How to Choose A Robo-Advisor in Canada


In recent years, more and more people are turning to investing in the stock market. It’s easy to see why when you consider that it’s not only an excellent way to generate returns, but also exceptionally good at creating lasting wealth.

The thing is, it can get complicated, especially for beginners. So, when you want to invest in the financial markets without the hassle, a robo-advisor could be a good choice for you. This is simply because they allow you to invest successfully without requiring a hands-on approach.

Also, with robo-advisors, you’ll have access to a wide range of investment portfolios and accounts you can choose from, depending on your specific investment goals, needs, and requirements. As a bonus, and because they’re more automated and require less human interaction, they’re cheaper than investing through a traditional financial advisor.


The problem is, how do you choose a robo-advisor? Fortunately, we’re here to help and here, we’ll show you some of the things you should consider when choosing a robo-advisor.

What is a Robo-Advisor?

Robo-advisors are digital platforms that simplify investing by offering their customers automated, algorithm-driven investment and financial planning services. Typically, robo-advisors collect information from clients and their financial situation and then use the data to offer investment advice with some even able to invest client funds automatically.

Generally, robo-advisors help investors invest in low-cost ETFs. This has two main advantages. For one, they enable investors to minimize the fees they need to pay because ETFs, by design, are more affordable than comparable investment instruments. Also, the fact that there’s no financial advisor involved, brings about further fee savings.

Another benefit is that they allow investors to maximize their returns over time. Here, although it isn’t possible to say whether a robo-advisor will outperform a mutual fund or financial advisor, they are cheaper which means there are no excessive fees that eat into your profits.

Apart from these benefits above, the best robo-advisors also offer easy account setup, robust and intuitive goal planning, portfolio management and rebalancing, account and customer services, security features, and education.

Wealthsimple and Questrade are two leading robo-advisors in the Canadian fintech space. They both offer low-fee automatic investing options for people who want to access the stock market but don’t want the headache of managing their own portfolio. But which is better when it comes to Wealthsimple vs Questrade? It depends on what you need!

How to Choose a Robo Advisor

Now that we’ve looked at what a robo-advisor is, the question is how you should go about choosing the right one. Obviously, there are no hard and fast rules when you do and your choice will, ultimately, depend on your specific investment goals and requirements.

With that in mind, there are some things you could consider to make your decision a bit easier.

What Fees Do Robo Advisors Charge?

With so many options available on the market that all offer similar products and services, the main differentiating factor between them will often be the fees you’ll pay. Generally, there are two fees that robo-advisors charge.

The first is the management fee, which is the fee that all robo-advisors advertise. This annual fee is calculated as a percentage of the funds you’ve invested. So, for example, if you invest $10,000 with a robo-advisor that charges a 0.4% management fee, you’ll pay $40 in fees. These fees will then be deducted from your invested capital at the end of every year.

Robo-advisor fees range anything from zero, in some cases, to 1% with the average being between 0.25% and 0.5%. Also, keep in mind that, some robo-advisors might charge a flat fee while others charge different rates depending on the amount of capital you’ve invested.

Average MER

The second fee you’ll need to pay, and the one many investors often neglect to consider is the average management expense ratio (MER). The average MER is not charged by the robo-advisor, but by the Exchange-traded Funds (ETFs) it invests in on your behalf. This fee is then paid to the portfolio managers and is not deducted from your capital.

Despite it not being deducted from your invested capital, you should still use it to calculate the total fees you’ll pay. So, for example, let’s use the same scenario described above where you invest $10,000 with a robo-advisor that has a 0.4% management fee again. Let’s also assume that the portfolio you invest in has an MER of 0.2%.

If we do the math, you’ll pay a management fee of $40 per year and an MER of $20 per year. So, you’ll pay a total fee of $60 or 0.6 % of your invested capital.

Investment Options

Most robo-advisors allow investors to invest exclusively in low-cost Exchange-traded Funds (ETFs). The average expense ratios for these ETFs are generally in the region of about 0.2% of the invested capital. So, when you compare different robo-advisors, you should take this into account in your comparison.

As described above, you should then calculate the total fees, or the management fees plus the average MER, to see how they compare. You should also consider the number of asset classes that will be included in the portfolio you’ll be investing in and what percentage of each investment is allocated to cash.


Typically, you’ll be able to find this information on the robo-advisors website, during the signup process, or by phoning them. If you don’t want to invest in ETFs, you should consider looking for a robo-advisor that offers you more customization options that will, in turn, allow you to invest in other assets like mutual funds and other investment products as well.

Another consideration is the range of investment plans and accounts the robo-advisor offers. So, for example, if you want to save for retirement, you should look for a robo-advisor that offers you Registered Retirement Savings Plan (RRSP) and Tax-free Savings Account (TFSA) portfolio options.

Likewise, if you want to save for your child’s education, you should consider a robo-advisor that offers a Registered Education Savings Plan (RESP). Keep in mind, though, that these are just some examples of accounts and there are many more. For instance, Wealthsimple offers the above accounts and a cash account, stock trading, halal investing, and an option to save and invest your loose change.

User Friendly

Although it might sound relatively trivial, you should also consider how user-friendly the robo-advisor and its platform are. For example, it should be easy for you to see and understand where your money is invested and how it’s growing.

Another important consideration here is customer support. The idea behind a robo-advisor is to minimize human involvement in the investment process. However, some investors still prefer to speak to a professional advisor from time to time. So, if this is important to you, you should consider a robo-advisor that offers this option.

Luckily, most robo-advisors in Canada use a hybrid approach to investing. This means that, although the platform is automated to a certain extent, there are still human agents and advisors you can speak to you and people managing your money behind the scenes.

Are Robo-Advisors Safe?

The question that investors often have is whether robo-advisors are safe. The simple answer is that they are. In fact, they’re as safe as any other investment broker mainly because most of them are backed by the Canadian Investment Protection Fund (CIPF).

This means your money is protected, usually up to a specific dollar amount. Keep in mind, though, that, although most robo-advisors are backed by CIPF, it’s worth your while to ensure that your chosen robo-advisor is because, in many cases, it’s not clear. In simple terms, you need to read the fine print to make sure this protection is there.

Hopefully, this post helped illustrate some things you should look at to find the right robo-advisor for you. To learn more about robo-advisors or investing, visit our website for more details. MoneyWizard is your one-stop shop for comparing all things financial and we’re here to provide Canadians with easy-to-access resources and trusted providers that will have them investing with confidence and growing their wealth.

Sandy Jensen
Sandy Jensen, a celebrated writer in the home and garden niche, boasts over 12 years of hands-on experience. Her educational background includes a Bachelor’s in Landscape Architecture from Cornell University. Before joining our team in 2016, she worked as a landscape designer, combining her love for nature and design. Sandy's expertise shines through her articles, offering readers practical and aesthetically pleasing gardening tips. Off the clock, she enjoys hiking and nature photography, further nurturing her connection with the outdoors.

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