ModernAdvisor Review 2024: Automated ETF Investing

Are you looking for a robo-advisor that can let you set and forget your investing?

Among the increasingly growing market of robo-advisor products in Canada, making the right choice can be daunting with so many options.

I’ve used and reviewed several robo-advisors, and ModernAdvisor is a lesser-known product I came across that’s worth highlighting.

Hopefully, my ModernAdvisor review will provide you with the information you need to determine if it’s right for you.

Things to consider before choosing a robo-advisor

When you are choosing a robo-advisor, here are a few factors you need to consider:

• Fees: The goal is to make the most of your investment to make more money. Getting a low-fee product is one of the most important factors for long-term growth.
• Performance: Performance will be closely related to fees but also depends strongly on the types of ETFs chosen for investment.
• Portfolios Offered: When it comes to investment, you need to have a variety of options that align with your goals. You need a robo-advisor that offers you several types of portfolios suitable for a variety of investment goals and risk tolerance. 
• Accounts Offered: There are various types of accounts available, and each offers its own features. You need to choose a robo-advisor that presents you with several account types, such as a TFSA and RRSP to store your investment. 
• Customer Service: Gauge the kind of customer support you can get from the platform. The level of customer support is crucial to help you make the most of your investment experience with a robo-advisor.

What is ModernAdvisor?

ModernAdvisor is a Vancouver-based robo-advisor product created in 2013 by two CFA Chartholders Navid Boostani and Adrian Brouwers. ModernAdvisor, like most robo-advisors, operates by creating customized portfolios for its investors with various investment goals based on their risk tolerance and preferences.

ModernAdvisor diversifies and holds assets in its portfolios based on the Nobel Prize-winning Modern Portfolio Theory to maximize the chance of success.

ModernAdvisor differs from its peers by using a hybrid approach to investing that involves both passive and active investing strategies. The passive method purchases the market and seeks to generate market returns. Active investing aims to beat market returns.

Registered as a restricted portfolio manager with the securities commissions of all provinces in Canada and the Northwest Territories, ModernAdvisor is legally obligated to make sure it puts your best interests first. It is a legal standard that companies with titles like “Financial Advisor” and “Money Coach” do not have an obligation to meet.

Features and Benefits

In this section of my ModernAdvisor review, I will discuss the various features and benefits you can benefit from through this robo-advisor.

ModernAdvisor Accounts Offered

ModernAdvisors offer you several account types that you can use with the platform, including:

• Individual Registered Retirement Savings Plan (RRSP)
• Tax-Free Savings Account (TFSA)
• Individual Registered Retirement Income (RRIF)
• Spousal RRIF
• Individual Registered Education Savings Plan (RESP)
• Family RESP
• Locked-In Retirement Account (LIRA)
• Joint Right of Survivorship Account
• Non-registered Accounts (Individual, Family, and Corporate)

ModernAdvisor Portfolios

ModernAdvisor offers you several options when it comes to portfolios. You can let the robo-advisor create for you based on your risk tolerance level. The portfolios range from “Aggressive” portfolios to “Conservative” portfolios.

Aggressive portfolios consist of low-cost ETFs that veer towards higher risk and higher reward. The more aggressive portfolios are suitable for investors with a high-risk tolerance. Conservative portfolios consist of low-cost ETFs that may not provide a rapid growth prospect for your capital, but it also reduces the risk to your funds.

In case you are curious, here are the low-cost ETFs that ModernAdvisor will use in various combinations that align with your risk tolerance levels:

• Vanguard FTSE Canadian Capped REIT ETF (VRE)
• 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)

ModernAdvisor creates individual portfolios for its investors using a combination of these ETFs. There are ten different risk levels that you can choose from, and they affect the allocation of funds to each ETF in your portfolio.

Socially Responsible Investing

ModernAdvisor’s founders understand and acknowledge the values many modern investors share regarding ethical investment.

ModernAdvisor also offers you a substantial number of ETFs suitable for Socially Responsible Investing (SRI). This option is fantastic for investors who are particular about the impact their investments have.

