The Bank of Montreal has launched an online portfolio manager, making it the first of the big five Canadian banks to offer at "robo-adviser."
The SmartFolio service is a financial advice service that interacts with customers online, directing them to a portfolio of exchange-traded funds depending on their answers to its series of questions about your income, investment horizon and tolerance for risk.
Robo-advisers are thought to be a key future direction in offering financial advice, because tech-savvy millennials prefer online service.
They also may appeal to more traditional investors after they find out all the hidden fees they are paying for financial advice in their statements to be issued later this year.
Fee disclosure coming
Beginning July 15, investment brokers and dealers will have to supply their clients with, among other things, a report that itemizes the annual costs of the service fees, embedded commissions, referral fees and all the other charges investors may have no idea they pay to their money managers.
The amounts may astonish many investors and drive them to seek out low-cost alternatives, such as robo-advisers.
There are numerous standalone robo-adviser services in the Canadian market, including WealthSimple, NestWealth and WealthBar. All the big five banks are believed to be interested in developing online investment tools, but BMO is first on the market with their SmartFolio.
"We felt it was an opportunity to really be able to tap into that segment that's on the move and wants to be able to do whatever they want to do from wherever they are," said Joanna Rotenberg, head of personal wealth management at BMO.
Rather than partner with a financial technology company, BMO developed its product in-house.
The bank says it used clear, jargon-free language and responsive website design that provides the same experience for users regardless of whether it's accessed through a computer, a tablet or a smartphone.
All support is online
Prospective clients fill out an online questionnaire that gathers information about their investment goals, their time horizon and their tolerance for risk.
After some online explanations of volatility and the relationship between risk and reward, the client is enrolled in one of five model porfolios made up of BMO's own exchange-traded funds, or ETFs.
Customer support is provided via live chat, email and telephone.
The minimum account size for SmartFolio is $5,000 and fees are charged as a percentage of assets under management, starting at 0.7 per cent for the first $100,000 and gradually moving lower for amounts above that.
For a $5,000 account, the annual fee comes out to $60, according to an online calculator featured on the SmartFolio site. There may be additional management expense ratio fees on the ETFs offered.
Although BMO is touting the service as low cost, its fees are somewhat higher than those offered by some of the upstarts.
For example, Wealth Simple and WealthBar both offer free accounts for those with less than $5,000 to invest. At WealthSimple, clients whose accounts are between $5,000 and $250,000 pay 0.5 per cent, while WealthBar charges 0.6 per cent of assets.
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