ModernAdvisor Review 2021

ModernAdvisor Review
  • Annual Fees
  • MER Commissions
  • Account Features
  • Customer Service
  • Ease of Sign Up
  • Platform User Experience
  • Overall Banking Convenience
3.5

ModernAdvisor Review Summary:

ModernAdvisor is a Vancouver-based robo-advisor. They offer free accounts for clients with under $10,000 to invest, and a unique trial period that lets you test drive a portfolio for free.

We love how ModernAdvisor works hard to counter any worries a beginner investor might have. We’re less thrilled about the $1,000 minimum to begin investing.

Wealthsimple (our most recommended robo-advisor) has no minimum account balance and offers a wide range of additional services from tax filing to crypto investing.

Pros

  • Free trial period
  • No fees for accounts under $10,000
  • Socially responsible investment options
  • Decent selection of ETFs
  • Reduced fees for large accounts

Cons

  • Minimum $1,000 balance to begin investing

ModernAdvisor is a good beginner friendly option, but is not among the best robo advisors in Canada

See our full list of top Canadian Robo Advisors

ModernAdvisor was founded in 2013 by Navid Boostani (the CEO and a Certified Financial Analyst) and Adrian Brouwers. ModernAdvisor focuses on robo-advising, although they also offer ModernAdvisor Pro, a service for professional financial planners.

ModernAdvisor has some unique characteristics that set it apart from the robo-advising crowd. This is particularly true for beginner investors who are uncertain how robo-advising works and whether it’s for them.

In our ModernAdvisor review, we’ll take a closer look at what ModernAdvisor has to offer and how it works. We’ll outline the pros and cons of this service and compare it to Wealthsimple, our choice for the best robo advisor in Canada.

How ModernAdvisor Works

Like most robo-advisors, ModernAdvisor invests your money in a portfolio of exchange traded funds (ETFs) based on your investment goals, timeframe, and level of risk tolerance. ETFs are well-balanced and diversified collections of investments that allow investors to develop a low-cost, low-maintenance portfolio without picking individual stocks.

ModernAdvisor’s “hybrid investing strategy” means that they rebalance your account whenever it strays more than 5% from your stated goals. This is a more active strategy than some other advisors.

Get Started With ModernAdvisor:

  1. Start by identifying your financial goal and the timeline for your investment.
  2. Answer a questionnaire that clarifies your risk tolerance.
  3. The system will recommend a portfolio based on your goal, timeframe, and risk level.

You can edit your level of risk tolerance at any time via the ModernAdvisor site, or you can contact them to change your stated investment goals and timeframe.

  1. Once you have a recommended portfolio, provide your personal information to set up your account. This includes:
  • Your SIN
  • Government-issued photo ID
  • Screenshot of your online banking or image of a recent bank statement
  • A void cheque
  1. Fund your account. You can open an account with any amount of money, but ModernAdvisor won’t invest it until your balance reaches $1,000.

ModernAdvisor will invest your money in the portfolio of ETFs that best matches your goals and risk level. They’ll check and rebalance the account as needed to make sure that it stays on track to meet your target allocation.

ModernAdvisor Fees

ModernAdvisor’s annual fees depend on the size of your account:

  • Accounts under $10,000 are free
  • $10,000-$100,000 pay 0.5% annually
  • $100,000-$500,000 pay 0.4% annually
  • Accounts over $500,000 pay 0.35% annually

For example, a portfolio of $25,000 would pay $125 in fees, while a $75,000 portfolio would pay $375.

ETF MERs

In addition to the annual fees, investors pay the MER that is built into the ETFs. ModernAdvisor ETFs average about 0.25%, although the total will vary depending on your personal portfolio.

Transfer Fees

While ModernAdvisor doesn’t directly charge you if you choose to transfer your account to another service, their custodian does. Account holders who transfer out of ModernAdvisor can expect to pay $50-125 depending on which custodian is holding their funds.

ModernAdvisor Portfolios

ModernAdvisor offers a selection of 7 regular ETFs and 6 socially responsible ETFs. Their selection covers a range of industries and asset classes. ModernAdvisor looks for asset classes that:

  • Provide diversification benefits
  • Have at least 10 years of investment track record
  • Are covered by at least one low-cost, high-quality ETF

ModernAdvisor’s current list of ETFs includes:

  • iShares Core S&P/TSX Capped Composite ETF (XIC)
  • Vanguard US Total Market ETF (VUS)
  • Vanguard Developed ex US ETF (VEF)
  • Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)
  • Vanguard FTSE Canadian Capped REIT ETF (VRE)
  • Vanguard Canadian Short-term Bond ETF (VSB)
  • BMO Emerging Market Bond ETF (ZEF)

We appreciate the fact that ModernAdvisor also offers socially responsible investment options (SRIs). These investments can make up 75-95% of your portfolio and have an average MER that’s roughly equal to their standard ETFs. Their SRI selection includes:

  • iShares ESG Advanced MSCI Canada Index ETF (XCSR)
  • iShares MSCI KLD 400 Social ETF (DSI)
  • iShares MSCI EAFE ESG Optimized ETF (ESGD)
  • iShares MSCI EM ESG Optimized ETF (ESGDE)
  • iShares Global REIT ETF (REET)
  • iShares Short-term Government Bond Index ETF (CLF)

You can look at sample portfolios and their performance over the past 4 years on the ModernAdvisor website.

A passive ETF portfolio has some drawbacks. You can’t pick and choose the stocks you want, and you have to choose from a set menu.

That means you can miss out on some good investment options – like dividend stocks, which provide regular income. You can check out our article about the Best Canadian Dividend Stocks for more information.

However, the plus side is that a robo-advisor makes investing accessible to novice investors, and that’s a good thing (for you, and for the market in general!).

