Parents have lots of questions when it comes to investing for their children’s post-secondary education. What should they invest in? How much should they save? When do I start investing and how often should I make contributions?
A robo advisor can help you answer some of these questions and more!
Robo advisors are an automated investment platform that use algorithms to create a personalized portfolio based on your risk tolerance, time horizon, and financial goals.
In this blog post we will cover the best robo-advisors for RESP accounts in Canada so you can find the one that suits your needs.
We’ll also outline what investors should look for in a robo-advisor and how they can benefit from using one.
What are Robo-advisors?
Robo-advisors are automated investment platforms that utilize computer algorithms, in place of human advisors, to construct portfolios and manage the investments.
The platforms are designed to be simple and user-friendly, allowing anyone to start investing in just a few minutes and usually with little money.
In fact, some of them (like Wealthsimple) will let you start investing with as little as $1.
Robo advisors can help investors of all knowledge levels get started with investments. With the portfolio managed by professionals, anyone can start investing and take advantage of the benefits that come from automated investing.
How Robo Advisors Work?
A robo advisor will help you create an investment plan based on your financial goals and risk tolerance then manage it for you automatically.
It’s like hiring a personal finance expert without having to pay an arm and a leg for it.
They are are known for being low-cost investment platforms, especially in comparison to traditional human advisors.
In fact, some robo advisor fees can be as little as 0.20% in Canada.
The fee is a percentage of your assets under management and will be taken each year regardless of your returns.
To get started with automated robo-advisory platforms:
- Simply open an account with the robo-advisor
- Take their quiz to determine the right portfolio for your needs (asset allocation)
- Fund your account and setup periodic contributions to the account
- Sit back, relax and watch as the robo-advisor manages your portfolio for you
One of the best things about robo-advisors is that they offer a wide variety of investment options with varying investment risks.
They provide access to different investment products like stocks, ETFs, bonds and so on which gives you exposure to investments in both the Canadian and international markets.
So depending on your risk appetite, your portfolio will have different allocations to these investments.
What are the benefits of Robo-advisors?
There are many advantages for using robo advisors. Some of them are:
- Low fees: Many robo advisors have low management fees when compared to traditional advisory services.
- Automation: Robo advisors are automated and don’t require you to be as hands-on with your investments as you would with a self-directed account. They’ll rebalance portfolios, make trades when necessary, harvest tax losses and more.
- Flexibility: You can set up your portfolio and then leave it alone while you focus on other things in life.
And if you want, most robo advisors will allow you to transfer funds from a traditional brokerage account into their platform.
In most cases though, the assets in the old portfolio will have to be liquidated in exchange for the robo-advisor’s portfolio.
What are the disadvantages of Robo-advisors?
While robo advisors are becoming more popular, they aren’t perfect.
For instance, you won’t receive investment advice when using these platforms and it can be difficult to get a hold of someone if you need help with your account.
In addition, some investors might not feel as comfortable investing their money without a human advisor to talk with.
Generally speaking, robo-advisors aren’t for you if you believe you need personalized financial advice. This is because robo advisors aren’t able to provide financial advice like an advisor or portfolio manager would be able to do.
On the other hand, robo advisors offer a great solution for investors of all knowledge and account sizes looking to start investing or save even more money on fees.
Who should use Robo Advisors?
Robo advisors are ideal for anyone looking to invest money on an handsoff basis by taking advantage of the automated features.
If you’re an investor with a smaller account, fees can really eat into your returns over time so using robo advisor platforms is the best way to save on those costs while still having access to a wide range of investment products like stocks, ETFs, fixed income and more.
Irrespective of your account balance, you get access to a globally diversified investment portfolio quickly at a fraction of the cost of building one yourself.
If you’re someone who is busy with life but still want to invest money on a regular basis or contribute regularly then robo advisors can be the best solution for you as well since they are automated platforms that handle everything for you while keeping your fees low.
Learn more: What Is Diversification And Why Is It Important?
