With an “invest and forget” framework, it seems like a pretty easy way to typecast the younger crowd’s interest in the technology, but is it more than just a stereotype?
Okay, hold the phone. Let’s just pause the conversation here and unpack this a little bit further.
- FACT: As a technology, robo-advisors attract people who don’t necessarily have the time or the desire to learn about do-it-yourself investing.
- FACT: As a business model, (and unlike its mutual fund counterpart) robo-advising is a lower cost solution that helps make advice-based investing more affordable and accessible for everyone.
- MYTH: Only the young and tech-savvy care for access to affordable investing solutions and only this demographic are proactive enough to take advantage.
The real fact here? While it is true that millennials are generally known to be the digital sweethearts of society, they’re not actually the majority of robo advisors’ clientele. As this Globe and Mail guide confirms, the average age for most robo advisors in Canada is 43! So throw away your stereotypes and get with the real program now because age doesn’t matter.
For the rest of this post, we’ll be referring to robo-advisors as robos the way the cool kids do, because we’re all the cool kids now.
Booming On The Robo Wagon
While we’ve just uncovered that the average age of the robo user is 43, the straightforward reason why more mature audiences are moving towards robo is that they just have more money. On the flip side, it also means that they also have a lot more potential to save on traditional management fees and commission-based structures. So outside of saving on some of the “old school” investing costs, what exactly does our average client look like, and why are they bothering with robo anyway?
What Does Their Average Account Look Like?
Based on our previous findings, our average client has two accounts open with us. That’s most commonly a non-registered cash account and a registered account like an RRSP or TFSA. Some of our clients have maxed out their RRSP and TFSA contributions, so a low-fee cash account is a great place to stash extra money. With their earnings, it’s money they’ll eventually want to put towards retirement, a new home, or giving their kids a leg up in this market. We’ve also found that quite a few clients who’ve left a job where they had a pension have invested in a Locked-In Retirement Account (LIRA)
Size Doesn’t Always Need to Matter
I bet you’re wondering what the average client is growing with us, so we’ll tell you. The average client has about $170,000 invested with us. Because of our account size pricing structure, our fees are capped at $80 a month for all accounts over $150,000. That means that no matter how large the account grows, we’ll never charge more than $80 bucks a month to manage it. The way we see it — whether someone is investing $2,000,000 or $200,000 — it takes us the same level of effort to manage, so why would we charge you more? It’s really just the fairest way.
So, Why are They Joining Robo?
We’ll spell this one out as one word…fees! What may initially feel as not-so-significant, actually begins to add up over time. Why is this such a big deal you ask? Because our fees aren’t just a little bit lower than the average mutual fund, they’re actually dramatically lower.
To be more exact, our fees are 90% lower than the average mutual fund fee.
Since 43 means there’s still a number of years left to amp up their retirement, paying dramatically lower than the average mutual fund fee is super attractive. And we can understand why! Perhaps it’s the realization that they’re saving more over a longer period of time. Perhaps they like the cool factor of using a shiny, intuitive and effective platform. Or maybe it’s because saving in fees means you have more to invest in your future self. And this is precisely the reason we exist.
To see how much you can save in fees, you can run your own numbers based on scenarios and goals you choose. See the impact that’s helping Canadians access smarter investing.
Have fun and happy (age agnostic) investing!