ModernAdvisor review: Exclusive robo-advisor or missed opportunity?

ModernAdvisor offers the following investment account types: 

• Taxable accounts (individual and joint) 
• RRSP
• Spousal RRSP 
• RRIF 
• TFSA 
• Individual RESP 
• LIRA
• FHSA
• RDSP 

NOTE: Corporate accounts are also available, however, they must be opened manually by a ModernAdvisor representative. 

We opened up a trial ModernAdvisor account, back in 2019, and had a look at what the platform looks like and how this robo advisor goes about advising on the trial investments.

First off, ModernAdvisor started by understanding my risk tolerance, my age, the amount I wanted to invest, and what my goals were.

A few pictures below show screenshots of the assessment of my investing personality and my risk level. They deemed my risk level to be moderate and created an ETF portfolio to match my level of risk.

Then it summarizes my investment style, I am deemed “moderate”.

After understanding the risk tolerance, inputting my free $1,000, and answering a few more questions (it didn’t take very long, I think under 15 minutes or so). Afterwards, the money I invested in the trial account is allocated to the varying ETFs in the portfolio created based on my risk level. The low-fee Exchange-Traded Funds that ModernAdvisor uses are a select few and have a mirror image of the socially responsible Exchange-Traded Fund they use for those who want to invest via socially responsible means.

• ModernAdvisor was cofounded by Navid Boostani and Adrian Brouwers.
• Navid Boostani is the CEO of ModernAdvisor. He has a background in electromechanical engineering and got his credentials as a CFA (Certified Financial Analyst) a few years later.
• Credential Securities Inc. (“Credential”) holds your assets and accounts and ModernAdvisor acts as a broker-dealer. Credential is Canadian-owned; the Provincial Credit Union Centrals own 50%.
• Many investment dealers and credit unions use Credential to hold their clients’ investment accounts, execute trades, provide tax reporting and other back-office account administration.
• Credential safeguards over $20 billion for Canadian financial institutions and is a member of the Investment Industry Regulatory Organization of Canada IIROC and the Canadian Investor Protection Fund CIPF

ModernAdvisor is registered as a Restricted Portfolio Manager with the securities commissions of all provinces in Canada and the Northwest Territories. You can check the registration of investment managers here. As a Portfolio Manager ModernAdvisor is held to a fiduciary standard. This is a pretty big deal in Canada because it means that legally the company must put your best interests first – a legal standard that someone who gives themselves the title “Money Coach” or “Financial Advisor” does not have to meet.

Every company has a different type way of automatically re-balancing your investment dollars. For ModernAdvisor, they automatically re-balance your asset allocation if there is more than a 5% difference from the original investment.

So there isn’t a scheduled time when you are supposed to see that your Robo Advisor is rebalancing your investment portfolio, but it will happen automatically whenever there is an absolute difference of 5% (high or lower) from the original investment.

Basically, the robo is there to keep your risk profile the same as the one you first decided on. You don’t want stocks or bonds to become too large a percentage of your portfolio, so they automatically sell a bit of one asset class (usually a class that is doing well) to purchase more of another asset class (usually one that is doing relatively poorly).

• XIC- iShares Core S&P/TSX Capped Composite Index ETF
• XEN- iShares Jantzi Social Index ETF
• VUS- Vanguard US Total Market ETF (Canadian dollar hedged)
• DSI- iShares MSCI KLD 400 Social ETF
• VEF- Non-North American Developed Market ETF (Canadian dollar hedged)
• VEE- Vanguard Emerging Markets ETF
• VSB- Vanguard Canadian Short-Term Bond
• CLF- iShares 1-5 Year Laddered Government Bond Index ETF (no corporate bonds, only government bonds, the socially responsible alternative to VSB)
• ZEF- BMO Emerging Markets Bond (Canadian Index hedged), invests in bonds from countries such as South Korea, Russia, Mexico and Indonesia
• VRE- Vanguard Canadian Capped REITs Index ETF (Real Estate Investment Trusts)- the interesting thing here is that they have very low assets under management, only $94 million. ModernAdvisor states that they use this particular ETF because it is the least costly one available.