With CI Financial recently purchasing WealthBar and rebranding to CI Direct Investing, we thought it was the perfect time to write an updated CI Direct Investing review for 2020.
CI Direct Investing Review Summary and Promo Offer Code
Expat Investment Options
Commitment to Excellent Financial Advice
Investment Strategy: ETF Portfolios
Investment Strategy: Private Portfolios
CI Direct Investing Review Summary
The CI Direct Investing ETF Portfolios are an excellent product. If you’re a Canadian non-resident expat investor, then CI’s ETF Portfolios are by far the quickest & easiest way to get your money into a well-diversified set of investments. As the only robo advisor that caters to expats, I 100% recommend them in that context! For Canadian residents, I’d check out our Wealthsimple Review in order to compare the two. For many investors, CI Direct Investing’s slightly higher costs are justified by their commitment to providing detailed financial advice to their clients. I cannot recommend the CI Direct Investing Private Portfolios option. You can read below to find out why this is the case.
What is CI Direct Investing and Is It a Robo Advisor?
CI Direct Investing is a combination of an automated investing platform and a personal financial advisor.
When it comes to taking a piece of your monthly pay cheque and turning it into a diversified investment portfolio – CI Direct Investing does that for you. That part of the business would be considered a “robo advisor model”.
What sets CI Direct Investing apart though, is the fact that right from Day 1, you will have access to excellent financial advice at your fingertips. This financial advisor will hold the credential of a Certified Financial Planner® professional. That’s an important distinction, because it carries legal responsibilities far beyond that of a “financial planner”. As the precursor to CI Direct Investing, WealthBar took great pains to emphasize the utilization of sound financial advice relative to other FinTech companies (which were often lumped together under the generic title of “robo advisor”).
What Accounts Does CI Direct Investing Offer?
When you register with CI Direct Investing (get started in as little as ten minutes) you can open the following accounts:
- Basic non-registered accounts
- Joint Account
- Spousal RRSP
- RESP (including Quebec residents)
- Corporate Investment Account
- Trust Accounts
- Charitable Organization Investment Accounts
- Group TFSAs and RRSPs (for your employees if you own a company)
- Individual Pension Plans
- Personal Pension Plans
CI Direct Investing Review: Fees
Your portfolio is going to have two levels of fees when you invest through CI Direct Investing.
- The fees that your underlying ETFs will charge you.
- The fees that CI Direct Investing will take for helping you out on your investing journey.
The underlying ETF fees are going to cost between .18% and .26%.
The fees that ETF fees that we refer to are known as a Management Expense Ratio (MER) and are commonly shown as a percentage of your overall assets. Because MERs are an inherent part of the ETFs themselves, clients will not see this money deducted from their CI Direct Investing account.
CI Direct Investing’s fees are charged under the following annual structure:
.60% on your first $150,000 invested
.40% on $150,000-$500,000
.35% on anything over $500,000
So, if you had $100,000 invested, you’d owe CI Direct Investing about $600 for the year, and the internal costs of your ETFs would be around $180-$260 which would be reflected in your portfolio’s performance.
If you had $750,000 invested with CI Direct Investing, you’d owe:
$150,000 x .6 = $900
$350,000 x .4 = $1,400
$250,000 x .35 = $875
Total CI Fees = $3,175
ETF Fees = $1,350-$1,950
That’s it – pretty transparent and easy to calculate!
CI Direct Investing for Canadian Non-Resident Expats
As of 2020 there is only one robo advisor option available for Canadian citizens who are also non-residents for tax purposes (aka: expats). Given my recent expat journey to Qatar, this was obviously very pertinent to me!
When doing my research, I did come across a couple of robo advisor-style platforms based out of Switzerland and Singapore – but they were prohibitively expensive and quite complicated to use. In my opinion, CI Direct Investing is by far the best option for Canadian expats.
I am very impressed with what CI Direct Investing has put together for their expat clients. If you want the easiest way to get into index investing as a Canadian expat – this is far and away the best solution! You’re going to pay a bit more than you would if you were index investing using a Canadian discount brokerage, but depending on how big your portfolio is, it’s quite possible that you’ll pay less in overall fees than you would with an international discount brokerage – plus you get a ton of additional services in return for your money.
