Tangerine has launched three ETF Portfolios. With management fees of .65% the Tangerine ETF Portfolios will compete with the Robo Advisors that also use ETFs. As readers may know, I was an investment advisor with Tangerine Investments for over 5 years, from 2013 and into 2018. I had long suggested (begged) that they find a way to lower their fees (from 1.07%) on their core index-based mutual fund portfolios. The Tangerine ETF Portfolio are more than a welcome addition for Canadians and Tangerine clients.
This new offering from Tangerine is obviously designed to compete with the Canadian Robo Advisors. And compete they will. In comparison, fees for Canadian Robo Advisors are in the range of 0.45% to 0.90%, so Tangerine is certainly in line with the average Robo. While it’s not just about the fees, if that is your main consideration you can have a read of this post.
That post looks into Questrade’s Questwealth Portfolios (“you’re not sill investing with Mom and Dad’s guy are you?”) and Nest Wealth that uses a flat fee subscription based model, with fees that starts at $20 per month and caps out at $80 per month. You will then add in the fees for the ETF holdings.
Scotiabank ETFs in a mutual fund wrapper.
The Tangerine Global ETF Portfolios employ (with one exception) Scotiabank ETFs in a Tangerine mutual-fund wrapper. (As you may know, Tangerine is a subsidiary of Scotiabank, acquired in 2015 from ING.) Because the offerings are mutual funds, there are no fees when you buy or sell.
The ETF Portfolios are available at three risk levels and will use these ETFs:
- Scotia Canadian Bond Index Tracker ETF
- Scotia U.S. Equity Index Tracker ETF
- Scotia International Equity Index Tracker ETF
- iShares Core MSCI Emerging Markets IMI Index ETF
- Scotia Canadian Large Cap Equity Index Tracker ETF
Three levels of risk.
The Balanced ETF Portfolio is 60% stocks and 40% bonds.
The Balanced Growth ETF Portfolio is 75% stocks and 25% bonds.
The Equity Growth ETF Portfolio is 100% stocks.
Tangerine’s Global ETF Portfolios will follow a global index weighting that will favour U.S. stocks over Canadian and International equities. At the same time the portfolios will offer exposure to the growth-oriented Emerging Market stocks. I mentioned the potential for EM stocks in a MoneySense post from Nov. 6, 2020. Emerging market stocks are up by 20% from positive vaccine news in early November of 2020, besting the performance of U.S. stocks, developed markets and Canadian stocks. Many embrace the theme that emerging markets will be a superior holding and portfolio diversifier (compared to developing markets) in the coming years and decades.
As an example here’s the allocation and assets for the Balanced Growth ETF Portfolio.
Is Tangerine Investments a Robo Advisor?
In my opinion, Tangerine Investments became the first Robo Advisor in Canada with the introduction of their core index-based mutual fund portfolios in 2008. These are more “complete” managed portfolios that can be accessed online, with an online risk and suitability assessment. When it comes to the question ‘what is a Robo Advisor?’ they tick all of the boxes.
That said, I had asked is Tangerine a Robo Advisor?, and the answer largely came back as no. I even conducted a Twitter poll that offered that verdict. Will the fact that Tangerine now offers robo-like portfolios that employ ETFs be enough to satisfy robo snobs? Ha. 🙂 In the end it does not matter what category you want to put them in. The Tangerine ETF Portfolios offer another wonderful low-fee solution for the many Canadians who are still stuck in high fee and poor performing mutual funds.
How Tangerine clients can switch to ETF portfolios.
Tangerine clients who currently hold the core portfolios and would like to switch to the Tangerine ETF portfolios can simply hit the “switch my portfolio” button once they are logged into their investment account. Keep in mind that if you hold the core portfolio in a non-registered account, switching may trigger capital gains, and you may have to pay some taxes. Seek professional tax advice if you have any concerns.
And you may ask the question – ‘should I switch out of my Tangerine core portfolio?’
If you are in the core Tangerine Balanced Income Portfolio, keep in mind that portfolio is much lower risk compared to the Balanced ETF Portfolio. The Balanced Income Portfolio is 70% bonds, while the Balanced Portfolio is 40% bonds. If you like the idea of a lower risk portfolio, you ‘d stay put. Also, there is no equivalent to the Tangerine Dividend Portfolio. If you like the idea of the big juicy dividends (perhaps for more tax efficiency in non registered accounts) you’d stay put.
Removing that Canadian home bias.
The greatest difference between the old and the new is the equity allocation. The new Tangerine ETF Portfolios are underweight Canadian stocks and overweight US stocks. In essence that is a bet, even though we are dealing with two ‘passive’ index-based sets of portfolios.
There are many who think Canadian stocks will outperform over the next few years if we experience another commodities ‘super’ cycle, or enter an inflationary period. I covered that topic in my most recent MoneySense post. But we certainly don’t know the future.
That said, there is no guarantee that the lower fee portfolio will outperform the higher fee portfolio. They are both wonderful portfolios with very reasonable fees. The asset allocation will determine what will be the outperforming funds. When I did comparisons for Tangerine clients, I would find that the core Tangerine portfolios would outperform the clients’ outside assets at an alarming rate. Well over 95% of the time.
Great portfolios and investment advice.
Investors will be well served by this combination of sensible global asset allocation and low fees. One would need to be a client of Tangerine to access these ETF portfolios. The sign up process is easy and can be completed online. If you need help you can chat with one of their investment advisors. And once you’re in and investing, you will also have continued access to those advisors. If you prefer, you can also choose to do everything online from start to finish – that Robo option.
The ETF portfolios are available for TFSA, RRSP, RRIF and non registered accounts. I would strongly suggest that you consider making that switch if you are currently invested in higher fee mutual funds. The transfer process is easy, and it can usually be done by completing an online transfer form. Once again keep taxes in mind if you are transferring taxable, non registered accounts. There are no tax implications for RRSP, RRIF and TFSA accounts.
Tangerine does not offer RESP accounts. I would strongly suggest that you use Justwealth for RESP accounts. They offer target date funds that adjust the risk level as the student approaches the education start date and the need of those RESP funds.
How to support Cut The Crap Investing.
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Check out EQ Bank for those who want to make their cash work a lot harder. The current high interest savings account rate is 1.5%. EQ Bank recently introduced RRSP and TFSA accounts with a rate of 2.3%. You’ll also find GICs.
In 2021, those Robo Advisors are still the answer for the majority of Canadians stuck in high fee mutual funds.