ModernAdvisor Account Options

ModernAdvisor clients can open the following accounts via the website:

  • Individual or spousal RRSP
  • TSFA
  • Individual and Family RESP
  • LIRA
  • RRIF
  • Joint and individual taxable accounts

Corporate accounts are available by contacting Modernadvsior directly.

ModernAdvisor Review: Features and Ease of Use

Free Trial Account: ModernAdvisor allows you to open a trial account with $1,000 of play-money via a program called Springboard. If you join ModernAdvisor and fund the account within the trial period, you can keep any gains (and if you didn’t make any gains, your account is still free for up to $10,000).

Safe and Secure: ModernAdvisor uses the highest level of encryption available to protect your information. Their software and systems are regularly audited by security experts.

All ModernAdvisor accounts are held by an independent custodian which is a member of CIPF. Your accounts are ensured up to $1 million, which is 10 times more insurance than your average bank account.

Automatic Rebalancing: If your account strays more than 5% from its target allocation, ModernAdvisor will automatically rebalance it. Trading fees are included in your annual fee.

Flexibility: While you can’t go in and dictate what investments are included in your portfolio, you can slightly edit your risk preference via the ModernAdvisor website. For major changes in investment goals or desired risk, you can contact ModernAdvisor directly.

Free Portfolio Check-up: ModernAdvisor’s website allows you to enter your mutual fund information, and they’ll tell you how much you’re paying in fees and how much you could save with a robo-advisor.  

User-friendly: ModernAdvisor’s website navigation is intuitive, and information is clear and easy to find. A chat window allows you to contact someone between 8:30 am and 5:00 pm Pacific Time if you have any questions. They’re also reachable by phone or email, and contact information is easy to find in the website footer.

ModernAdvisor Mobile App Review

ModernAdvisor has a free mobile app available which allows users to:

  • Track your portfolio’s performance
  • Make changes to your investment plan
  • Contact advisors via chat
  • Transfer funds
  • View your account holdings and transactions

It has a clear, streamlined interface and has a 5-star rating on the Apple App Store.

ModernAdvisor vs Wealthsimple

Our ModernAdvisor review wouldn’t be complete without a look at how it compares with Wealthsimple, our most recommended robo advisor.

Like all robo-advisors, both ModernAdvisor and Wealthsimple specialize in mostly passive investing. This means that they choose a portfolio of ETFs based on your investment goals and risk tolerance.

You, the investor, don’t have a hand in selecting the investments, and you can’t direct specific sales or purchases. If you’d prefer a more DIY service, we recommend checking out an online brokerage like the ones in our list of the Best Canadian Online Brokers.

Fees: Wealthsimple and ModernAdvisor both operate with a percentage-based annual fee. ModernAdvisor is free for accounts under $10,000, while Wealthsimple charges smaller accounts 0.5% annually.

ModernAdvisor also offers clients investing over $500,000 a 0.35% annual fee, which is lower than Wealthsimple. However, Wealthsimple offers investors with over $100,000 some significant perks such as financial planning and tax loss harvesting.

ETF Selection: ModernAdvisor offers investors a choice of 7 standard ETFs and 6 socially responsible ETFs. Wealthsimple offers fewer SRIs but also has a selection of Halal investments.

Ease of Use: Both ModernAdvisor and Wealthsimple have websites that are easy to navigate and apps that are easy to use. On the whole, we found that the user experience on Wealthsimple’s platforms is smoother and more fully featured. 

Perks: ModernAdvisor has a free trial period where potential customers can try out a $1,000 investment portfolio and fund the account later. They offer on-demand financial advice and a free portfolio review.

Wealthsimple also offers round the clock access to financial advice. They also offer perks to $100,000+ accoun tholders that make the service well worth its 0.4% fee.

Rebalancing: Both companies rebalance accounts when they stray from their optimal allocation. ModernAdvisor rebalances accounts when they’re more than 5% outside the optimal range, while Wealthsimple is a less active manager and doesn’t rebalance until accounts are 30% off.

There are different theories regarding whether a more active approach is ideal. Wealthsimple has based its approach on the Nobel Prize-winning Modern Portfolio Theory.

Range of services: ModernAdvisor offers robo-advising plus management services for financial professionals. Wealthsimple offers robo-advising plus additional services including:

  • Wealthsimple Trade (a DIY online brokerage with commission-free trading)
  • Wealthsimple Roundup (a service that allows you to invest your spare change from everyday purchases)
  • Wealthsimple Crypto (a crypto investing service)
  • Wealthsimple Tax (a tax filing service)

While ModernAdvisor has some excellent features, we still prefer Wealthsimple for ease of use and range of services. For a more in-depth look at Wealthsimple, check out our Wealthsimple Review.

ModernAdvisor Review: FAQ

ModernAdvisor Review: Our Verdict

After completing our ModernAdvisor Review, our verdict is largely positive. Our editorial team appreciates the option for a trial account and the lack of annual fees for accounts under $10,000. The fees in general are good, as is the selection of ETFs – especially the socially responsible options.

However, ModernAdvisor does have some downsides. Your account balance must reach $1,000 before they’ll invest your money. We’re also not convinced that their more active investing strategy leads to significant investment growth – we prefer Wealthsimple’s purer Modern Portfolio Theory approach.

As it stands, our team agrees that ModernAdvisor is a quality service. However, Wealthsimple is still our robo-advisor of choice. See our list of the Best Canadian Robo-Advisors to see the best robo-advisor services on the market.

Meg

Meg Goodmanson is a writer, editor, virtual assistant, credit card expert, and lifelong learner-of-things. A self-proclaimed nerd, Meg’s favourite thing is collecting information and presenting it in an interesting and helpful way—especially if it helps her travel for free!
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