A Robo Investing Solution For Affluent Investors

Nest Wealth: A Robo Investing Solution For Affluent Investors

Robo-advisors have been around for several years now in Canada offering affordable online investing services with a light human touch.

You might picture the typical client as a smart young millennial just beginning his or her investing journey. After all, that’s how robo-advisors are often portrayed in the media.

But it might surprise you to learn that the average client at one of Canada’s leading robo-advisors is 48 years old and has $170,000 invested with them.

Why Nest Wealth Is A Clear Winner for Affluent Investors

Nest Wealth operates a different business model than the other robo-advisors in Canada. Rather than charging the industry standard “percentage of assets”, Nest Wealth charges a monthly fee that’s capped at $80/month.

So whether you’re an investor with a $200,000 portfolio or $2,000,000 portfolio you’ll never pay more than $960/year in management fees at Nest Wealth.

Boomer & Echo readers can try Nest Wealth free for three months

Other robo-advisors charge a percentage between 0.35 and 0.50 percent, which is great for smaller accounts and a fantastic alternative to expensive bank-managed portfolios that can easily charge 2 percent or more (check your year-end statements, folks).

But once your portfolio crosses a certain threshold – say $250,000 – Nest Wealth’s monthly fee structure really starts to shine.

  • A $250,000 portfolio at 0.40 percent will cost you $1,000/year in management fees. That exceeds Nest Wealth’s monthly caps by $40/year and the advantage only grows from there.
  • A $500,000 portfolio at 0.40 percent will cost you $2,000/year in management fees. With Nest Wealth you’d still pay $960/year.
  • At $1,000,000 the comparison gets pretty ridiculous. You’d pay $4,000 under the percentage of assets model and – surprise, surprise – just $960 under Nest Wealth’s capped monthly fee model.

That’s an absurdly cheap 0.10 percent for Nest Wealth to monitor and rebalance your portfolio.

Adding up the fees

Of course, robo-advisor clients do pay other charges in addition to a management fee. The biggest expense is the MER of the underlying ETFs that make up your portfolio.

Most robo-advisors follow modern portfolio theory and the idea that a low cost, broadly diversified portfolio of ETFs leads to the best outcomes for investors.

This philosophy keeps fees low for investors and ensures your overall cost to invest stays well below 1 percent.

Nest Wealth constructs its portfolios using seven ETFs representing seven different asset classes, with MERs ranging from 0.05 to 0.39 percent. A typical portfolio will cost investors an additional 0.13 percent on top of the flat monthly fee.

Nest Wealth ETFs

  • Vanguard Canadian Short-Term Bond Index ETF (VSB)
  • BMO Aggregate Bond Index ETF (ZAG)
  • iShares Canadian Real Return Bond Index ETF (XRB)
  • iShares Core S&P/TSX Capped Composite Index ETF (XIC)
  • iShares Core S&P 500 Index ETF (CAD-Hedged) (XSP)
  • iShares MSCI EAFE ETF (IEFA)
  • Vanguard REIT ETF (VNQ)

Finally, Nest Wealth also charges $9.99 per trade whenever it allocates or rebalances your account – however these fees are capped at $100/year per account.

It’s an extra charge that other robo-advisors don’t levy onto their clients, but one that’s acceptable when you consider the incredible savings that Nest Wealth offers on portfolios greater than $250,000.

When you consider the management fee, MER of the underlying funds, and $100/year in trading fees, a Nest Wealth client with a portfolio of $250,000 will pay approximately $1,385/year or 0.55 percent.

At $500,000 the annual cost reaches $1,710 or 0.34 percent.

And at $1,000,000 an investor would pay $2,360 per year or just 0.24 percent.


The Robo Solution

So here’s the bottom line. Nest Wealth blows away other robo-advisors when it comes to portfolios of $250,000 or more.

If you’ve even considered moving your money over to a robo-advisor, and your portfolio is in that range or higher, Nest Wealth is the clear winner with the absolute lowest fees.

And, well, if your sizeable portfolio is currently being managed by a bank advisor or investment firm that charges 1.5 to 2.5 percent then I invite you to do the math on how much you’d save by switching to Nest Wealth.

In fact, you can send me your portfolio details and I’ll do the math for you.

Final thoughts

Robo-advisors are not the panacea for all investors. Some investors are perfectly happy, willing, and able to invest on their own – and in some cases can put together an even cheaper portfolio than the robos offer. That’s great.

But many investors do need a bit of handholding when it comes to their investments. Unfortunately the full service advisory model fails investors whenever an advisor positions himself as an expert stock or fund picker instead of a rational asset allocator and trusted financial planner.

A robo-advisor strips out all the excess fees that investors used to pay for a “skilled fund manager” and builds a cheaper and more efficient portfolio that will ultimately lead to better outcomes for investors.

Are you willing to give a robo-advisor a try?

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  1. Moe on February 23, 2018 at 8:56 am

    Do you recommend it for novice investors with over $1000000?

    • Echo on February 23, 2018 at 10:41 am

      Hi Moe, I don’t know your personal situation or your goals. Nest Wealth is certainly suitable for a portfolio of that size and the fee structure would save you thousands of dollars annually versus another managed portfolio.

      Please remember that a robo-advisor is not a substitute for a financial advisor. They simply monitor and rebalance portfolios as you add new money and markets fluctuate. They do this at a very low cost while keeping you invested in broadly diversified ETFs.