The SRI portfolios consist of an entirely different assortment of ETFs that are more environmentally conscious or deal with social issues and corporate governance.

If you are curious about the ETFs offered by ModernAdvisor in its SRI portfolios, here is a list:

• iShares Jantzi Social Index ETF (XEN)
• iShares MSCI KLD 400 Social ETF (DSI)
• iShares MSCI EAFE ESG Optimized ETF (ESGD)
• iShares MSCI EM ESG Optimized ETF (ESGE)
• iShares Global REIT ETF (REET)
• iShares Short-term Government Bond Index ETF (SHV)
• BMO Emerging Market Bond ETF (ZEF)

Each of these ETFs comprises companies that have environmental and social governance factors that are responsible and transparent. Between 75% to 95% of your portfolio can be eligible for SRI using the ETFs mentioned above.

As with the typical ModernAdvisor portfolios, the platform will use a varying combination of these ETFs to create an ethical investment portfolio based on your risk tolerance.

ModernAdvisor Performance

An excellent aspect of ModernAdvisor is that the robo-advisor is transparent about its performance for various portfolios it can create for you.

If you are not entirely sure about the portfolio, you might feel more inclined towards, or whether you want to choose standard portfolios as opposed to its SRI portfolios. You can tally the performance of its portfolios over the years on its website.

I’ll give you an example of a moderate risk tolerance portfolio’s performance from its core (standard) ETF portfolio.

To check out the performance of different portfolios, both standard and SRI, you can adjust the risk tolerance and type of ETFs. There is also a more detailed breakdown of ETFs that comprise the specific portfolios.

Using the performance statistics of its past performance, you can gauge what you can expect from the different portfolios.

ModernAdvisor Trial Account

A unique aspect of ModernAdvisor is its trial account.

You can begin using a free trial account at the platform funded by $1,000 of ModernAdvisor’s money called the Springboard. The trial account is the perfect way to find out whether you might want to work with this robo-advisor.

Keep in mind that the trial account does not use any dummy transactions. It is a real world-based account that you can use to create a portfolio based on your risk tolerance. If you choose to open a real account with ModernAdvisor, you can keep all the profits from your trial account that you made during the free trial period.

The trial account allows you to invest the $1,000 for free for 30 days. You can create a customized portfolio without giving any banking details. If you do not feel inclined to continue with the trial period, you can cancel at any time.

If you do not make any gains in your portfolio during the trial period, but you still want to open a real account with ModernAdvisor, you can still open an account for free. It seems like a fantastic way for you to become comfortable with investing in the stock market with a robo-advisor without fully committing to it with your funds.

Even if you do not end up using MoneyAdvisor, I would suggest trying out this feature just to get the experience of it.

Mutual Fund Fee Analyzer

Another feature with ModernAdvisor is its mutual fund fee analyzer. If you invest money in mutual funds, you can use this feature from MoneyAdvisor to determine the amount you pay in fees for mutual funds. This analyzer also includes the amount you might not be disclosed to by the provider (hidden fees are a big thing with traditional mutual funds).

You can input the data manually or scan your documents to get the summary report. The idea behind this feature is to help you understand the amount you are paying and grasp the difference that lower fees can make for your bottom line in the long run. You might find it surprising how drastic the difference can be.

Automated Portfolio Rebalancing

Another important feature that ModernAdvisor provides you is automatic rebalancing. The robo-advisor continually analyzes the performance of your portfolio, and it automatically rebalances your account if it ever strays more than 5% from its target allocation.

It saves you from the effort of keeping track of it yourself and manually rebalancing the portfolio. Most robo-advisors offer this feature, and I think it is a crucial aspect of any modern robo-advisor.

Low Fee Structure

I will discuss the fees charged by ModernAdvisor in more detail in the following section of my ModernAdvisor review. However, I would like to point out that it is a significant benefit that investors can stand to gain with this robo-advisor. The fees are significantly lower than what you pay for average mutual fund managers, and there is no fee for accounts of less than $10,000.

ModernAdvisor Fees

As I mentioned above, one of the main benefits of using ModernAdvisor is its promise of lower fees. Investors mostly consider using robo-advisors for the lower cost and maximum returns. 

