ModernAdvisor: Everything You Need To Know

April 15, 2020
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At Yore Oyster, we strive to help you make wise financial decisions. We're committed to giving you the most relevant, actionable advice anywhere.

Minimum Deposit 6
Service Fees8
MER Fees6
Portfolio Options10
Portfolio Performance5
Usability10
Withdrawal and Deposit options0
Human Advice 4
Customer Service5
Referral Program10
Total74

Launched in 2013, ModernAdvisor is a fin-tech company that still remains one of Canada’s most relevant robo advisors. Why? Well there are many reasons for that, and in this article we’ll talk about some of them, like their automated investing, low-cost ETFs, lower management fees and set-and-forget investing, among other features.

We recommend ModernAdvisor if
You want to have access to socially responsible investment options.
You prefer a hybrid robo advisor that offers human services as well as software.
We don’t recommend ModernAdvisor if
You want a robo advisor that’s more beginner-friendly, in which case you should check WealthSimple.

What Is ModernAdvisor?

ModernAdvisor is a Canadian robo advisor that offers the most competitive fees for people who don’t have upwards of $500,000 to invest. In fact, they even allow you to demo the account with just $1,000, and you still get to see the results of said investment.

This company was founded back in 2013 by two CFA Charterholders: Navid Boostani and Adrian Brouwers. ModernAdvisor works under the premise that long-term portfolio performance is attributable to asset allocation so their portfolio engineering process is used to calculate expected returns for each of the asset classes included. This way, they are able to diversify a portfolio by making strategic allocation decisions. In turn, that allows them to reduce risks while maximizing profits for both them and consumers.

How Does ModernAdvisor Work?

ModernAdvisor works by using low-cost ETFs (Exchange Traded Funds) to design customized portfolios, much like financial advisors. At the same time, they also stick to a hybrid strategy in which they combine “passive” and “active” investing. Thus, customers get portfolios that are categorized based on the risk level they choose according to each investor’s goals. These diversified portfolios hold assets that will be optimally allocated to have the most efficient ratio of risk vs reward.

Then, the passive investing strategy consists in buying safely and aims to generate modest market returns, while the active investing strategy aims to beat the market and continuously return better than expected profits. Both of these strategies are combined to provide a balanced and effective portfolio.

Sometimes, too much active investing from active money management funds actually wastes resources, therefore racking up costs without beating the market. Warren Buffet and John Bogle are both big investors who have concluded that the average investor should be better off using passive index funds.

This is why robo advisors are a better option. Bcause they need way less resources, they are able to operate efficiently without inflating management costs.

How To Open A ModernAdvisor Account

  • Step 1: Set Your Investment Plan

Think of your investment goals. For example: saving for retirement or your child’s education. You also need to consider your investment timeframe. 

You’ll have to complete a short questionnaire that will determine your risk tolerance. Using the information provided (which you can edit any time you need to), a portfolio will be recommended to you. 

  • Step 2: Provide Your Personal Information

This one is pretty self-explanatory. You write the required data, they verify who you are and continue with the process.

  • Step 3: Fund Your Account

The documents or information you need are:

  • Social insurance number (SIN).
  • Beneficiary SIN if applicable.
  • Government-issued photo ID.
  • Image of a recent bank statement or screenshot of your online banking.
  • A void cheque.

Accounts Offered

These are the account types that ModernAdvisor has to offer:

  • Registered Retirement Savings Plan (RRSP)
  • Tax-Free Savings Plan (TFSA)
  • Registered Education Savings Plan (RESP – individual and family)
  • LIR
  • Non-registered accounts (individual, joint, and corporate)

#1 Minimum Deposit

The minimum deposit with a ModernAdvisor account is $1,000. 

What’s great about ModernAdvisor, is that they also offer what they call “Trial Accounts”. With these accounts, customers can start investing with ModernAdvisor’s money and get a sample test of their services for free. With a sample account, you can invest for free the first 30 days using $1,000 that ModernAdvisor will lend you. You will get to build your own portfolio and watch how it performs without even worrying about giving them your banking details! 

Once the trial is over, you can either cancel the account or continue with it. If you decide to open an actual self-funded account, you still keep all gains made during the trial period. How’s that for a deal?

However, there are other robo advisors that have no minimum deposit, for example, Nest Wealth and WealthSimple. These allow you to start with no minimum amount (but may require you to reach a certain amount to be able to start investing).

ModernAdvisor Minimum Deposit Score:6/10

#2 Service Fees

One of the main advantages of robo advisors are their low fees. ModernAdvisor offers a fee model that is simple to understand, with fees that vary depending on your balance:

  • $0 – $10,000: No fees.
  • $10K – $100K: 0.50% per year.
  • $100K – $500K: 0.40% per year.
  • $500K – $1 million or more: 0.35% per year.

As an example, for a portfolio of $25,000 you’d be looking to pay $125 per year.

ModernAdvisor Service Fees Score: 8/10

#3 MER Fees

The Management Expense Rates on this robo advisor also vary according to the investment size. However, on average they’re 0.25% per year. Assuming you pay 0.50% in service fees, you’re looking at a total of 0.75% per year when paying for a BMO SmartFolio account.

