ModernAdvisor Review

Are you new to investing? Then check out ModernAdvisor; a solid robo-advisor for newer investors who may not have a lot of capital to start with.

WRITTEN BY
Lisa Rennie
Updated November 11, 2020


RATING

ModernAdvisor is one of a number of robo-advisors available to Canadian investors, allowing for passive investing while algorithms and real-life experts behind the scenes manage your investment portfolios. Robo advisors like ModernAdvisor offer a streamlined solution to investing and an affordable alternative to conventional in-person investment brokers. 

Thinking of using an online investment broker? Check out our list of the best online brokers in Canada.

Vancouver-based ModernAdvisor was founded in 2013 and uses savvy algorithms and expert input to determine the right investment portfolio for you based on your risk tolerance and your financial goals. Designed by a CFA charterholder, your investment portfolio will be regularly monitored and adjusted accordingly. 

Let’s dig a little deeper into ModernAdvisor to help you decide if this robo-advisor is the ideal platform for you to invest with. 

How Does ModernAdvisor Work?

ModernAdvisor works with a specific set of asset classes to build each client’s investment portfolio that offers the opportunity for diversification using low-cost ETFs. In order to determine the appropriate asset class proportion for clients, ModernAdvisor follows the “Mean-Variance Optimization (MVO)” methodology that is used by many high-level investors to find the right combination of assets. This allows each portfolio to maximize returns for each level of risk. 

Internal models have been built to calculate expected returns, after which they are adjusted for taxes and fees. ModernAdvisors algorithms simulate many potential return scenarios, then use these scenarios to calculate the optimal portfolio. 

The platform automatically re-balances asset allocations if there is more than a 5% change from the original investment to maintain your risk portfolio. 

To begin investing with ModernAdvisor, your investment goals and timeframe will be established and a few questions will need to be answered to help the system determine your tolerance for risk. Based on this information, a portfolio will be suggested for you, which can be modified at any time.  

A minimum of $1,000 is needed to start investing, and once you’ve funded your account, you’re ready to invest. 

Important Features to Consider When Choosing To Work With ModernAdvisor

  • Free trial. Before you commit yourself to ModernAdvisor, you can try it out for a month using $1,000 of their money and keep any gains made during the trial if you decide not to go forward.
  • Types of accounts. Investors can choose to invest in RRSPs, TFSAs, RESPs, RRIFs, LIRAs, and non-registered accounts, such as joint, individual, or corporate accounts. 
  • Automatic rebalancing. Your portfolio will be automatically rebalanced if your account changes more than 5% from its original target allocation when the market fluctuates.
  • Live support. You can speak with an expert via telephone, email, or live chat when you need a little guidance or have questions about your portfolio. 
  • Pop-up box for support. A pop up frequently appears and asks you if you need any assistance. 
  • Socially Responsible Investing (SRI) portfolios. ModernAdvisor offers investors the chance to invest with companies with ethics that match their own. Between 75% to 95% of your investment portfolio may qualify for ethical investing using a variety of portfolios.
  • Tax-loss harvesting. Keep more money in your pocket at tax time by offsetting your capital gains taxes by selling securities at a loss.
  • Low-cost ETFs. Your portfolio will be optimally diversified and exposed to a variety of low-cost ETFs that will help reduce risk and promote solid returns. 
  • Passive and active investing. ModernAdvisor is a bit unique for a robo-advisor in that it uses a hybrid model of both passive and active investing so that you’re not only generating returns but also actively seeking out opportunities to beat the market.  
  • Funds protected. Up to $1 million of your capital is protected by the Canadian Investor Protection Fund (CIPF).

How Much Does ModernAdvisor Cost?

ModernAdvisor charges a management fee of anywhere between 0.35% to 0.50% on an annual basis. These fees are calculated based on the end-of-day value of accounts, which is then deducted from the total amount for the given month. 

More specifically, here is how management fees with ModernAdvisor are broken down:

  • Up to $10,000: No charge
  • $10,000 – $100,000: 0.50% a year
  • $100,000 – $500,000: 0.40% a year
  • $500,000 – $1 million+: 0.35% a year

How Customized Are the Portfolios?

Investors who work with ModernAdvisor will have the advantage of creating an investment portfolio that is highly customized according to risk tolerance and financial goals. With several portfolio options available, ModernAdvisor will help you choose a portfolio that is closely suited to your investment style. 

