Canada: When Investors Lose Patience, Advisors Lose Assets

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3 September 2016
William Trout

Growing interest in robo advice among Canadian investors reflects the dearth of advice offered by incumbents more than any real threat from startups. The independent robo community in Canada, split between the traditional financial services hub of Toronto and fintechy Vancouver, is fragmented and small; there is no Canadian Betterment. And so, with a few exceptions, banks and other providers of wealth management services in Canada have felt little need to undermine their fat margins by rolling out digital advice channels.

This may prove a mistake. A recent JD Power survey of Canadian investors showed that few felt that their financial advisors provided much in the way advice. Roughly half of those surveyed felt their advisors helped them set goals; only a third believed that their advisors were helping them follow a strategy. This skepticism begs the question, what are these advisors providing?

If it’s just portfolio management, there’s a real opportunity for the robos, particularly given the fee transparency enforced by CRM2 regulation. If it’s portfolio management plus service and coaching, there’s still an opportunity to undercut the high fees charged by advisors. Indeed, the JD Power survey found that nearly half of Millennial investors in Canada would consider using a robo type solution, versus 30% of all investors. These levels may seem low compared to the US, but as I discuss in my Thawing Market: The Growth of Robo Advice in Canadareport published last spring, robo advice in Canada only dates back to 2014.

A revolution starts with just a few voices. Once the crowds have gathered, it’s often too late to respond. Canadian banks and advisory firms must find ways to roll out low cost digital advice channels, or else risk losing a generation of investors. These roll outs needn’t be cumbersome or expensive. I’ll discuss some quick and painless ways firms can get up and running in my webinar on robo this Thursday.

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Asia-Pacific, EMEA, LATAM, North America