How do I choose the right Robo Advisor?
Choosing the right robo advisor can be difficult since there are so many options. But here are a few things to consider
The first thing you’ll want to consider is your investing needs and whether the robo-advisor meets them.
You’ll also want to consider what services they offer, how much money you need to have invested before moving forward and their management fees.
There are typically three different types of fee structures for robo advisors:
- fixed percentage every year based on the amount of assets under management (AUM)
- flat monthly fee; or
- a mixture that charges a flat fee and a percentage of AUM.
Also, consider what investment products are on offer such as ETFs (exchange traded funds), mutual funds or stocks and how they are diversified.
Ultimately, review the features of the robo-advisor, compare to its competitors and be sure their offering fits with your investing goals.
What is RESP?
Registered Education Savings Plan (RESP) is a tax-deferred savings plan designed to help parents save for their child’s post-secondary education.
It is a long term investment with the goal of accumulating enough money by the time your child enters post secondary school so they can pay for tuition, books and living expenses.
There are several options when it comes to opening an RESP account.
You may decide to go the DIY route and open a self-directed RESP account, but many parents choose to go with robo advisor RESPs or managed RESPs because of the low fees, automated investing and convenience.
What are managed RESPs?
A managed RESP, or robo advisor RESP, is an RESP account where the parent or guardian has a bank, credit union, online brokerage and so on manage their investments and contributions for them.
As the name suggests, the management of the portfolio is almost entirely done by the financial institution.
The parent simply setup periodic and regular contributions to the account, while the robo-advisor takes care of choosing the investment, rebalancing and other investment decisions.
Types of RESP
There are three types of RESPs: individual, family and scholarship plans.
Individual RESPs are designed for a single child who is the sole beneficiary of the plan.
Family RESP plans allow more than one child to be named as the beneficiary of the plan. But all the beneficiaries must be related by blood.
Finally, Group RESP or scholarship plans are a type of RESP account that pools the fund of several families and invests the money into a pooled fund.
The investments are managed by experts who are able to determine which assets will bring in the best returns for all of their clients.
However, they are less flexible that the other 2 RESP types and are generally more expensive.
How do I choose an RESP type?
Choosing between an individual, family or scholarship RESP is the first step and will typically come down to your situation.
In general, you should avoid group plans so you’re really left with choosing between an individual or family plan.
Family plans can be easier to manage since you’re dealing with only one account for all your kids. They can also save you on fees.
But it can also get cumbersome if the age difference of the kids are too wide that it would not make sense to have the same asset allocation for them.
RESP Contribution Limits
So what are the contribution limits for RESP?
The lifetime maximum amount you can contribute to an RESP is $50,000 per child under 18 years of age. There are no annual limits so you can decide to max out your RESP limit in a single year.
However, you’ll be missing out on the Canada Education Savings Grant (CESG) that matches your contribution by a minimum of 20%.
The maximum CESG per child is $500 per year and a total lifetime grant of $7,200. Which means you’ll need to contribute $2,500 each year for about 14 years to receive the full CESG.
Best Robo-advisors for RESP
So you’ve decided to open a managed RESP at a Robo-advisor and are you looking for the best robo-advisor in Canada to help you invest your RESP?
Not sure which one is right for you and your family’s needs? We’ve done the research so that you don’t have to.
We’ve compiled a list of the best Canadian RESP Robo advisors and created an easy-to-read table at the end that contains some quick information for your consideration.
So here are the top Robo-advisors for RESP in Canada:
- Questwealth Portfolios RESP from Questrade
- Wealthsimple Invest RESP
- Justwealth RESP
- CI Direct Investing RESP
1. Questwealth Portfolios RESP
First on this list of the best robo-advisors for RESP in Canada is Questwealth Portfolio.
Questwealth Portfolio is the robo-advisory arm of Questrade, arguably the best online brokerage in Canada.
Unlike the other robo-advisors on this list, Questrade’s Questwealth Portfolios are managed actively. Yet, they still manage to keep the management fees lower than their peers.