The one caveat here is that CI Direct Investing is not available in the USA or certain other countries such as North Korea, Iran, etc.
Here were the answers to my expat questions when I emailed CI Direct Investing.
What do Canadian Expats need in order to open up a robo advisor account with CI Direct Investing?
- $25,000 account minimum
- Your downloaded account statement for a Canadian bank account
- An electronic document issued by a Canadian government agency, or a cell phone company, or a utility company.
- Canadian SIN
- Any foreign tax ID numbers that have been assigned to you
- A signature (either electronic or old school)
Do I have to be in Canada at any point or have a Canadian address in order to open a non-resident account with CI Direct?
What accounts can I open as a Canadian non-resident?
You should stick to a plain, vanilla non-registered account as a non-resident. However, you could also transfer over any existing RRSP and/or TFSA accounts you have in order to keep life simple and have all your investments under one roof.
What taxes will I have to pay with CI Direct Investing?
The same taxes you’d have to pay anywhere else as a Canadian non-resident. Namely, the withholding tax on Canada-sourced income. What you owe in your new country obviously depends on local laws.
How does having a CI Direct Investing account affect my non-resident status – and is it a strong resident tie?
Neither a non-resident CI Direct Investing account, nor a non-resident discount brokerage account is going to be a secondary residential tie to Canada. It will not be enough – by itself – for the CRA to consider you a factual resident. If you also own a car in Canada that you use when you come for the holidays, never cancel your provincial health insurance, and still have a provincial driving license… The combination of all of those things might start to tilt the scales toward being considered a factual resident.
How Does It Work? CI Direct Investing ETF Portfolios
When you first sign up with CI Direct Investing, you’ll be matched to the right investment based on your goals and risk profile. You can connect with an adviser how and when it works for you. Simply connect via email, phone, video or chat.
CI Direct Investing has one main investing path (which is probably what you want) called ETF Portfolios and they also offer a second option called “Private Investment Portfolios”.
Within the broad ETF Portfolios at CI Direct Investing, there are five asset allocation options: Aggressive, Growth, Balanced, Conservative, and Safety.
Each of these all-in-one solutions is made up of the following ETFs – just held in different proportions depending on how much risk you want to take.
Horizons S&P 500 ETF (HXS) = US stocks
iShares Core MSCI EAFE IMI (XEF) = Non-Canada or US stocks from developed countries
BMO High Yld US Corp Bd Hdgd to CAD ETF (ZHY) = Bonds from USA corporations
Horizons S&P/TSX 60 ETF (HXT) = Canadian stocks
Horizons Equal Weight Canada REIT ETF (HCRE) = Canadian real estate
BMO Mid Corporate Bond Index ETF (ZCM) = Bonds from Canadian corporations
BMO Mid-Term US IG Corporate Bond Hedged to CAD Index ETF (ZMU) = Bonds from USA corporations
Then the more conservative portfolios will also use the Vanguard Canadian Short-Term Bond ETF (VSB), which consists of bonds issued by the Canadian federal and provincial governments.
For example, here’s a look at the balanced ETF Portfolio (as currently constructed at the time of writing).
|Horizons S&P 500 ETF||HXS||24.0%|
|BMO Mid Corporate Bond INdex ETF||ZCM||22.0%|
|iShares Core MSCI EAFE IMI ETF||XEF||12.5%|
|Horizons S&P/TSX 60 ETF||HXT||10.5%|
|BMO High Yld US Cordp Bd Hdgd to CAD ETF||ZHY||10.0%|
|BMO Mid-Term US IG Corp Bd Hdgd to CAD Index ETF||ZMU||8.5%|
|Horizons Equal Eright Canada REIT ETF||HCRE||7.5%|
|Vanguard Canadian Short-Term Bond ETF||VSB||5.0%|
CI Direct Investing offers a “clean-tech add on” for investors interested in the Socially Responsible Investing (SRI) models. This add-on allows investors to put 5% of their money into the Invesco Cleantech Portfolio ETF (PZD). It Includes investments in renewable energy, water purification, logistics, and transportation.
