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”.

Questrade 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 Portfolio IQ 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.

Pricing:

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%
$1,000,000+ 0.35%

Model portfolios:

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%.

Holdings:

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.

Rebalancing:

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.

Availability:

Questrade’s Portfolio IQ is open to all Canadians.

Final thoughts on Questrade Portfolio IQ

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?

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8 Comments

  1. Bet Crooks on January 19, 2015 at 6:45 am

    I’m thinking for the investor with less than $100 000 the combined surcharge plus MERs is very similar to the Tangerine balanced funds (which also are re-balanced for the investor at no extra charge.) Including the internal trading costs for rebalancing the Tangerine funds charge 1.08-1.12% all in.There is no fee to purchase or sell units in their funds.

    It looks from your summary like the all-in fees for an investor with under $100 000 at Questrade are at least 0.99-1.17%.

    I don’t have the current total expenses for the TD e-series mutual funds (you have to re-balance those yourself but there is not fee to buy or sell units.)but I have been told they are lower than the Tangerine funds.

    There’s a perception that ETFs are cheaper than mutual funds but the reality is that they CAN be cheaper than mutual funds not that they have to be.

    Also, is there anything paid on balances of $2000 or less? It says there is no fee but it also says it is held as cash. Do they pay interest or is your money just sitting there earning nothing?

    • Echo on January 19, 2015 at 1:35 pm

      Hi Bet, the TD e-Series funds run at about 0.42% with a portfolio split 25% each between Canadian, U.S., International, and Cdn Bonds. As you mentioned, you have to do the buying and rebalancing yourself.

      I’m not sure if accounts under $2k just sit in cash or not. I’ll ask Questrade and see if they’ll comment here.

    • John - Team Questrade on January 19, 2015 at 2:02 pm

      Hi Bet and Echo,

      Amounts under $2,000 in cash will be subject to the same interest rate as our self-directed accounts, which is CAD prime minus 4.5%. More information is available on our website here:

      http://www.questrade.com/pricing/interest_rates

      • Paul N on January 19, 2015 at 5:19 pm

        @ John

        I don’t want to speak for Bet Crooks, but I think she was asking if the client gets interest for the money sitting in cash in their account while waiting to be deployed into the portfolio. For example in my TD account I roll over my cash into these little monthly IC’s (TDB8150) that gives me a few $ month until I save enough up and decide what I want to purchase next. Your link seems to go to a borrowing menu.

        @ B+E

        Nice post – I was surprised to see the charges add up like this. I always though pooling money together would give the company offering these “institutional MER rates” with the companies offering the ETF’s and they would make the difference in profit that way, not adding 7/10ths of percent on top of that. Your explanation of this makes it clear.

        It’s a good idea for a person who is in expensive Mutual funds now to switch, but for the DIY person, if you can’t balance a couple of funds over the year by yourself that’s kind of lazy… I guess you deserve paying the premium.

  2. Tyler on January 19, 2015 at 10:54 am

    @Bet
    I concur that this isn’t the lowest priced option. Q-trade gives a nice sliding scale of costs on their website (http://www.questrade.com/portfolio-iq#secPricing).

    However, unless you exceed $200,000 with Q-trade, the TD e-series will be a cheaper option with a similar portfolio MER in the 0.41-0.47% range with no buy/sell or re-balancing costs.

    Of course, you do need to re-balance with TD e-series… which can be a challenge for some investors. The cost of a few points in MER might be worth it to many investors.

  3. John on February 7, 2015 at 8:11 pm

    I am very interested in this “new form” of investing. I have some accounts at Questrade. However, with all this talk about robo-advisors and how well they are perceived as in the an article in Money Sense magazine (Feb – Mar issue) I would like to know how the IQ programme at Questrade compares to these new Robo advisors programmes such as Wealth Simple and NestWealth, for instance.

    • Echo on February 8, 2015 at 9:44 am

      Hi John, thanks for your comment. That was a great article by Chevreau in the latest MoneySense because it focused on actual customers rather than just a review of the services and features.

      In my review of the robo-advisors, Sandi Martin left a comment with a link to a very detailed spreadsheet comparing the different services and costs based on the size of portfolio – https://docs.google.com/spreadsheets/d/14wMiTNkRxlwzaqwUYLgjQSyfGU4hfEbop6cpNCF0tTo/edit#gid=0

      I’ll send her a note and see if she can add Questrade’s portfolio IQ to see how it stacks up.

  4. ADi on August 1, 2016 at 5:01 pm

    The Aggressive growth portfolio doesn’t add up to 100% 🙂

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