Management Fees: 0.20% – 0.25%. Pricing starts at 0.25% but drops to 0.20% for deposits above $100,000.
Minimum Investment Amount: $1,000
Promotion: Get $10,000 managed free for the first year. They’ll also cover your transfer fees up to $150 if you moved your account from another brokerage
Offers Self-directed RESP: Yes
Best features: Lowest investment management fees, tax-loss harvesting
2. Wealthsimple RESP
Wealthsimple is Canada’s most popular and largest robo-advisor. If you’re looking for where to start investing in a diversified portfolio with little money, Wealthsimple is for you.
The Wealthsimple RESP offering makes saving for your kids’ post-secondary education easy, simple and enjoyable.
Users can choose one of their 10 different portfolios with varying risk profiles from Conservative to Growth.
Management Fees: 0.40% – 0.50%. Pricing starts at 0.50% but drops to 0.40% for deposits above $100,000.
Minimum Investment Amount: None. You can start investing with as little as $1.
Promotion: Get $10,000 managed free for the first year. Like Questrade, they’ll also cover cover your transfer fees for transfers that are more than $5,000.
Offers Self-directed RESP: No. But they have a commission-free trading app that supports TFSA and RRSP.
Best features: Intuitive & Friendly app & interface, Socially Responsible Investing.
3. Justwealth RESP
The next RESP provider on this list of the best robo-advisors for RESP is Justwealth.
Justwealth RESP portfolio are setup as target date funds. That means, they’ll automatically de-risk or reduce their allocation to equities as the maturity date (when your kids’ start school) gets closer.
This feature is innovative and takes the convenience of robo-advisors up a notch. To the best of my knowledge, they are the one robo-advisor that provides this service.
And if not that the fees for Justwealth RESP is double the ones at Questrade, it would top this list of the top robo-advisors for RESP.
Management Fees: 0.40% – 0.50%. Pricing starts at 0.50% but drops to 0.40% for deposits above $500,000.
Minimum Investment Amount: No minimum
Offers Self-directed RESP: No
Best Features: Automatic portfolio de-risking, tax-loss harvesting and access to a personal portfolio manager.
4. CI Direct Investing RESP
Finally on our roundup of the best robo-advisors for RESP we have CI Direct Investing.
With CI Direct Investing, you get access to a dedicated financial advisor that can help you with financial planning.
They offer two sets of portfolios: the usual low-cost ETFs common with robo-advisors and private investment portfolios that hold mortgages, real estates and other alternative assets.
Management Fees: 0.35% – 0.60% (Tiered). Pricing starts at 0.60% for the first $150,000 deposits; 0.40% for the next $350,000; and 0.35% for amounts above $500,000
Minimum Investment Amount: $1,000.
Promotion: Get $10,000 managed free for the first year. They’ll also cover your fees up to $150 when you transfer $25,000 or higher.
Offers Self-directed RESP: No
Best features: Professional advice from a Certified Financial Planner® (CFP), Access to private alternative investments.
|Best For||Lowest Fees||Intuitive App and SRI||Automatic portfolio de-risking||Professional advice|
|Promotion||$10,000 managed free for the 1st year||$10,000 managed free for the 1st year||N/A||$10,000 managed free for the 1st year|
|Learn More||Visit Site||Visit Site||Visit Site||Visit Site|
What to look for in the Best Robo-Advisors for RESP
When choosing which robo advisor is right for your RESP, it’s important to consider your needs, because each one offers different things in terms of their fees and flexibility.
This means that depending on what type of investor you are, there will likely be certain features offered by one robo-advisor over another (which may not be something that matches your needs).
However, if you’re looking specifically at which is best for RESP investing, you should consider the following:
- Lower Fees: Investment costs add up. So it’s important to keep them low. Questwealth Portfolios score high here with management fees that’s half of the other robo-advisors.
