While investment firms and regulators continue debating over issues like fee disclosure, advisor conflict of interest, and a standard of care for investors, a new breed of investing services has put the industry on notice by bringing low cost investing to the masses.
Last year I reviewed the new robo-advisor entrants, but since then Questrade has got in on the act with its long-awaited Portfolio IQ, a solution billed as “Canada’s only online wealth-management service”.
Portfolio IQ caters to individual clients by assessing their risk tolerance and suitability before creating a personalized portfolio.
Here’s how it works:
Investors can start with as little as $1 and pay no fees until their account reaches $2,000. Your portfolio is charged a percentage of its total annual value in management fees – applied quarterly. The percentage drops as your portfolio grows.
Questrade combines the total value of all your managed accounts – including accounts within your household – to give you the potential to jump to a lower fee faster.
|Asset range||Management fee (annual fee, billed quarterly)|
|Less than $2,000||Your money will be held as cash, with no fees or penalties|
|$2,000 – $100,000||0.7%, $99.95 minimum|
|$100,000 – $250,000||0.6%|
|$250,000 – $500,000||0.5%|
|$500,000 – $1,000,000||0.4%|
Portfolio IQ offers five types of model portfolios, ranging from aggressive growth to conservative income.
- Aggressive growth – The aggressive growth portfolio is comprised of 100% equity ETFs (35% International, 32% Canadian, and 31% U.S.), aiming to deliver maximum long-term growth potential. The average-weighted MER is between 0.29% and 0.47%.
- Growth – The growth portfolio has a greater concentration of equity ETFs at 80% (28% International, 26% U.S., and 28% Canadian) of the portfolio with 20% invested in fixed income ETFs providing a moderately higher risk level with emphasis on long-term growth. The average-weighted MER is between 0.29% and 0.45%
- Balanced – The balanced portfolio has a target mix of 40% fixed-income and 60% equity ETFs (21% International, 20% Canadian, and 19% U.S.) and an emphasis on growth. The average-weighted MER is between 0.29% and 0.42%.
- Income – The income portfolio invests 60% in fixed income ETFs while including 40% equity ETFs (14% International, 13% U.S., 13% Canadian), blending the potential for growth with an emphasis on steady income. The average-weighted MER is between 0.29% and 0.39%.
- Conservative Income – By investing 80% in fixed income ETFs and 20% in equity ETFs (14% International, 6% Canadian) the income portfolio works to preserve your money, while minimizing exposure to market volatility. The average-weighted MER is between 0.29% and 0.36%.
Portfolio IQ only uses ETFs, with expense ratios as low as 0.04%, and a management fee with zero trailing commissions.
Related: The ins and outs of ETFs
Because you hold the shares of the ETF, you have your own cost base. This can be more tax efficient and allow tax loss harvesting to offset taxes on capital gains.
Your portfolio is rebalanced on an ongoing basis to keep it working at peak performance. There is no extra charge for rebalancing, and the portfolio managers will take advantage of tax-loss harvesting.
Questrade’s Portfolio IQ is open to all Canadians.
Questrade is best known for offering rock-bottom commissions for trading stocks ($4.95) as well as commission-free purchases for any ETF in North America. It’s great to see Questrade rollout a low-cost online wealth management service that is accessible (and scalable) for all Canadian investors.
What are your thoughts on the new offering from Questrade?