      I do advise pairing a robo-advisor with a fee-only planner who can help you focus on financial matters larger than investing – like your short and long term goals. tax planning, retirement planning, etc.

  2. Douglas Badger on February 23, 2018 at 10:10 am

    I’d like to see Nest offer at least two ‘flavours’ of their model portfolios; one for taxable accounts (w/favourable dividend treatment) and one for tax-sheltered accounts.

    • Echo on February 23, 2018 at 10:42 am

      Hi Douglas, great comment – perhaps someone at Nest Wealth is watching the comments and can reply or take your feedback up the chain.


    • Doc on June 24, 2018 at 6:29 pm

      Great site guys.
      I totally agree. Similar question. I am an older guy and have traded the house down, leaving me with about $4/500,000. I am wondering which would be a better selection of ETFs between Nest Wealth and Wealthsimple for a non registered portfolio. This would be for tax efficiency in a joint legacy account for my kids. I will not be touching it. Also I am 71 and not well at the moment.

  3. Mark on February 23, 2018 at 10:44 am

    I looked into WealthSimple. The concept appealed to me but a few things really turned me off. First, if you are not a current customers the options to contact a company representative is limited to email (no phone number). First RED FLAG. Second, they consider socially responsible investing to be a methodology that follows Halal or sharia law. When I found this out I was appalled. In fact, they have clerics approve what they consider ethical investment vehicles. For someone like me who considered religion in itself to be generally unethical, it was a “shut the front door” moment. Second RED FLAG. Two red flags are enough for me to stay clear.

    • Sumar on March 3, 2018 at 11:24 am

      Mark- I am a Wealthsimple investor but not an investor in their halal fund or the Socially Responsible Funds. These are two separate investment options available to investors besides their general one. As far as I know, halal funds and socially responsible funds have similar goals but not exactly same. Halal funds do not invest in anything that would generate interest income while Socially Responsible Funds have no such restrictions. Social Responsible Fund managers do not consult clerics. Halal funds do not invest in gambling, alcohol, marijuana, guns & arms, casinos, banks etc. The problem with Wealthsimple’s Halal Fund is it is expensive and it contains mostly US companies – so only suitable for RRSP.

  4. James on February 23, 2018 at 12:29 pm

    I am with Modern Advisor and am only charged 0.35% once I reached $500 K invested along with an annual lounge pass and most importantly access to a financial advisor, a very sweet package!

    • ronaldo on April 23, 2018 at 7:40 am

      James what date did you start with them and what is your compounded yearly rate of return and year to date?

  5. Dan on February 23, 2018 at 2:19 pm

    I would like to compare returns of a 7 out of 10 risk scale among the leading robots but cannot find any info.A nudge in the right direction is appreciated!! Thanks

    • Echo on February 23, 2018 at 7:52 pm

      Hi Dan, that’s a good point. The robos have only been around since 2014 and so there’s not a lot of track record when it comes to returns. That said, with a bit of work you can find the returns of the underlying ETFs and back-test the results.

      Might be worth a new blog post!

  6. Gert on February 23, 2018 at 4:18 pm

    Hi Robb,

    “In fact, you can send me your portfolio details and I’ll do the math for you.” What details do you need and where should I send them?

    Also, is this true that $100,000 invested in March 2013 would be $265,176 today? I have somewhat more that the $100K but it certainly has not more that doubled.

    • Gert on February 23, 2018 at 4:39 pm

      Hey, where did the clip go? It was right under “Are you willing to give Robo advisor a try?” Now replaced with “Free Day Trading e-Book”. I’m guessing the $100,000 in March 2013 into $265, 176 had something to do with Day Trading.

    • Echo on February 23, 2018 at 7:44 pm

      Hi Gert, send me an email via our contact page or at info@boomerandecho.com


  7. Ken on February 23, 2018 at 4:33 pm

    I have been wondering if it is time to use a robo advisor. Right now I have a self-managed portfolio of about $1.5 million. Being in a situation where my fees are .34% is appealing. However, as Nest Wealth transitions my existing investments, I am faced with realizing capital gains of nearly $400 thousand. After taxes, my new portfolio will be about $100 thousand less. Seems like a steep price to get an advisor.

    • Echo on February 23, 2018 at 7:47 pm

      Hi Ken, if realizing capital gains is a concern then I’d maybe start with a registered portfolio (RRSP and TFSA). A good financial planner can help you figure out the most optimal way to deal with your non-registered account.

  8. ronaldo on April 4, 2018 at 8:29 am

    Robb where are the investments and cash held by these or other robo investors? independent bank or trust co.? and to what extent are the investments insured ? thks

    • Echo on April 4, 2018 at 9:16 am

      Hi ronaldo,

      Robo-advisors typically work with a custodian bank so they never actually hold your money. For example, Nest Wealth clients have their money in an account with National Bank and in the event that Nest Wealth ceases to do business your money would be safe and unaffected at NBCN.

      Wealthsimple acquired ShareOwner in 2015 so they are their own robo-custodian. ShareOwner is a member of Canadian Investor Protection Fund. CIPF covers accounts up to $1,000,000 against bankruptcy.

  9. Valerie Palmer on December 12, 2018 at 6:19 pm

    Hi Rob,

    I am nearly 75 female, I have my money with a big bank and paying about $6,000 a year to have it managed. I had over $900,000 but since the market dropped its more like 850 What can you tell me about Ken Fisher and Fisher International. I am seriously thinking of switching. The managers take a salary. What is your opinion?

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