Why It's Time to Put Down the Phoneandgive the Robots Your Money
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NATIONAL POST, SATURDAY, NOVEMBER 28, 2015 FINANCIAL POST financialpost.com FP9 Our parents would receive calls from people on the phone. It was like Wolf of Wall Street … I don’t have a banking degree, I’m not saying I know more than bankers do, but if you do some homework, you can start to make decisions on your own. — Adam Slight, 29 PERSONAL FINANCE CHLOE CUSHMAN / NATIONAL POST TRADING WHY IT’S TIME PLACES TO PUT DOWN THE ONLINE WEALTHSIMPLE Type of brokerage Robo-adviser that trades PHONE AND GIVE THE ETFS Minimum investment $5,000 Commissions and fees First $5,000 managed ROBOTS YOUR MONEY free; then 0.35-0.50% of assets under manage- ment Whether it’s an online Fees None Money perks Rebates brokerage, ETF or robo-advisory, all transfer fees for regis- tered accounts there’s no shortage of options What makes it different For millennials, by millen- nials. Founded by 28-year from this category. While all old Torontonian Michael BY DANIELLE KUBES of the major banks technic- Katchen. ally allow investors to trade Registered accounts ack in ancient times, online, it’s clear by the abun- All, plus dual currency there were three main dance of administration fees settlement saving on ways to invest. that a bank’s online presence conversion fees B First, if you were an is simply an extension of the Best for The investor active, knowledgeable trader, traditional branch and its who has no idea what you would call a broker (on values. he’s doing, doesn’t make the telephone) and pay him “The major banks are, to much money, but still a hefty commission to buy or some degree, interested in wants to retire on a beach sell a security. your well-being — to the ex- in his early 50s. If you didn’t want to deal tent that you need to be a little with the decision-making, happy if you’re going to keep SHAREOWNERS and you had the required min- doing business with them,” imum balance, you could just Slight says. “But they are really Type of brokerage Dir- delegate the whole business to self-interested, as far as I can ect and pooled trading an investment adviser and al- see, like with fees.” for select blue-chip U.S. low him to create and monitor They still, for example, and Canadian stocks plus a portfolio, while he charged charge inactivity fees, account robo-adviser that trades a percentage of your assets, maintenance fees and usually ETFs or sold you a mutual fund or insist on minimum balances Minimum investment annuity for a hefty sales com- of $10,000 to $50,000 — all of None mission. which goes against the simpli- Commissions and fees Of course, you could also city and low-entry threshold Direct Trades: $20 per just buy a Canada Savings championed by true products stock; Pooled Trades: $10 Bond and call it a day, but created for a virtual, do-it- per stock to a maximum the rock-bottom rates of the yourself age. of $40 to buy an unlimited last decade and a half have And it’s this digital-first number of stocks at once; made this route incredibly un- ethos that’s the real attraction Robo-advisor: 0.5% for appealing. to non-traditional investing under $100,000 of assets, L u c k i l y, t i m e s h a v e firms — especially for millen- or $40 a month changed. The Internet, after nials. all, has democratized in- “What I find with them, is Fees Annual mainten- vesting along with everything with WealthSimple in particu- ance fees for registered else. lar, is that it is in some sense accounts; misc admin. “A lot of services (brokers a fairly traditional company, Money perks Free and investment advisers) used except that it seems to be born fractional dividend re- to provide, and used to get out of the conditions that our investing paid for, are now done (for) generation is kind of partici- What makes it different pating in right now,” Slight Unique and inexpensive says. way to fractionally re- “It seems like it’s a little invest dividends. Can more of a tech startup; it ap- choose your own auto- They want you peals to the sort of app cul- mated model portfolio to be nervous ture that we’re a part of and Registered accounts All it’s kind of rebellious too. If Best for Mr. Conserva- about doing you read their blog, they are tive who’s in it for the sort of trying to challenge the long haul. Robots fit in status quo.” (it) yourself with his buy-and-hold And the primary path philosophy, but he isn’t through which these digital- pennies and are largely auto- first options are