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Managing Your Money

You have options when it comes to how you manage your investments. You can use a registered individual investment advisor, a robo-advisor, or look after your investments yourself through self-directed investing. Learn about each option below to decide which one might be right for you.

Registered Investment Advisor

A registered investment advisor is someone who manages your investments for you and can provide investment advice on a wide range of securities. They work for firms that are registered as portfolio managers. These firms can be independent or owned by full-service organizations such as banks. You can meet in person with an investment advisor and they can work with you to help you achieve your financial goals.

You may want to consider using an investment advisor if you:

  • Have limited time, interest, and financial knowledge or experience.
  • Are looking for a more comprehensive financial plan and service.
  • Want in-person feedback.

Before making a decision, keep the following in mind:

Robo-advisor

Robo-advisors, also known as online investment advisors, use technology to lower costs and create processes, such as opening an account, that require minimum or no direct human contact. You’ll likely be offered standardized model portfolios containing lower-cost investments, such as exchange-traded funds. As such, robo-advisors charge lower fees because of their lower operating costs.

Robo-advisors often provide discretionary portfolio management. This means they make investment decisions on your behalf without your specific approval for each trade. The process may not be fully automated; it could be a hybrid model where human advisors have a role alongside technology.

Robo-advisors ask clients to complete a questionnaire about their risk tolerance, financial circumstances, and their investment goals and objectives. The robo-advisor’s algorithm then takes the information and produces a portfolio recommendation for the client. Ensure the robo-advisor understands your needs before making investments on your behalf.

Make sure you understand each robo-advisor’s offerings and fee structure before you invest. You should be able to call and have a conversation with someone who works for the robo-advisor if you’re interested in making a change to your portfolio’s risk or investment mix.

You may want to consider using a robo-advisor if you:

  • Are digitally savvy.
  • Are comfortable having your investments managed without human interaction.
  • Want lower fees.
  • Are open to recommendations based on algorithms.

Before making a decision, keep the following in mind:

  • Investments bought on your behalf may not be as personalized.
  • Recommendations are only as good as the information you provide about yourself.
  • Before you use any robo-advising platforms, run a search on aretheyregistered.ca. It’s important to ensure the robo-advisory service you want to use is registered.
  • It’s also important to look at how robo-advisors serve you. Some firms call you at various points in the process, while others do everything online through questionnaires or live chats.
  • You should look at how you’ll be able to ask questions or change your investment strategy, including if you’re able to talk to an investment advisor over the phone at any time.
  • Robo-advisors may or may not give you the option to adjust your portfolio’s risk or investment mix.

For more on robo-advising, read this blog post.

Self-directed Investing

Self-directed investing is where individual investors build and manage their own investment portfolios. In other words, they direct their investment strategy themselves. Self-directed investors, also known as do-it-yourself (DIY) and in some cases, day traders, decide which investments they want to buy and sell, and when. Typically, they use discount brokers and online trading platforms to make their trades.

Successful self-directed investors develop and follow a disciplined investment strategy that diversifies their investments. They stick to their strategy and do not follow their emotions, especially when markets are volatile.

You may want to consider self-directed investing if you:

  • Want to be hands on with your investments and develop your own investment plan.
  • Want to pay lower fees and invest in what you want.
  • Can manage your investments without outside advice.
  • Can remain actively engaged with buying and selling your investments to help you reach your financial goals.
  • Are comfortable with using online technology to manage your investments.

Before making a decision, keep the following in mind:

  • To determine if you want to be a self-directed investor, think about your financial goals, your time horizon, your risk tolerance, and your investment knowledge.
  • You’ll need to be active with your investments. Self-directed investors have to do their own research, decide what to buy, monitor it, and decide when to sell.
  • Self-directed investors can purchase investments and make trades through a discount broker and will typically pay lower commissions and fees because they don’t get advice about the suitability of the investments they choose to make for themselves.
  • Self-directed investors can buy and sell stocks and other investment products from the convenience of a website or app. Investors who make quick decisions based on emotion may not benefit from direct, instant access to the market. They could pay a lot for trades, or end up with a portfolio that isn’t aligned with their goals or needs.   

Each of the options above come with various fees and charges. Be sure to ask about or do your research on all the fees and other charges you will be paying when you invest through any of these services. It’s important to read the information provided to you and ask questions if you are not clear on what you are paying for investments and/or advisory services.