You’ve probably heard of the term “robo-advising,” but you truly understand its meaning? Robo-advising isn’t your typical arrangement with a financial advisor at the bank. Robo-advisors are virtual operations that operate on the World Wide Web. Through robo-advising you can build a customized investment portfolio with exchanged-traded funds (ETFs) at the fraction of the cost.

What is Robo-Advising?
The name “robo-advisor” is a bit misleading. When you imagine a robo-advisor, you probably picture a computer acting as your investment advisor. That may make some investors nervous putting their financial future in the hands of a robot. It should put you at ease to know that humans are working in the background to create portfolios.

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Canadian pay some highest management fees of developed countries. With robo-advising it’s a lot less – you’ll only pay somewhere in the range of 0.6 to .85 percent towards management fees (this includes the costs of advice and ETFS fees). Robo-advising is a good all round solution for investors. Robo-advisors fall somewhere in the middle between DIY (do-it-yourself) investing and using the services of a financial advisor.

With how costly the MERs are on mutual funds, you’d think your portfolio would be automatically rebalanced. Unfortunately, that’s not the case in many instances. This is another area where robo-advising has a leg up on traditional mutual funds. Robo-advisors monitor your portfolio daily so you don’t have to. Your portfolio is automatically rebalanced so your investments aren’t at greater risk if your asset allocation gets out of whack.

With more than $15 billion (U.S.) in assets in the U.S., robo-advising has reshaped the investment landscape south of the border. In Canada, robo-advising is still in its infancy. Fintech (financial technology) firms are looking to capitalize on the momentum stateside and offer the same low-cost investing to Canadians.

Why Robo-Advising Isn’t Just for Millennials
Robo-advising has proven popular with millennials. This shouldn’t come as a surprise. If you ask the typical millennial what they couldn’t do without, their mobile phone is likely to be at the top of the list. The traditional business model of people visiting their bank to buy investments is falling by the wayside thanks in large part to robo-advising.

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Although millennials may be known for their technological savviness, they’re not the only ones who are fans of robo-advising. Robo-advising is proving popular with middle-aged Canadians in their 40’s and 50’s who are frustrated with paying high fees and in return receiving little facetime with their financial advisor and instead left scratching their head with complicated financial statements. With the big banks getting into robo-advising, look for it to rise in popularity over the coming months and years, as more Canadians look to get better value for the thousands of dollars in investment fees they pay.

At Smart Money Invest, we offer you the best of both worlds. You get ridiculously low fees and a portfolio that automatically rebalances, so you can worry about the important things in life like spending time with loved ones and friends. Get started with robo-advising today and start reaping the benefits.