challenging quite ready to let them mated,” says Marshall Beyer, the status quo is by capitaliz- run the farm. director of academic stan- ing on technology that makes dards at the Canadian Secur- growing (or losing) your QUESTRADE ities Institute. money a far more accessible seed money. To earn a profit, portfolio automatically. In this rate of return. Halving an- Type of brokerage Whether it’s an online process. she would need to earn a re- way, completely novice invest- nual fees, from one per cent Onlinediscount broker- brokerage, an ETF or a robo- No longer do you have to turn of at least eight per cent ors with very little to invest to 0.5 per cent, would increase age that trades equities, advisory, Canadians have drive crosstown to keep a on her stock pick to make it can gain access to a managed, the value of the portfolio by bonds, mutual fund and never had so much competi- branch appointment during worth even bothering to in- diversified portfolio that has $20,000 over 20 years: You ETFs, plus robo-advisory tion for their money. bankers’ hours, or try to get vest. the potential to outperform would cash out with $200,000, that trades ETFs Adam Slight, a 29-year-old through a busy signal to your Conversely, when her trad- the market. versus $180,000. Minimum investment who started Rickshaw Stu- broker before the market clos- ing costs decrease to $10 total Since robots and servers With those numbers, it’s DIY: $1,000. Robo-Advis- dios, a print and marketing es. Instead, you can trade pos- ($5 to buy a stock and another are cheaper than people and easy to see why millennials, or: $2,000 company, recently opened ac- itions on an app or check out $5 to sell it), she only needs a branches, robo-advisory servi- with long time horizons and Commissions and fees counts at both Questrade, an your annual performance re- return of a little more than ces charge far less in manage- native comfort on the com- DIY: $5-$10 per stock online discount brokerage, view on your computer while a one per cent return on her ment fees, at a maximum of puter, are turning their backs trade. Robo-advisor: and WealthSimple, a robo- eating lunch at your desk. stock to start making a profit. 0.6 per cent of assets, plus the on the so-called advice and ex- .29-.47% of assets advisory. The old ways baffle But the biggest advantage With this lower bar for cost of the ETFs themselves, pertise of the old-guard money Fees Misc. administra- him. of unconventional broker- entry, everyone saves money, which usually top out at about professionals. “Our parents would re- ages is their dramatically and more Canadians are able “Just to go to an adviser tive fees. ceive calls from people on the lower fees. to participate in the benefits to execute orders, or even Mostly applicable on phone. It was like Wolf of Wall They undercut each of the of the stock market. get some stock picking ideas wire, estate and regis- Street,” he says. three major ways that old- And what about our invest- — it’s hard to justify what tered account transfers As a small-business owner school investment firms, or who doesn’t want to deal They’re invested you’re paying to them unless Money perks Buy ETFs in Toronto, he’s especially in- banks and funds make with the decision-making? in making money you’re getting some real value- free; rebate on mutual terested in investing as he has money: dollar amount com- He now can dump his con- added services,” Beyer says. fund trailer fees; rebates no employer or pension plan missions, a percentage of cerns onto a robot, which uses off the For now, many savvy mil- transfer fees for regis- to secure his future. assets under management algorithms and ETFs to repli- lennials will stick with easily tered accounts up to to “It’s sort of in my nature, and administration fees. cate the sort of portfolio that transaction available market data and in- $150 if assets are at least even with my own career, to Let’s recall our active, previously only an investment vestment blogs for guidance. $25,000 spend the time to learn the knowledgeable trader. She adviser or mutual fund could 0.15 per cent. Compare that to “Certain professionals want What makes it different ins and outs of things,” he can now trade stocks, bonds, create. fee-based investment advisers, you, with any sort of service Different trading plat- says. “I don’t have a banking mutual funds and ETFs with Robo-advisories work who collect fees of between professional industry, they forms accommodate degree, I’m not saying I know an online discount brokerage.