This post is sponsored by RBC InvestEase Inc. All views and opinions expressed represent my own and are based on my own research of the subject matter.
Young investors want a simple solution to manage their investments at a low cost and with minimal hassle. They want automated advice and professional guidance – but on their own terms – without having to make an appointment.
A robo-advisor could be the perfect fit. These digital platforms have changed the investment landscape for the better by offering investors a portfolio of low-cost ETFs that is monitored by a team of professionals and rebalanced regularly as you add new money and market movements take over.
RBC InvestEase: Investing Made Easy
RBC is getting in on the robo-advisor revolution with the launch of RBC InvestEase. RBC wants to help investors get started on their path to wealth by offering a host of competitive features including RBC InvestEase.
One of the benefits of a robo-advisor service is how easy it is to set up and fund your account quickly from the convenience of your phone, tablet, or laptop. Just answer a few questions online about what you want to invest for, how much you plan to invest, what your investing timeframe is, along with your feelings about risk.
Based on your answers, you’ll get an investment plan with a recommended mix of ETFs packaged into a portfolio. The ETFs (and cash) recommended for your portfolio depend on your answers to this short online questionnaire.
For example, if you’re investing for retirement and have 30 years to save, you’ll likely get a different portfolio recommendation than if you’re investing for a new car and need the money in five years.
What about the Fees?
Clients pay a management fee of just 0.50 percent on their investment balance, plus the management expense ratios (MERs) charged by the ETF manager. The weighted-average of those MERs is a very reasonable 0.10-to-0.17 percent.
That’s important because investors are starting to warm to the idea that fees matter when it comes to growing their portfolio over the long term.
I talk with younger investors all the time who want to start building an investment portfolio but don’t know how to get started. They don’t have the experience to build a diversified portfolio of ETFs that is suitable for their goals and time horizon. Or they might understand how to allocate their initial lump sum contribution, but freeze up when it comes to making new contributions and rebalancing.
With the RBC InvestEase platform, you don’t need to do your own research on which stocks or ETFs to buy and sell. Once it confirms the portfolio is suitable for you, the team of experts at RBC InvestEase takes care of all the details behind the scenes, making investment decisions for you and keeping you on track through automatic portfolio rebalancing.
Low Cost, Broadly Diversified Suite of ETFs
Let’s talk about those ETFs. RBC InvestEase uses seven low cost products to construct your investment portfolio. From their website, these include Canadian bonds, Global government bonds, and Canadian, U.S., International, and Emerging Market equities. Simple, diverse, and efficient.
- RBC Canadian Short Term Bond Index ETF (Management fee 0.10%)
- RBC Canadian Bond Index ETF (Management fee 0.10%)
- RBC Global Government Bond (CAD Hedged) Index ETF (Management fee 0.35%)
- RBC Canadian Equity Index ETF (Management fee 0.05%)
- RBC US Equity Index ETF (Management fee 0.09%)
- RBC International Equity Index ETF (Management fee 0.20%)
- RBC Emerging Market Equity Index ETF (Management fee 0.25%)
I wanted to see what type of portfolio it would build for me based on my investment experience, time horizon, and risk tolerance. Here’s what it gave me:
That looks quite close to the portfolio I have set up now in my RRSP with a focus on globally diversified equities and long term growth.
Alternatively, if I needed the money in five years for a house down payment, for example, or I was an ultra-conservative and risk averse investor, I might see a portfolio that looks more like this one:
Monitoring and Rebalancing your Portfolio
What I love most about robo-advisors is not just the use of low-cost ETFs but the methodology behind how they manage and rebalance your portfolio. Stuff that you don’t even have to think about.
A robo-advisor can elegantly solve this problem in two ways:
- By periodically rebalancing your portfolio whenever the market value of one or more of your ETFs drifts away from its original target asset allocation. A robo-advisor imposes rules to automatically trim the holdings of a high performing asset class and/or buy more of one that’s lagging behind its benchmark.
- By dispersing any new contributions to the portfolio in a way that keeps your asset allocation in alignment. For instance, if I added $1000 to my portfolio I might have one-third go to Canadian equities, one-third go to U.S. equities, and one-third go to International and Emerging Markets. In this case, using a robo-advisor is more economical than using a discount brokerage since an investor would need to make three separate trades to produce the same results.
The robo-advisor revolution is clearly here to stay and RBC InvestEase is making a serious run at attracting young investors with the launch of this new platform. After taking the platform for a test-drive and looking under the hood at the fees, products, methodology, and service, I can say with confidence that RBC InvestEase is the real deal.
RBC InvestEase is currently being piloted in Ontario, Alberta, and Saskatchewan, with a national launch planned shortly. Investors can open TFSAs, RRSPs, and non-registered investment accounts, with additional account types available soon.
They also have a limited offer. You can open an account by October 31, 2018 and pay no management fees until March 31, 2019.