do not use Exchange Traded Funds (ETFs). With a mutual fund there is one price per day. ETFs trade like a stock in that they trade throughout the day and can change in price by the second. Your Robo ETF portfolio is going to change in price throughout the day as well.

What happens on the back end with the portfolio management is very different. On that please have a read of ever wonder who makes your ETFs? How ETF portfolios are managed throughout the day and how buys and sells are executed is quite different. Tangerine uses one of the index ETF giants to manage their mutual funds – they go to State Street.

Would the client care?

While everything is quite different on the back end, would the client notice or care? The traditionally-accepted as Robo advisors also operate under a different set of regulations. There are many differences that the client would not know or see. That said the experience and offerings can be more robust at many of the traditional Robo’s compared to the Tangerine experience.

And keep in mind that the Robo’s are all so different. It’s important to know your Robo’s. I would suggest that you have a read of Justwealth the Canadian robo advisor that knows when to get personal. Tangerine would be the most ‘simple’ while Justwealth is the most sophisticated with the most portfolios and capabilities.

But again you might not put those two money managers in the same category. What do you think? Is Tangerine a Robo Advisor? It might matter. Their robust growth can be included and ‘added in’ to the tracking of this up and coming wealth management option. And then we might say that the Robo’s have been on the ground for over 10 years, not 5. And in fact Tangerine would be the ‘leading’ Canadian Robo Advisor with some $4 billion of assets under management.

That might add some weight. And I do think that these modern portfolio managers are a wonderful solution for the vast majority of Canadian investors. As we know the masses are stuck in high fee mutual funds.

What the experts say.

I’ve checked in with a few contacts who operate or work at Robo Advisors and their answer is a resounding “No”.

I also checked in with some popular investment writers and bloggers. Jonathan Chevreau of Findependencehub suggests that Tangerine could be, but likely is not. It all depends on how you want to define ‘Robo’.

Mark Seed of myownadvisor offers …

Nope. Not for me. I consider them a mutual fund dealer, albeit they have some lower cost index-based portfolio solutions… Robo advisors are defined by me as a hybrid solution of front end and back end automation, with some personal touch and support for investors.

Robb Engen of boomerandecho suggests…

Tangerine is not a Robo Advisor. It’s a digital bank… That said, Tangerine’s investment mutual funds are robo-like in that an investor can buy one globally-diversified, balanced fund and can set it and forget it.

Financial Planner Graeme Hughes (who also runs The Money Geek blog) gives another no vote. Graeme also banks with Tangerine. He also considers them a bank with a proprietary mutual fund offering. He adds …

In order to be a true True Robo Advisor, there would have to be more robust planning available… not just an asset allocation questionnaire, but retirement planning, income planning, income planning etc. I’d also expect a more robust set of investment options.

With that definition, Graeme’s list might include more of the WealthBar’s, ModernAdvisor’s and Justwealth’s. I feel and know that for many, Tangerine is a wonderful option as well – Robo or no Robo.

Cut The Crap Investing readers can sign up through this Tangerine partnership link.

Thanks for reading. Fire away in the comment section. Is Tangerine a Robo Advisor?

Dale