Cost of Investment with Robo-advisors in Canada

Analyzing the top three low-cost providers

Graph 1: If only fees are considered, Nest Wealth is more expensive than Wealthsimple till CAD 270,000

There are hundreds of discussions every month on this topic. Most have been focusing on Nest Wealth and Wealthsimple as low fee options; Questwealth is a relatively recent addition, having been launched 5 years later.

Are robo-advisor fees the only factor contributing to cost? Turns out that there are a host of other factors, including fees charged by funds the robo-advisors invest in. It is the fund management expense, referred to as Management Expense Ratio [MER]. Here is a great article by Wealthsimple on MER.

Graph 2: Fees + MER, Nest Wealth is less expensive than Wealthsimple at CAD 70,000 and CAD 270,000 onwards; Questwealth is the lowest cost provider till CAD 390,000

With MER, Nest Wealth cost is no longer flat as in Graph 1. Wealthsimple cost has also increased to such an extent that Nest Wealth is less expensive than Wealthsimple at one lower investment point.

Questwealth is the lowest cost provider till CAD 390,000.

As Nest Wealth charges a fee per trade maxing out at CAD 100 per account, their fees fall in a range depending on the number of trades a year. Another line, Nest Wealth min., appears. More than 12 trades a year is reflected by Nest Wealth max.

Graph 3: Fees + MER + Custodian fees [Account fees + Trading fees], Nest Wealth is the low cost leader above CAD 390,000

Nest Wealth is the lowest cost provider above CAD 390,000.

Number of clients in a family, number of registered and non-registered accounts, type of account first opened by each client, aggressive / balanced / conservative nature of portfolio / risk profile of each client, and investment share of each client are the other factors contributing to cost.

The graphs above are for one person in a family holding a single non-registered account in an aggressive portfolio.

Identify the robo-advisor best for you. Watch the graph change as you play around with inputs.

Have fun! Let me know what you discover.

Citations:

Nest Wealth | Pricing That Works

Questwealth

Wealth Simple

Robo-advisor fees and perks