Generally speaking, if you have longer term goals, and a higher risk profile, your ETF portfolio will be weighted more heavily towards stocks and less towards bonds.
CI Direct Investing has chosen the ETFs for their portfolios by using the following criteria:
- Tracking error minimization to mirror the index
- Higher trading volume ETFs selected for best pricing
- Priority given to funds with higher Assets Under Management
- All else equal, they choose the ETF with the lower share price
- Country of origin considered to reduce currency exchange charges
- Successful performance history verified
- Lowest MER possible
If you want to change your selected ETF portfolio, you can do that at any time – BUT – keep in mind that you were placed in a portfolio for a reason. Has your risk tolerance really changed, or are you simply chasing recent performance? These are great conversations to have with your CI Direct Investing advisers.
How Does It Work? CI Direct Investing Private Investment Portfolios
To understand the difference between CI Direct Investing’s ETF portfolios and their Private Investment Portfolios, it helps to get a quick refresher on active vs passive investing.
Active Investing Mindset: Whomever I pick to manage my investments is smarter than the average person who invests in assets in the stock/bond/real estate/commodity markets. Because they’re smarter, they can pick investments that are currently worth more than what people are paying, or that will do better in the future than most people think. The ability to pick those better investments will lead to better overall returns on my investment money and/or my portfolio will have much less volatility (i.e. “big ups and downs”). Because the investment professionals will be working really hard to select these better-than-average investments, the people who will manage my investments will need to get paid and will charge me a percentage of my entire portfolio each year.
Passive Investing Mindset: There is no statistical evidence that we can identify which investment people or funds are going to be better-than-average when it comes to picking the best stocks/bonds/real estate/commodity investments. It’s really, really hard to pick investments that beat the average, because a lot of incredibly smart people are trying to do precisely that every day. Because it’s really, really hard to pick investments that beat the average by even a small amount, that extra that I’m paying in fees means that they have to be a super-duper All Star in order for me to pay their extra fees, and still have enough investment returns leftover to beat the average.
I’m likely better off just cutting my fees as low as possible and taking the average of the asset class. I can do that by using the ETF portfolios to own nearly every large company in the world.
Active Investing + Different Asset Classes
CI Direct Investing’s Private Portfolios use actively managed Nicola Wealth Funds to build clients a portfolio of investments that include “unconventional assets” as shown below.
Aggressive Private Portfolio
There are three different Private Portfolio options available. Here’s an example of what your asset allocation would look like if you chose the “Aggressive” option (accurate at the time of publishing).
|Nicola Core Portfolio Fund||NWM254||50.0%|
|Nicola Global Real Estate Fund||NWM144||25.0%|
|Nicola U.S. Tactical High-Income Fund||NWM234||25.0%|
Personally, I remain unconvinced that the Private Portfolios offer any extra utility to the average investor. I understand the theory of trying to diversify into asset classes that are not correlated to stocks/equities, but those high MER fees that go with active management scare me.
The Private Portfolios do have a relatively good track record over their short lifespan, but as with all things investing, “Past results are not indicative of future performance.”
I recommend keeping it simple and staying away from these more complicated options.
Is CI Direct Investing Safe?
CI Direct Investing is as safe as any banking and investment option in Canada!
Of course, one has to remember that when it comes to investing, “safe” means different things to different people. There is no company that can guarantee investment returns. CI will make sure your information stays safe, and that your investments are protected from fraud or corporate bankruptcy – but your investments can still go down in value. If any company claims that they can guarantee the “safety” of your investment returns – I’d walk away immediately.
CI Direct Investing is the robo advisor arm of a massive company that manages over $160 Billion of assets. Companies this large employ the latest in online security and encryption standards. I would hesitate to say that any website or online platform is “hack-proof”, but at the very least, you’re as safe with CI as you would be anywhere online.
Some people ask, “What happens if my robo advisor goes bankrupt?”
No worries on that front. First and foremost, there are all kinds of laws that prevent financial companies from dipping into your investment assets to pay their expenses. So that’s one level of protection.
The second level of protection is actually just the free market! You’re a fee-paying customer, and so if for some crazy reason CI Direct Investing decides that their robo advisor branch of the company isn’t pulling its weight, it’s quite likely the company would be sold to another robo advisor platform, and your assets would stay nice and safe while new management took over.