Most mutual funds will charge you more than double that when managing similar investments. All in all, it’s clear they offer a good ratio. Nonetheless, there are other fish in the sea.

When you compare ModernAdvisor MER fees with other competitors like Nest Wealth (0.15%) and WealthSimple (0.20%), it’s clearly not among the best. As stated, it’s certainly good, but whether this works for you or not will depend on your investment needs and overall goals.

ModernAdvisor  MER Fees Score: 6/10

#4 Deposit and Withdrawal Options

To add funds to your account, click the “Transfer” button on the dashboard. If you want to send a bill payment from your bank, just add the custodian of your account as a payee with the account number of the account you’re going to deposit the funds to. Transfers initiated from the ModernAdvisor dashboard will be on hold for four days before becoming available for investing. 

As for withdrawals, you’ll need to submit a request to the ModernAdvisor dashboard. Then, select the account you want to withdraw from, enter the amount and click “Confirm”. It may take about two business day to have everything delivered. 

In urgent cases ModernAdvisor also offers to send cheques and wire transfers. 

ModernAdvisor Deposit & Withdrawal Options Score: 10/10

#5 Portfolio Options

ModernAdvisor categorizes their portfolios based on their risk level. It ranges from “Aggressive”, which is suited for higher-risk investors, to “Conservative” which is suited for lower-risk investors who have short-term goals. In case you were curious, these are the ETFs used depending on the portfolio:

  • 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 Canadian Short-term Bond ETF (VSB)
  • BMO Emerging Market Bond ETF (ZEF)
  • Vanguard FTSE Canadian Capped REIT ETF (VRE)

ModernAdvisor also offers a great number of ETFs for Socially Responsible Investors (SRI). This option is ideal if you’re someone who likes being mindful of the impact your investments have.

You can choose investments that are environmentally conscious (less carbon footprint, pollution, etc.) or that deal with social issues and corporate Governance (executive compensation, shareholder rights, among others).

You should also know that you can view the returns and past performance of ModernAdvisor portfolios on their website.

ModernAdvisor  Portfolio Options Score: 10/10

#6 Portfolio Performance

With ModernAdvisor return expectations are very reasonable and in line with market performance. As mentioned above, they build their portfolios based on broad market ETFs. So, as an investor you’re more likely to ride the market performance over the long run. Even if there are drops on the short term, over time you’ll be very likely to see compound returns with overall gains. 
However, its Annualized Portfolio Growth rate is only 4.38% which also pales in comparison to RBC’s InvestEase 6.55% (one of the highest) or the average 5% of other robo advisors.

ModernAdvisor Portfolio Performance Score: 5/10

#7 Human Advice

ModernAdvisor offers two types of investing. You can use Modern Advisor Digital and pay $125 per hour for the advice of a professional financial planner or get ModernAdvisor Personal and get financial planning as a benefit. Take into account that with any of these choices, you still get actual experts behind your investing making sure everything works just fine. 

This is all good, but Human Advice is not free. You actually have to pay $125 per hour to get financial advice if you choose the personal plan over the digital one, this is a huge downside considering most of the other robo advisors offer this service for free. 

ModernAdvisor Human Advice Score: 4/10

#8 Usability 

The website for ModernAdvisor has an interesting layout, not confusing but a little bit more complex than other robo advisor sites. Their investment calculator is one of the features that stands out the most, giving customers the opportunity to have a glimpse as to how their investment will perform based on a small profile provided.

It also has a mobile app. It has about four stars on the app store and almost no bad reviews. Overall, users seem to be pleased with the application and have found it easy to use. 

ModernAdvisor Usability Score: 10/10

#9 Customer Service

To get in touch with the advisors from Modern Advisor, you may contact through any of these means:

Call: 1-888-365-0075

Email: info@modernadvisor.ca

Address:

Suite 300 1110 Hamilton St

Vancouver, BC V6B 2S2

ModernAdvisor  Customer Service Score: 5/10

#10 Referral Program

ModernAdvisor offers a fun referral program. It’s only valid for new accounts. If you qualify for ModernAdvisor’s referral program, both you and your friend get $50.  If you find their service to be useful, this is a great way of making some bucks and helping a friend looking to invest.

ModernAdvisor Referral Program Score: 10/10

The Takeaway

ModernAdvisor is a great robo advisor that has earned its place among Canadians. Its hybrid investing model reassures investors who look for certainty in earnings, while also keeping the low fees of a traditional robo advisor. It has customized and diversified portfolios that are tailored to each investor’s needs and preferences. As a result, you’re guaranteed to make the most out of your choice.

ModernAdvisor’s Socially Responsible Investing (SRI) options are a great addition as well. For those looking to align their money with their values, this is the way to go.

Additionally, you also get a free portfolio check-up just by entering your current mutual fund details. And let’s not forget their automatic rebalancing feature, which guarantees your account never strays from its target allocation. 

Here you have it! Everything you need to know about ModernAdvisor.

If you want to explore other similar investing services, consider checking our post on WealthSimple for a more beginner-friendly robo advisor. Also, if you’re more on the passive side of investment, Nest Wealth can be a great robo advisor to use, especially when working with higher balances.

For those interested in this kind of investment services, we highly recommend that you also check our article on robo advisors. This way you’ll know more about all the choices out there.