Like most robo-advisors, ModernAdvisor’s fee structure has a tier system based on the balance in your account with the platform.

• $0 – $10,000 Free
• $10,000 – $100,000 0.50% per year
• $100,000 – $500,000 0.40% per year
• $500,000 – $1,000,000 0.35% per year

For Example: If you have a portfolio with $50,000 invested, you can pay $250 per year in management fees to ModernAdvisor.

Keep in mind that these are the management fees charged by ModernAdvisor.

The actual fees will be slightly higher. There is also the Management Expense Ratio (MER) that is built into the underlying Exchange-Traded Funds by the providers. Depending on the ETFs, the MER can vary. It can be around 0.27% for the MER. Add it to the 0.50% per year management fee, and you can realistically expect to pay 0.77% in fees to ModernAdvisor.

Traditional mutual funds cost you an average of 2.23% each year. Between the management fees charged by ModernAdvisor and the MER for underlying ETFs, you will still have to pay a drastically lower amount than traditional mutual funds.

I would like to point out that although ModernAdvisor does not have a minimum initial account balance, there is a slight kink there. The robo-advisor does not begin investing your funds until you have at least $1,000 in your account.

Modernadvisor Personal (Paid Premium Service)

If you want more comprehensive financial planning, ModernAdvisor has you covered for an extra fee. Here are some of the benefits

Is ModernAdvisor Safe and Legit?

Safety and security is a primary concern for most investors. I would suggest never to consider using any robo-advisor platform unless they can provide you with sufficient guarantee that it will keep your fund secure.

ModernAdvisor holds your funds using an independent custodian called Credential Qtrade Securities Inc., a member of the Canadian Investor Protection Fund (CIPF). Credential is a reliable custodian that safeguards more than $20 billion for financial institutions across Canada. It is also a member of the Investment Industry Regulatory Organization of Canada (IIROC).

It means you can rely on ModernAdvisor to keep your funds safe. In case of delinquency, bankruptcy, or any other issues with ModernAdvisor or Credential Qtrade Securities, your account is insured for up to $1 million.

Alternatives to ModernAdvisor

When I think of alternatives, I will compare ModernAdvisors with Wealthsimple, Questrade, and Wealthbar, which are some of the biggest names in Canadian Robo-advising.

ModernAdvisor vs. Wealthsimple

Wealthsimple is the most popular and largest robo-advisor in Canada. Its investment strategy consists of using low-cost ETFs to create a diversified portfolio based on various risk tolerance levels.

Wealthsimple’s approach is passive management for its portfolios instead of ModernAdvisor’s hybrid passive and active investment method. ModernAdvisor requires a minimum of $1,000 to invest, while Wealthsimple begins investing your funds with whatever amount you initially invest.

You can learn more about Wealthsimple in my Wealthsimple review.

ModernAdvisor vs. Questrade

Questrade is a discount brokerage popular among DIY investors in Canada. Its robo-advisor product is Questwealth Portfolios. It matches new users to a portfolio based on their risk tolerance using a 10-question form covering various aspects of your financial situation and preferences.

Questrade beats ModernAdvisor when it comes to the fee structure it offers you. However, Questrade does require a minimum account balance of $1,000. Questwealth also follows an actively managed investment style as opposed to ModernAdvisor’s hybrid active and passive approach.

Learn more about QuestWealth in my QuestWealth review here.

	ModernAdvisor	Wealthsimple	Questwealth
Management Fees	0.35%-0.50% per year	0.4%-0.5% per year	0.2%-0.25% per year
MER	Average 0.27%	Around 0.2%	0.11%-0.23%
Minimum Balance	None	None	$1,000

Conclusion

If you are new to investing and are searching for a robo-advisor that can help you understand the basics of it without putting your capital at risk, ModernAdvisor is an excellent option to consider.

While it is not as comprehensive as the likes of Questwealth and WealthSimple in some ways, it provides you with several options to help you achieve your financial goals without compromising your values.

For a more complete list, check out the best robo-advisors in Canada here.