11 Questions for Online Wealth Managers

By Nest Wealth on 07/11/2015Article 9 Minute Read

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In this article by the Globe and Mail’s Rob Carrick about online wealth managers, Rob writes about the financial technology (“fintech”) movement in Canada and says firms like Nest Wealth “make good sense for the right type of investor. That would be someone who has neither the time nor inclination to learn about do-it-yourself investing and wants advice at a reasonable price.”

In this article by the Globe and Mail’s Rob Carrick about online wealth managers, Rob writes about the financial technology (“fintech”) movement in Canada and says firms like Nest Wealth “make good sense for the right type of investor. That would be someone who has neither the time nor inclination to learn about do-it-yourself investing and wants advice at a reasonable price.”

Rob ends the article by posing 10 questions investors should ask before transferring their money. To help you with your decision, we’ve answered the 10 questions that Rob posed and also added one more.

We’ve also included Rob’s background notes from his article on how the industry usually works. Thanks Rob, for the great article and giving us the chance to continue the conversation.

We added this question: Who will be your Portfolio Manager?

When you join Nest Wealth, your money is held in your name at NBIN Inc., a subsidiary of National Bank, or Fidelity Clearing Corporation and I’ll be your portfolio manager.

Let me tell you a little about my background. I’ve been involved in the financial services industry for almost 15 years. I learned how to manage portfolios as part of the quantitative investments team at the Ontario Teachers Pension Plan, one of the largest pension plans in Canada. I have been managing individual and institutional portfolios using quantitative strategies my entire career.

Recently, I concluded a three-year term as a director for the Chartered Financial Analyst Society of Toronto, which stands for the highest level of ethics within the industry. From 2012-2014, I hosted Market Sense on BNN, Canada’s most respected business network.

When it comes to your money, it always comes down to trust. Knowing and feeling comfortable with the person who will be directly responsible for handling your portfolio is a fundamental step in building that trust.

Read on for more answers! And, if you want to speak with any of the Nest Wealth team members in person, you can set up a call to speak at your convenience.

1. What advice do you provide?

Carrick’s Background: Online advisors typically create a portfolio for you based on your age, current financial circumstances and ability to tolerate stock market ups and downs.

Nest Wealth’s Answer: When you open an account at Nest Wealth, we learn about you. We take your goals and assess your risk tolerance, your investment time horizon and your financial situation to build a customized portfolio to your needs. We’re different than other robo-advisors in that we don’t have preset funds, buckets or products. You get exactly what you need.

Over time, as your situation changes, we adjust your portfolio to meet your new needs. This usually occurs for one of two reasons: either you let us know or this is identified when we check in on you, at minimum once a year.

We design diversified portfolios. Nest Wealth portfolios are based on the work of David Swensen, the Yale University endowment fund manager, author of Unconventional Success, and one of the most respected institutional money managers in the world.

Swensen and other great investment minds suggest having a portfolio that is diversified over different asset classes, not just different stocks. Our clients currently hold 7 asset classes, including:

  • Domestic equities
  • US equities
  • Emerging market equities
  • International equities
  • Government fixed income
  • Real-return bonds
  • Real estate

We buy low-cost blue-chip ETFs that represent each different class, and each ETF holds many individual stocks or bonds. So what that means is that although our clients only hold seven ETFs, those securities hold thousands of stocks and bonds. See our current low cost ETFs.

2. What’s the price?

Carrick’s Background: Most firms either charge a percentage of your account value – 0.6 per cent or thereabouts per year is a typical starting point – or a flat monthly rate.

Nest Wealth’s Answer: At Nest Wealth, your wealth management fee starts at $20 a month and is capped at $80 a month, regardless of how much you put into your portfolio or how much it grows. That’s it. Nothing complicated and no percentages that take more of your money as you save more.

We have three packages that are based on your asset level.

  • $20 a month – $0 to $75,000
  • $40 a month – $75,001 to $150,000
  • $80 a month – $150,001+

After $150,000, as your account increases in size, your fees won’t increase.