- Minimum Investment Amount: If you don’t have $1,000 to open an RESP at a robo advisor, then choose one that lets you start with little money like Wealthsimple.
- Features: Beyond the 2 factors above, consider the overall features offered by the robo-advisor. Justwealth for example is the only robo-advisor that automatically adjust your portfolio as time passes to align with when you’ll need the money
- Supported Government Grant: Unfortunately, some robo-advisors may not support all the available grants your RESP may qualify for. For example, Questrade does not support British Columbia’s Training & Education Savings Grant (BCTESG).
Note: In addition to the management fees charged by the robo advisors above, you’ll also have to pay the fees for the underlying ETFs they invest in.
This may add another 0.20-0.30% to the total cost of your RESP portfolio.
Taking the mid-point of 0.25%, that means you’ll pay total fees of 0.50% at Questrade and 0.75% at Wealthsimple for deposits below $100,000.
Self-Directed vs Managed RESP at Robo-advisors
Unlike the managed RESP that you get from any of the robo-advisors above, you make all the investing decisions with self-directed RESPs.
When you open a self-directed RESP, you’re fully in control. You decide, how much to invest, when to invest, what to invest in, rebalancing frequency, asset allocation and many more.
This may seem like a lot of decision, but it does not have to be if you invest wisely. There are now asset allocation ETFs, or one-ticket ETFs, that let you pick a portfolio that aligns with your risk profile.
The ETF provider buys the investments, rebalances, and make all the decisions for a small management fee (as low as 0.20%). All you have to do is fund your investment account and place the trades.
And the best part is some brokerages, like Questrade, will let you buy the ETFs for free.
Which means your entire investment cost could be even lower than the ones at the robo-advisors.
But self-directed RESPs are not for everyone. It may be for you if:
- You’re comfortable with picking your own investments
- Have the time to login to place your trades monthly (or as needed)
- You can stick to your investing plans
But on the other hand…
Use a Robo-advisor RESP if you want to:
- start investing with little money
- keep your RESP fees low
- an hands-off approach to invest for your kids’ education
- don’t have a need to speak with an advisor*
Note: some robo-advisors offer some form of financial advice. This is usually basic and would only cover your investing needs.
For financial planning that considers your entire financial life, you may need to speak with a fee-only financial planner.
Alternatives to Robo-advisors’ RESP
So what are the alternatives to investing your RESP at one of the best robo-advisors for RESP in Canada?
Here are a few:
- Online Brokerages: They provide self-directed RESPs covered above
- Banks: they let you invest in one of their funds, usually more expensive mutual funds. Though the TD e-series funds with low MERs are one of the exceptions
- Group Plans: or scholarship plans like the ones offered by Knowledge First and CST. They are generally more expensive, inflexible with their rules and should be avoided by most people.
Some FAQs: Best Robo-advisors for RESP
Questrade’s Questwealth Portfolio is not only the best robo-advisor for RESP in Canada, but it’s also one of the best robo advisors when assessing all Robo Investing platforms.
It has the lowest management fees (0.2%-0.25% admin fee) and offers some of the most competitive account opening promotions including covering your transfer fees.
In Canada, there are many Robo advisors who can help you with your RESP. Overall the best robo advisors for parents looking to save for their kids’ education using RESP are Questwealth Portfolios, Wealthsimple, Justwealth and CI Direct Investing.
Questrade’s Questwealth Portfolio has the lowest management fees among the robo advisors for RESP. The fees start at 0.25% but drops to 0.20% when your deposits exceed $100,000.
Final Thoughts: Best Robo-Advisors For RESP
In our opinion, the best robo advisor for RESP is Our top pick – Questwealth Portfolio from Questrade. It has a great management fees and low account minimum of $1,000.
They offer an easy-to-use platform that makes investing accessible and easy to follow.
A great alternative is Wealthsimple. They also have one of the lowest management fees in Canada – 0.50% which is a fairly low amount compared to other RESP providers who have management fees that are as high 2!.
Learn more about RESPs in the posts below: