Robo-advisors may be relative newcomers to Canada’s financial services sector, but these firms are beginning to offer expanded slates of specialized investment products.

Recently, for example, Toronto-based Justwealth Financial Inc. entered the market, offering clients target-date portfolios for registered education savings plans (RESPs). And Toronto-based Wealthsimple Financial Inc. is making forays into socially responsible investing (SRI) and workplace pensions.

Mike Foy, director of J.D. Power and Associates‘ wealth-management practice in New York, is not surprised that these automated investment services firms now offer a wider range of specialized products. “As this market starts to get more mature,” he says, “people are going to want to establish a more niche position in the market and differentiate.”

Andrew Kirkland, Justwealth’s co-founder and president, sees an evolution taking place in the Canadian robo-advice market, as demonstrated by the growing variety of products on offer.

“As people become more familiar with [robo-advisors], you’ll probably start to see more niches or companies taking different approaches,” Kirkland says.

Justwealth’s RESP product is an astute marketing move. It targets millennials, who typically are more interested in robo-advisory services than older clients, and are likely to be starting families and thinking about saving for a child’s education.

When clients sign up for a Justwealth RESP, they are asked to enter the expected year at which the beneficiary of the RESP would begin his or her post-secondary education. Assets in the RESP then are placed in a portfolio that reflects a time horizon based on that target date.

For example, if a beneficiary is expected to start his or her post-secondary education in 2034, the account might be invested in a relatively aggressive portfolio. Each year, the account assets would be reallocated to reflect the slightly shorter time horizon, so that by the time the beneficiary is ready to enrol in university or college, the account is invested in the most conservative asset classes available.

According to the J.D. Power 2016 U.S. Full Service Investor Satisfaction Study, 62% of American millennials who work with a full-service advisor said they would be interested in investing through a robo-advisor if their advisory firm provided one. Only 18% of baby boomers said they would do the same.

Justwealth’s launch is not the only new development in Canada’s robo-advisory market. Wealthsimple recently announced plans to enter the pension market. At a panel discussion at the Conference Board of Canada’s Pensions Summit 2016, Michael Katchen, CEO and founder of Wealthsimple, said the company is running a pilot project for a group retirement benefits program, which it plans to launch under the name Wealthsimple for Work.

Says Katchen: “We see a massive opportunity to transform that space. We would like to bring the Wealthsimple experience, which is all about access, transparency and low fees [in exchange-traded fund (ETF)]-based, low-cost passive products, and bring that to the workplace.”

In March, Wealthsimple began offering clients access to SRI through portfolios of ETFs focused on advanced, “clean technology” innovation, sustainable growth in emerging markets and low carbon emissions.

Wealthsimple is not the first robo-advisor to offer clients SRI portfolios. Vancouver-based Modern Advisor Canada Inc. launched its SRI-focused portfolios in January 2015. Those SRI portfolios consist of five ETFs that meet SRI’s environmental, social and governance criteria and include exposure to North American and emerging markets.

This emphasis on SRI is in line with the investing interests of many younger clients, Foy says, who are more likely to be drawn to robo-advisors.

With files from Tessie Sanci.

© 2016 Investment Executive. All rights reserved.