Portfolio managers who offer services and advice to clients online are sometimes called online investment advisors, online advisors, or robo-advisors. Robo-advisors in Canada use a hybrid of technology to automate parts of the investment process, such as opening an account and determining your investment portfolio, and human review and decision making. In the United States, robo-advisors are often fully automated and involve no human interaction, but in Canada the hybrid model includes human advisors working alongside technology.
When you open an online investment account, the robo-advisor will ask you a series of questions about your financial situation and investment goals (this is referred to as the “Know Your Client” process). Then the system will use algorithms to generate investment recommendations based on the information you provide. Robo-advisors typically use discretionary portfolio management, meaning they make investment decisions without needing your approval for every trade. However, before your money is invested, a human advisor will review and, if necessary, adjust the portfolio to be sure it is suitable for you. You can always speak with your online investment advisor if you have any questions or concerns.
Because of their limited human interaction and increased use of technology, online advisors are typically able to charge lower fees than a traditional advisor, making them an appealing option for tech-savvy investors.
When choosing a robo-advisor, it’s important to do research on the firm and review the different offerings and fees structures. It’s also important to find out how easy it is to update your information when your goals or situations change. Robo-advisors are subject to securities laws and regulations and must be registered.