Robo-advisors face significant challenges in gaining traction with Canadian investors, but that may change if investors gain greater awareness of the impact that fees have on their investments, suggests new research from Toronto-based robo-advisor firm Nest Wealth Asset Management Inc. and Harbinger Communications Inc., also of Toronto.
The firms report that an online survey of Canadians carried out earlier this year found that the top three barriers to considering an automated advisory service are: a preference for in-person meetings; concerns about the security of assets; and a preference for dealing with large, well-established financial services institutions.
The survey also found that the importance of these barriers rises with age as 59% of respondents aged 65-75 said they would not be comfortable investing without in-person meetings vs just 21% of those younger than 35. Similarly, 43% of older investors expressed a preference for dealing with established financial services institutions compared with just 20% of those who are under the age of 35.
At the same time, Canadian investors are largely unaware about low-cost advisory services, such as robo-advisors, as 73% have never heard of robo-advisors.
That may change in the future as the survey also found fee transparency to be the “most important criteria” for Canadian investors when selecting a financial services provider, although many don’t seem to have a clear idea why fees are important or understand the impact of fees on their portfolios.
For example, the research found that 31% of Canadian investors say they have “never considered how the money they spend on fees might impact them”; and only 43% believe that fees “might have a significant impact on their ability to meet their financial goals.” Moreover, 46% admit that they are “unclear about how financial services fees are calculated.”
The results are based on an online survey of 700 Canadians aged 18 and over from Aug. 20-25. The firms report that the results are accurate +/- 3.7%, with a 95% confidence level.