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Jan 30, 2017

The Ultimate Guide To Robo Advisors - Part 1

by Kyle Prevost

Kyle PrevostYou want an easy, user-friendly way to sock money away in an RRSP or TFSA without having to learn “a bunch of investing stuff”?

Perhaps you’re looking for a financial service that matches your lifestyle and allows you to get advice online without having to wait at a bank or sit on a phone for hours?


Maybe you’re familiar with low-fee Do-it-Yourself(DIY) index investing (aka couch potato investing) and are just looking for the quickest, simplest way to put this into practice?

The bottom line is that if you have any interest in investing for the future, you should take a serious look at what Canada’s robo advisors (aka “robos”) has to offer. This is especially true if you are comfortable with technology and want a financial solution that is easy to access and will take less than ten minutes a month to implement. Before I get to the ins and outs of just what a robo advisor is, I should point out that the incredible growth that these new companies have seen over the past few years hasn’t happened by accident. I think that robo advisors are an excellent alternative to traditional ways of managing money and that they specifically represent a superb value for the majority of Canadian millennials.

What The Heck Is A Robo Advisor?

I feel for the folks that have started up these low-fee online financial management businesses. In case you haven’t gotten the picture yet, I love what they’re doing and what they’re offering. Unfortunately, in an investing world full of lingo, harmful myths, and ridiculous marketing efforts, my real fear is that people will recoil at this misleading name that has been slapped on them before understanding what a great deal they can be.

“Robo Advisor” sounds like an ATM that robotically rasps some generic finance-related stuff in a Siri-esque way before taking a bunch of your money.

Or maybe it evokes images of R2-D2 spitting out a bunch of numbers – numbers that won’t mean anything to you and that will likely give you a headache.

Plus, I guarantee your full service financial advisor (or “friend with your best interests at heart” as they likely refer to themselves) will tell anyone who will listen that robo advisors are nothing but heartless automatons that won’t give you any personalized help such as the wonderful advice that they provide.

Money is an inherently emotional topic, and consequently no one wants to think of their hard-earned savings being managed by a robot! I get it. I really do.

Online Financial Advice And

Automatic Investment Strategies

– A Rose by Any Other Name?

Here’s the thing – robo advisors AREN’T ROBOTS. In fact, they’re not even close. Here’s where the name comes from and what the reality is:

  • The “robo” in robo advisor refers to the fact that there is no human being that will be stock picking your investment portfolio. I cannot emphasize enough that this is a very good thing. On average, human beings are terrible at picking stocks and other investable assets (CMS readers aside). Please do your own research if you don’t believe me – or for now, accept that not having a human being pick stocks on your behalf will probably be a great advantage to you.
  • Robo advisors are operated by humans. You will communicate with humans. You will email with humans. You will talk on the phone or via Skype with real live humans if you so choose. You probably won’t meet with people face-to-face very often – but who has time for that anyway?
  • No one would choose to work with robo advisors if they were impersonal and/or robotic in any way. People simply care about their money too much. Robo advisors are managing hundreds of millions of dollars in Canada alone, and billions worldwide. People trust these folks.
  • Canada’s robo advisors are subject to serious regulations. From all the research I’ve done, I’ve found that all of the major players are just as safe to use as any of Canada’s other financial institutions.

I think it’s worth repeating at this point that robo advisors are NOT ROBOTS and that if you have any problems or want to talk to a person, every major player gives you multiple ways to do that. The Canadian Government is aware of the online investment/advice model and it is well regulated. So, while the name might sound a bit scary, please do your best not to let that dissuade you.

What Can They Do For You?

In short, robo advisors can give you a basic plan, help answer many – if not all – of your questions when it comes to investing your money, and then provide you with a super easy way to turn part of your paycheque into a pretty good investing portfolio.

That sounds simple – but it’s a pretty big deal.

It’s a big deal because most Canadians understand that they should be saving and investing for the future, but they are intimidated by all the confusing language, the time & energy involved in setting up accounts, and managing the logistics of actually handling their own investment portfolio. As a result of this intimidation, the answer provided by the money managers and investment companies since time immemorial was to hand over your investment dollars to someone in a suit. They would hold your hand, tell you it would all be ok, and that only they could help you navigate the choppy waters full of financial acronyms and graphs that only a physics PhD could appreciate. In return for this combination of advice and “expertise” you would be charged nothing. That’s right – it was free – at the point of delivery anyway. All you would eventually pay is a measly 2-3% of your investments, but that was all numbers stuff – and you got it, right? It was basically pretty easy to understand, right? If you didn’t get it and asked questions about it, you were kind of weird and maybe not very smart, right?

I wish I were exaggerating with my dripping sarcasm, but unfortunately this was the option that a majority of Canadians chose for a long time – and still continue to choose actually. However, help is on the way. Robo advisors won’t do absolutely everything for you that a full service financial planner will – but they will do most of it – and do it for much cheaper.

Here’s the real takeaway: robo advisors will provide 99% of the information you need to get started with investing and building a nest egg. If you need more advice than they can provide, you can read this magazine, read a book, or hire a professional such as a fee-only planner or a lawyer to help you fill in the specialized blanks on stuff like wills, insurance, leaving children an inheritance, or some of the other niche financial needs.

We’ll talk more about the actual investment portfolios offered in Part 2 of this series, but here’s a quick rundown of what all of the major robo advisors offer:

  1. Much better investing options than mutual funds!
  2. “Light advice” that can vary from company to company. In my opinion, if you care enough to be reading a financial blog, then “light advice” will work just fine for you.
  3. The most easy-to-use way to invest your money that I’ve seen.
  4. Very straightforward methods to get your money from your paycheque, and into investments that are right for you. Less time & less stress = easier to stick with.
  5. Visually appealing websites that make life simple on a computer, tablet, or smartphone.
  6. A safe and secure way to invest and grow your money for the long term.


If you want to see our comparison of Canada’s robo advisors and take advantage of some exclusive discounts, head to:


Kyle Prevost is a business teacher and personal finance writer helping people save and invest over at and His co-authored book, More Money for Beer and Textbooks, is available in book stores.