The final layer of protection is perhaps the one that inspires the most confidence. When you use CI Direct Investing your investments are automatically insured by the Canadian Investor Protection Fund (CIPF) up to $1 Million per account. This gives your investment portfolio the full protection of the Canadian government, and consequently is about as solid a guarantee as you can find.
When Did Wealthbar Become CI Direct Investing?
In 2019 CI Financial purchased Wealthbar and merged the company into their large umbrella of Canadian investment companies. They also purchased the discount brokerage company Virtual Brokers.
In August 2020 the Wealthbar brand officially became CI Direct Investing – but the company took great pains to make it crystal clear that while the name had changed, the commitment to excellent customer service and financial advice had not.
Wealthbar was founded back in 2014 by Tea and Chris Nicola. In a Globe and Mail interview, Tea explained, “I felt like finance needed a boost of benevolence to be honest, I wanted to be Robin Hood, in my own way.” With a solid background of working at Nicola Wealth, the duo hit the ground running, quickly building what would become known as the Canadian robo advisor option that most emphasized sound financial planning.
Frequently Asked Questions
Is there an account minimum?
Yes. The account minimum is $1,000 for most individual investors, and a $25,000 account minimum for non-resident expats.
Does CI Direct Investing charge commissions?
No! There are no hidden commissions or kickbacks of any kid.
Are there hidden fees?
No! Simply read the section on fees above to thoroughly understand the fee structure.
Does CI Direct Investing have a socially responsible option?
CI Direct Investing offers a “clean-tech add on” for investors interested in the Socially Responsible Investing (SRI) models. This is accomplished by allocating a part of your portfolio to the PowerShares (PZD) ETF – which is composed of companies focused on renewable energy and water purification.
What accounts does CI Direct Investing offer?
Non-Registered, Joint, TFSA, RRSP, Spousal RRSP, RIF/RRIF, LIRA, LIF, RESP,, RDSP, Corporate, Trust accounts, Accounts for charitable organizations, Group TFSAs & RRSPs for employers to setup for staff.
Does CI Direct Investing do tax loss harvesting?
No. CI Direct Investing does not offer tax loss harvesting.
Does CI Direct Investing have a fiduciary duty to put my interests first?
Yes! As registered portfolio managers, all CI Direct Investing advisors have a legal fiduciary duty to recommend investments that are in your best interests. Sadly, this is not the case with many mutual fund salespeople in Canada.
Does CI Direct Investing use fractional share investing?
No. CI Direct Investing does not offer fractional share investing.
Does CI Direct Investing have a Mobile App?
Yes, the app is available in both the Apple App Store and the Google Play Store.
Can I link my CI Direct Investing Account to Mint?
Yes. Simply generate a third party key from within your CI Direct Investing account, and use that to link to Mint, Wealthica, or similar services.
Will CI Direct Investing send me tax slips?
The following tax slips will be created and “sent to you” via your CI Direct Investing dashboard under the “Documents” tab: RRSP contribution slip, T4, T5, T500d, RL-16, RL-3, T3, T5013, RL-15, NR4 (for non residents),
Setting Up an Account: A Peek Inside CI Direct Investing
Here’s what your screens will look like when you sign up, in addition to some of the more prominent advertising that CI Directing Investing is currently running.
CI Direct Investing Review: Who Is It Best For?
The one group of people who should unquestionably take a long look at CI Direct Investing are Canadian citizens who now live overseas. The investing options available to expats in their new countries are often very expensive and somewhat confusing. The $25,000 minimum account size is a minor drawback, but the benefits of getting so much paperwork done on your behalf, utilizing their institutional knowledge of how expats are treated, and the beautiful simplicity of automated convenience makes CI a no-brainer for the expat crowd.
For Canadian residents, if you’re looking for a hands-off way to get 95% of the benefits of index investing, with only 10% of the work, then CI Direct Investing fits your style. I recommend taking a look at our writing on Canadian online brokers if you’re more the DIY type.
Check out our interviews with Wealthbar co-founder and CI Direct Investing CEO Tea Nicola.