Robo-advisors: Not for clients only

“Right from the beginning, we said that we would much prefer to work with those in the industry,” Katchen says. “And, as a result, we are actively in conversations with advisors who are looking to support their books of business with our platform.”

Both Wealthsimple’s and Nest Wealth’s advisor platforms will allow advisors to outsource traditional functions, such as portfolio rebalancing and tax-loss harvesting, so that the advisors can focus on other important elements within their practices.

“As [financial advisory] firms learn about Nest Wealth’s ability to handle client ‘onboarding,’ portfolio construction, diversification and automated rebalancing more efficiently and easily, [advisors] can quickly connect the dots,” says Randy Cass, founder and CEO of Nest Wealth. “They then realize that we could help free up time to focus on the things they care about most. Firms and advisors that ‘get it’ see Nest Wealth as part of their future, not as something to be concerned about.”

Advisors will be able to customize their clients’ investment portfolios, as well as co-brand with the robo-advisor services to include the advisor’s and/or advisor’s firm’s name on both platforms. Although both providers still are considering their fee structures, these will include platform fees for advisors that are expected to be less than what’s charged to most consumers.

“It’s no secret that everybody today is looking to become more efficient and provide a higher level of service and transparency to their clients,” says Cass. “Our vision is that we’ll help [financial services] firms by being the power behind their efficiency gains.”

Robo-advisory platforms provide clients with an online risk-assessment tool that calculates appropriate asset allocation based on age, risk tolerance and financial goals. An automated, online portfolio manager reviews each account and creates a portfolio of funds consisting mainly of exchange-traded funds (ETFs). Unlike self-directed accounts, clients are able to receive automatic rebalancing – all for the fraction of the cost of a financial advisor.

But, Cass and Katchen say, there are two key reasons why advisors look to join the robo-advisor movement: to off-load smaller accounts that may have been turned away in the past; and to gain access to robust technology.

“We’re seeing advisors who would love to have a similar reporting and account system setup for their clients but are not able to build the technology themselves,” Katchen says. “These advisors still want to have the freedom to create their own customized portfolios and offer their services and advice while we handle the technology component of the transaction.”

In the U.S., robo-advisors are slightly ahead of the game in this field. New York-based Betterment LLC launched an automated robo-advisor tool, Betterment Institutional, for traditional advisory firms in October. This pilot project started out with 25 advisory firms on board; in less than two months, that number jumped to 45. In fact, FMR LLC (a.k.a. Fidelity Investments), which provides brokerage services to 3,000 firms, is referring advisors interested in robo-advisory services to Betterment.

Betterment’s tool gives advisors access to statements and reporting, online client sign-up, billing software and fee collection. And advisors can access 12 ETF portfolios for a small fee of 0.25%.

Other firms are taking different approaches. New York-based Ritholtz Wealth Management created an internal robo-advisory platform with the help of a third-party technology firm. Charles Schwab Corp. of San Francisco made headlines when it announced its robo-advisor offering would be free for advisors.

Although other Canadian providers of robo-advisory services, such as Toronto-based ShareOwner Investments Inc. and Vancover-based WealthBar Financial Services Inc., don’t have any immediate plans to launch a separate offering for advisors, they’re hearing a great amount of interest from advisors.

“Our platform is a bit more independent in that it is the investors who decides on what type of portfolios they want,” says Bruce Seago,president of ShareOwner Investments. “But for someone who wants to work with an advisor, the advisor can quite easily use our platform to do the same thing – and it would be the advisor making the decision on what assets are to be held by the client.”

Toronto-based Questrade Inc., which has been in the online brokerage space since 1999, launched its own robo-advisory platform, Portfolio IQ, in late November. Edward Kholodenko, president and CEO of Questrade, says it’s too early to see if advisors would take an interest in the new platform.

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