The term “robo-advisor” is becoming much more popular in the world of investing, but it can still be confusing to navigate how they actually work. On a fundamental level, robo-advisors aim to take all the work off your plate, leveraging computer analysis to pick the best investments.
he question that remains, though, is what qualifies as “the best”? There are a million and one definitions, since “the best” is really “what works best for you based on your unique circumstances and goals.”
Most robo-advisors focus on the idea that almost no one can outperform the stock market, something studies confirm time and again. So their pitch to you is ignore the money side – let them do it, and your nest egg will be fine.
Vancouver-based WealthBar, however, takes a different approach. While their platform uses similar investing strategies that other robo-advisors invest in, they take it up two notches. One notch focuses on unique investments outside the traditional low-cost investing strategies while the other focuses on getting you more involved, not less, in your financial future.
WealthBar’s history and how it works
Started by husband and wife duo Tea and Chris Nicola, WealthBar was founded after the Nicolas’ decades of experience in wealth management. There, the couple saw wealthy clients getting access to different kinds of investments. Further, they saw wealthy people taking a different investment approach: one that focused on sustaining wealth through turbulent times while maximizing growth in good market conditions.
At the time, these high net worth investing strategies required a lot of human effort to research and manage, so it was not an option for the majority of Canadians. The Nicolas saw an opportunity to “democratize investing through innovation,” leveraging technology to bring those fancy rich-person investing opportunities to people with as little as $1,000 to invest.
Once you have $1,000 to invest in any kind of account – TFSA, RESP, RRSP, etc. – setting up on WealthBar is as simple as creating an account, letting them know about your goals, and linking your bank account to send the money over. WealthBar uses “custodians,” a fancy name for government regulatory bodies, to keep money safe, so there’s no concern of them stealing your capital.
After your money is with WealthBar, you can do a few things
- Sit back and relax – they manage the money for you
- Get advice on your financial plan from a WealthBar advisor, free of charge
- Look through your investments on WealthBar’s desktop or mobile applications
As with any financial service, there are fees. But WealthBar claims it works to be as transparent as possible with the management fees they charge, further saying they are on average significantly lower than a typical mutual fund offered by a big bank.
WealthBar charges a management fee that is a percentage of how much value you have in your account. The more money you have, the less you pay in fees.
- 0.6% management fees for the first $150,000 CAD in your account
- 0.4% for the next $350,000 CAD in your account
- 0.35% for all dollars added above $500,000 CAD in your account
The fees are blended, meaning that your first $150,000 CAD will always be charged at 0.6% management fees. If you have more than that, the lower fees apply to the additional money, not the total amount. For example, your actual average management fee will be 0.46% if you have $500,000 in your account, taking into account the two tiers of fees (0.6% and 0.4%, respectively) that your money is charged at.
There is also the matter of fees for the investments themselves, as funds charge their own management fees to buy into them. However, WealthBar pays these fees on your behalf – the only thing you pay is your stated management fee to WealthBar, ranging from 0.35% to 0.6%, as noted above.
These fees are similar to other robo-advisors, such as Wealthsimple, that charges 0.5% on your first $100,000 and 0.4% after that.
Bringing Wall Street to Main Street
In many discussions around financial inclusion and helping people with lower incomes generate wealth, people decry Wall Street tactics. They are angry that a few Wall Street-ers get rich off really good investments that no one else has access to. Some people want to stop these investing practices altogether, feeling they are a detriment to society. WealthBar takes the opposite approach, instead wanting to bring those lucrative, wealth creating-and-preserving investments to everyone.
While their strategy has yet to come to fruition, since a $1,000 minimum still puts some people out of reach, they have come a long way – many investments they work with such as real estate and fixed income investments have minimums closer to $1 million.