Account Types Offered

ModernAdvisor accounts include the following:

  • RRSP
  • TFSA
  • RESP
  • LIRA
  • RRIF
  • Non-registered individual accounts
  • Non-registered joint accounts
  • Non-registered corporate accounts

Want to invest in GICs? Check out Canada’s best GIC rates.

Portfolios Offered 

ModernAdvisor classifies different investment portfolios according to their risk ratings from conservative to aggressive. The ETFs used to create portfolios include the following:

  • 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)
  • iShares Core S&P/TSX Capped Composite ETF (XIC)
  • BMO Emerging Market Bond ETF (ZEF)
  • Vanguard FTSE Canadian Capped REIT ETF (VRE)

What Perks Does ModernAdvisor Have?

  • Low fees. ModernAdvisor’s virtual platforms and centralized operations allow them to pass their savings onto you in the form of low fees. 
  • Low-cost index fund. Investors can benefit from the sensibility and security of investing in low-cost index funds.
  • On-demand access to your accounts. View your dashboard and access your accounts from your mobile device or computer whenever you need to. 
  • Support. Chat with an expert by phone, email, or live chat.
  • Free trial. Try out ModernAdvisor for one month using $1,000 of their money, and any profits you make during that period are kept in your pocket, even if you decide not to move forward with the platform.
  • Clean interface. The ModernAdvisor platform uses clean, sharp and minimalist graphics and is simple to navigate.  
  • Automatic rebalancing. ModernAdvisor automatically rebalances your account when it strays more than 5% from its target allocation.
  • Socially responsible investing. Invest with companies that share the same ethics that you do.
  • Customized and diversified portfolios. Gain exposure to a variety of ETFs at different proportions to maximize diversification and minimize risk. 
  • Security. Your funds are protected by the CIPF.

Who is ModernAdvisor Best Suited For?

ModernAdvisor is ideal for investors who are looking to simplify their investment strategy with a hybrid active/passive approach while saving a bundle on management fees. It’s also a great platform for those who like the idea of taking their investment strategy entirely online for the ultimate in convenience. 

And with the simple interface, you don’t have to be digitally savvy to make good use of the online platform. Investing with ModernAdvisor will give you the benefit of having both algorithms and real-life experts keep your investment portfolio in perfect balance according to your needs. 

Is ModernAdvisor Safe?

ModernAdvisor uses vigorous encryption to make sure that your sensitive information is fully protected. Plus, up to $1 million in your capital is protected under the Canadian Investor Protection Fund (CIPF). 

Overview of ModernAdvisor

Management Fees– Up to $10,000: No charge
– $10,000 – $100,000: 0.50% a year
– $100,000 – $500,000: 0.40% a year
– $500,000 – $1 million+: 0.35% a year
Account types– RRSP, TFSA, RESP, LIRA, RRIF
– Non-registered individual accounts
– Non-registered joint accounts
– Non-registered corporate accounts
Minimum Investment$1,000
Tax-loss harvestingYes
Dedicated personal portfolio managerWith ModernAdvisor Personal 
Automatic rebalancingYes
Socially Responsible InvestingYes

Should You Use ModernAdvisor Or Work With a Human Advisor?

The more that personal human interaction and assistance are needed, the higher price you’ll be paying to invest. Robo advisors tend to offer much lower management fees compared to the typical human investment advisor, the latter of which tends to also charge a percentage of your assets. Some traditional investment advisors may also require that new clients have a much higher minimum investment amount to manage. 

On the other hand, online financial robo-advisors are generally much cheaper than a traditional investment advisor, which is one of the big benefits of these types of investment platforms over human advisors. Plus, they offer low-cost funds tied with a combination of investments. Instead of trying to beat the market, they just simply try to match market gains over time.

Considering this, it’s tough to beat robo-advisors like ModernAdvisor, which allows investors to grow substantial wealth and minimize risk without the high amount of capital and fees that are generally required by human advisors.  

Final Thoughts

Using software to automatically invest and rebalance your investment portfolio passively with the help of algorithms and experts behind the scenes is a great way to invest, and ModernAdvisor is a solid robo-advisor that provides plenty of perks. It’s especially attractive to newer investors who may not have a lot of capital to start with and who don’t want to pay unnecessary fees to invest with.