For example, if your account holdings are $200,000, you pay $80 a month or you’re fees are 0.48%. By the time you’re at $300,000 you’re paying 0.32% and so on. Whatever your account size, the monthly fee stays the same. The difference between us and other companies is that you don’t keep paying  more as you save more and we think that’s the fair way to manage money.

3. What will the monthly cost be for my own account?

Carrick’s Background: Tell the firm how much you have to invest and find out what your monthly fee will be.

Nest Wealth’s Answer: We invite you to use our ‘Why It Matters‘ page to see the impact this type of fee structure could have on your individual account compared to buying and holding Canadian mutual funds.

4. How are the fees paid?

Carrick’s Background: The usual way is to deduct them every month from cash in your account.

Nest Wealth’s Answer: Nest Wealth deducts your monthly fee each month from the cash in your account.

5. What’s included in the price?

Carrick’s Background: Brokerage trades needed to manage your portfolio may or may not be included in the advice fee; the cost of owning individual ETFs is not included and must be considered to arrive at your total cost of investing.

Nest Wealth’s Answer: To get a sense for the services provided in your monthly fee, visit our pricing page.

You should also be aware of two other costs: the fees paid to ETF companies and and the costs charged by NBIN Inc. or Fidelity Clearing Corporation, where your money is held.

ETF fees: The exchange traded funds (ETFs) in your portfolio also have management expense ratios (MERs) paid to the ETF providers. Nest Wealth portfolios are currently built using iShares and Vanguard funds. The fees paid will vary based on your customized asset mix but we anticipate that the combined fees of the ETFs in a Nest Wealth portfolio, should average approximately 0.15%. We choose the largest, most liquid ETFs with the least tracki
ng error.

Custodian fees, or trading costs: When we rebalance your account, as the asset mix strays from your targets, NBCN Inc. or   Fidelity Clearing Corporation charges your account up to $9.99 per trade. To help you anticipate your annual costs, we have capped your trading fees to a maximum of $100. For a complete list of our custodian pricing, visit our pricing page.

6. Do you have a minimum account?

Carrick’s Background: $5,000 is a typical minimum, but it could be higher.

Nest Wealth’s Answer: We don’t have an account minimum.

7. Can I talk to any humans?

Carrick’s Background: Some firms have advisory staff available to go over certain points related to your portfolio; ask what investment industry credentials these people have.

Nest Wealth’s Answer: Yes. Whenever you want.

We’re here for you. Speak to your portfolio manager or customer service lead by emailing us at questions@nestwealth.com, starting a chat conversation, or by scheduling a call to speak at your convenience.

You can also read more about your customer service lead and the Nest Wealth team.

8. Where is my account actually held?

Carrick’s Background: All assets should be held in your name at a third-party broker that is a member of the Canadian Investor Protection Fund; your online adviser should simply be able to buy investments for you and move money around within the account.

Nest Wealth’s Answer: We use a bank (NBIN Inc. under National Bank) or  Fidelity Clearing Corporation to hold your money. We cannot access your capital and are limited to buying and selling investments for you and withdrawing our monthly fee.

Once you open your account, you’ll be able to access it both through www.nestwealth.com and through National Bank’s portal. Your account remains in your name and your assets are held separately from all other Nest Weath clients. Your account is covered by the Canadian Investor Protection Fund (CIPF) and you can rest easy knowing your assets held at one of Canada’s oldest financial institutions.

9. What if you go bankrupt?

Carrick’s Background: Your account should be unaffected as it’s held at a third-party firm.

Nest Wealth’s Answer: If anything should happen and Nest Wealth becomes insolvent, your account will be unaffected. Your assets are held separately in an account in your name at NBCN Inc. or  Fidelity Clearing Corporation

10. How do I get money in my account?

Carrick’s Background: You should be able to send money directly to your account at the third-party firm via your online banking website – just set up the firm holding your account as a bill payee.

Nest Wealth’s Answer: You can set up automatic transfers from your bank account to your account at NBIN Inc.or  Fidelity Clearing Corporation . You can also set up automatic transfers from your account at NBCN Inc. or  Fidelity Clearing Corporation back to your bank account, if needed. Both are free and we’ll walk you through the process.

Have any questions about what Nest Wealth can do for you? Feel free to contact us at questions@nestwealth.com