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The Canadian Financial Advisor

Nest Wealth, the start of a Canadian robo revolution?

Benjamin Felix

Canada's investment industry is trailing the rest of the world. Not only do we have some of the highest mutual fund fees, we are also stuck in the age of embedded commissions. These industry issues have fallen under scrutiny from the media and the public causing many investors to seek fee based advice, or avoid working with an advisor altogether. In either case, people want low cost, globally diversified, and rebalanced portfolios. Not everyone needs a professional advisor in their corner, but not everyone is equipped to properly manage their own portfolio, either. The US had similar problems once, but in true capitalist fashion they have seen a wave of start ups appear to fill the gap. Online services like Wealthfront and Betterment offer portfolio construction, rebalancing, and tax-loss harvesting for a fraction of the cost of working with an advisor, but what about us Canadians? We don't currently have an option that fills the gap between paying for advice and managing a portfolio solo, and it really is a problem for small investors. I have seen plenty of people attempt to go the DIY route only to see managing their ETF portfolio become akin to cleaning the garage or doing the taxes.

Enter Nest Wealth. Nest Wealth is an online portfolio manager that should be available to investors later this year, according to moneysense.ca. Nest Wealth is subscription based, so if your account grows your fee doesn't increase. The cost has been set at $40 per month for investors under 40, and $80 per month for investors over 40 with an additional $20 per month for extra accounts like TFSAs and RRSPs. Just like a professional advisor's fee, Nest Wealth's fee is on top of the fees of the ETFs that they use in building their portfolios. For investors, a service like Nest Wealth is an excellent option for professional portfolio management without the cost of high level advice. Nest Wealth is currently only registered in Ontario.

So how does their fee compare with a professional advisor? If we look at a 30 year old investor with $100,000 in savings split between a TFSA, RRSP, and non-registered account, they would be paying .96% per month in fees to Nest Wealth as opposed to 1% per month to work with a professional advisor. The beauty of Nest Wealth, though, is that as the account increases the fee as a percent of assets effectively decreases. At $500,000 the fee has dropped to .19%. As long as investors understand that they are only getting portfolio management and not the thoughtful advice of a professional, this is a great deal. I envision a situation where online portfolio management becomes a pathway for people to build assets to the level where professional advice is warranted.