New opportunities in robo-advisors

“We believe in the value of financial planners and the role they play in people’s lives,” says Ron Fox, Glidepath’s CEO, “and [Glidepath is] a service that these financial planners want to use to help them continue to add value to their loyal clients.”

Glidepath is an investment-counsel portfolio-management firm that creates customized portfolios, consisting exclusively of exchange-traded funds (ETFs), for financial planner clients. The firm partners with independent financial planners across all distribution channels in Ontario.

At the moment, financial planners are not required to have a specific designation to use Glidepath. However, Fox says, he is looking to work with like-minded financial planners who are committed to financial planning standards. Planners charge their own fee to their clients on top of Glidepath’s 0.5% management fee.

Glidepath is unique among the various robo-advisors operating in Canada in that Glidepath is strictly a business-to-business offering without a direct-to-consumer component. That doesn’t mean, however, that Glidepath is alone in offering an advisor-friendly platform. Wealthsimple Financial Inc., Nest Wealth Asset Management Inc. and Bank of Montreal’s SmartFolio offer advisors access to their platforms to help them manage client accounts in addition to the direct-to-consumer offerings these firms have available. (All three companies are based in Toronto.)

Meanwhile, De Thomas Wealth Management, a Toronto-based mutual fund dealer, has taken the plunge in launching a robo-advisor of its own last year. The service, RoboAdvisors+, is an online platform through which De Thomas serves its clients.

To get started, clients sign up with RoboAdvisors+ by completing an online questionnaire. Once the questionnaire is completed, clients are contacted by and assigned to a De Thomas advisor, who discusses the responses with clients in more detail. A portfolio consisting of mutual funds then is built for each client. All communication with RoboAdvisors+ clients is done via telephone or online.

Tony De Thomasis, president of both De Thomas and RoboAdvisors+, says the dealer firm decided to start up the robo-advisor platform to make the dealer’s services accessible to more clients – and the strategy appears to be working. De Thomasis estimates that the dealer has gained about $30 million in assets under management from clients across the country since launching RoboAdvisors+ last year. The average client with the robo-advisor is about 50 years old with $75,000-$150,000 in investible assets.

“We’re very happy with that growth,” says De Thomasis. “We don’t want to get $200 million overnight; that’s not our market.”

The investment industry’s embrace and launching of robo- advice platforms, in one form or another, is not surprising, says Mike Foy, director of the wealth-management practice at J.D. Power & Associates in New York: “A lot of folks in the industry are thinking about how to use these kinds of tools to enable advisors to be more productive and better able to serve say the mass affluent market than they are today.”

J.D. Power’s research suggests there’s a growing interest in robo-advisors among Canadians, particularly among do-it-yourself investors. According to J.D. Power’s 2016 Canadian Self-Directed Investors Satisfaction Study, 66% of millennials are interested in robo-advice, and 54% of investors of all age groups said the same thing.

Despite this interest, there’s room for the traditional advice model. The study found that self-directed investors still look to work with financial advisors. For example, 37% of self-directed millennial investors said they have a secondary full-service investment account. And 21% of those investors who don’t have a full-service account said they probably will need one in future.

“[Investors are] not putting all their eggs in one basket,” says Foy. “They want to think about treating different pools of money differently.”

Although investors may use different platforms to manage their wealth, research suggests that they will continue to seek the same traditional financial services institutions they have worked with in the past – potentially giving those firms that develop technlology-driven platforms an advantage.

Specifically, Montreal-based CGI Group Inc.’s The Fintech Disruption in Financial Services report found that more than 75% of consumers globally would prefer to use digital platforms through their traditional financial services institution rather than a non-traditional provider.

Indeed, Chris Ambridge, president of Transcend Private Client Corp., an online platform and a subsidiary of Provisus Wealth Management Ltd. (both Toronto-based firms), believes that the hybrid robo-advisor model, in which technology is used to create customized portfolios and to aggregate multiple accounts but in which clients still work with a human advisor, will continue to grow.

Says Ambridge: “It’s one change that’s occurring – and will continue to occur.”

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