Robo Advisors A Touch More Human In Canada

Canadian regulation requires human intervention with each new client, something more and more U.S. robo advisors are doing.

Reviewed by: Drew Voros
Edited by: Drew Voros

Neville Joanes is portfolio manager and CCO at WealthBar, Canada's first full-service portfolio manager to conduct its services entirely online, with clients across Canada with an average account size of $90,000. Joanes will be speaking at the Inside ETFs conference in Florida on Jan. 22 on “The Rise of the Canadian Robo Advisor.” caught up with him to discuss the differences and similarities between robo advisors there and in the U.S. Are there differences and similarities between what's happening in the Canadian robo industry space compared to the U.S.?

Neville Joanes: The robo space in terms of Canada and the U.S. are similar in offering a broad-based offering. They both provide online financial advice to clients at a low cost, mainly using ETFs. And much like our counterparts in the U.S., here in Canada, we're able to leverage technology to offer local solutions online.

What we've seen in general is that people are doing more and more online each day. They interact with each other, they bank, they shop. They've developed confidence around investing and working online. So there's less "It's new; I'm scared of it."

They look at the reliability of the service, and people are more inclined to trust an online advisor, especially if it's associated with a brand or they're reading more about them.

Where we differ from the U.S. is, in Canada, the regulatory environment is slightly different. We're required to have a portfolio manager and an advisor review every account with the client. So we have a follow-up process with each client. It's not pushed through, like simply "click, click, click." There actually has to be interaction with an advisor.

You don't have to physically talk to a human with us. You can send us a message, you can email. But regulators here require some interaction between the advising representative and the client. We have to explain to the client on a basic level what the portfolio is, to make sure they understand it. We found that initially this was a hindrance, but we've actually embraced it. And can clients call?

Joanes: Yes, they can call, and they can use our online chat function to connect with a person. The main reason is to help the client with their understanding of the portfolio and provide financial planning. And that's how we differentiate ourselves from our peers here in Canada. We provide more financial planning for the client. For instance, prior to elections or other macro events, do you get calls from worried clients? How is that relationship in general?

Joanes: In general, it's very nonhuman interaction. For example, and this is where we leverage technology, with all the macro events—the beginning-of-the-year correction, Brexit, as well as the election—we see these things unfold. Because they happen on a global scale, we see it happening and we prepare messages.

We add messages to the client's dashboard, so when they log on, they’ll see a message, and it’ll explain what's happening. We provide some context as to why it's happened, what we expect to see going forward and what we’re going to do, if anything.

And so, when the client logs on, they see this message and it provides a level of comfort. Over this year, there were those three major market events. Not one of our clients pulled out money. We didn't send them emails, so we didn't panic them. But if they were concerned and they logged in, they saw a message. Some of them replied to it. And we noticed that, on those days, or around those events, we saw higher log-in rates.

If we can predict what's coming down the line in terms of a client's concerns and we address that in a way you can communicate to them and they can see it first and foremost, it gives them that level of comfort so they don't need to reach out and actually have a conversation with someone.

But there are those that do. So some will see the message and say, “OK; so how should I deal with this now given that my portfolio's like this?” We follow up and we have conversations with those clients that require it. Would you describe your client base as wide cohort, or are you seeing a younger clientele?

Joanes: I'd say it's very diversified. We have clients ranging from 19 years old to 88, which I think is our oldest client. We are seeing it barbelled between the retirees and preretirees, and the working millennials.

Initially we found that the older clients were a surprise, but having spent more time working with them, we understand that they've got more time to focus on retirement. They don't find technology as inhibiting because they do a lot of stuff on a daily basis online.

We also realized that they need a little bit more attention and they have different requirements in terms of account types. And we also noticed that they're being underserved by the advisor market here in Canada, for example, in that they have depleted accounts and they may not meet some minimums held by traditional advisors. We’ve also seen a larger-than-expected growth in the preretirees. So what’s the protocol for new clients? Do you put them through a risk tolerance test and then assign portfolios based on that?

Joanes: Yes. So, effectively a client comes in to the site. We ask questions to determine their risk and we assign a portfolio based on that. And as I said, we then have a follow-up discussion with the client in terms of what the portfolio is and the risks associated and make sure they understand that.

We've seen in that discussion that sometimes the client’s needs are straightforward. And as long as they have that basic portfolio that's going to reach their goals, it gets them there. And tell me a little bit, are your portfolios all 100% ETFs? Or is there a mix of mutual funds and cash?

Joanes: We have two types of offerings. The core part of our business is portfolios of low-cost ETFs that are diversified across various asset classes and geographies.

We also offer a group of private investment pools that have access to asset classes that are not easily captured by ETFs, such as mortgages, infrastructure, private equity, physical real estate. We offer portfolios that use those. So what percentage of your investments are in ETFs? Are all the ETFs you use Canadian-listed, or do you use any U.S.-listed?

Joanes: It's about 50/50 in ETFs and in our private investment portfolio. We offer all-Canadian-listed ETFs. We've seen that the Canadian ETF landscape is evolving. Most of the large providers from the U.S. have a presence in Canada, such as Vanguard, iShares, First Trust, WisdomTree.

We've also seen development of strategies beyond simple indexing, such as smart beta and active management. And with more than 400 ETFs in Canada, we are able to construct well-diversified portfolios for our clients. Here in the U.S., there's a big home bias. Most investors here in the U.S. don't have much beyond the U.S. borders in terms of emerging markets or any of that. Is there that same kind of home bias there in Canada?

Joanes: Yes. Canada also experiences high home bias. Canada makes up, let's say, 4% of the global equity market, yet 60% of equities in a client's portfolio are Canadian.

So where you have large countries like the U.S., with large diversified markets, the implications of home bias can be small. However, in Canada, where equity markets are concentrated securities in sectors such as resources and financials, the impacts can be significant.

So we at WealthBar have low Canadian equity exposure in the portfolio. At the same time, we have to remain cognizant of our clients' expectations and eventual withdrawals being in Canada in Canadian dollars. Do you offer any kind of services toward advisors in terms of your robo offering?

Joanes: We’ll be rolling out services towards advisors in Q1 of 2017. Are we getting to the point that if you're an advisor and you don't have some kind of robo offering, you're too 20th century; you're not going to be able to sustain any kind of future growth. Or is that overdramatic?

Joanes: I think at the moment it's overdramatic. But what advisors should be prepared to do and be aware of is that clients are doing everything online today. So they need to have some way to interact with their client that gives their clients convenience and accessibility without the client needing to come in to the office for discussion or pick up the phone.

I don’t think that the robo-advisor space is going to destroy the traditional financial advisor. What I do think is that the technologies we use and the type of interactions with which we engage with our clients will be integrated into traditional practices.

We’re working on solutions for advisors. And then advisors will pick and choose what works best for them and their clients. Some clients prefer not to do anything online and to deal with an individual person.

But I do think that if advisors ignore the technology, their clients could suffer and their growth could suffer. But I don't think it’ll destroy their business if they don't jump into it right now.

Visit to read more and to subscribe to ETF thought leadership from FactSet.


Drew Voros has nearly 30 years' experience in financial journalism. He was a longtime business editor for the Oakland Tribune and sister papers of the Bay Area News Group, and finance writer for the Hollywood trade publication Variety. Voros' past roles have also included editor-in-chief at and ETF Report.