This post is sponsored by Nest Wealth, but the views expressed are entirely my own. Thanks for supporting the brands that support this blog.
I started investing about four years ago at age 24. At that point, I was primarily concerned with finding an investing option with fees that weren’t too high, and that was easy to contribute to – because I wasn’t sure how great I’d be at contributing regularly.
Fast forward four years and my portfolio is nearing $35,000 in value, and it’s time to start seriously evaluating my options and choose an investing method that is the best place for my money, and not just the most convenient option.
My criteria are simple: I’m looking for a cost-efficient way to use an index investing strategy for long-term growth. Canada is known for having high investment fees, so I can’t just pick any old mutual fund and call it a day. Sure, I could do it myself with exchange-traded funds (ETFs), but I’m just not interested in doing it myself. Every time I start researching investing my own money, my eyes glaze over, and I start daydreaming about what kind of trim I’m going to add to my office window. I’m just not that into it.
Instead, I’d rather educate myself on the fundamentals and pick a low-fee robo-advisor to do the heavy lifting for me.
Fortunately, the rise of robo-advisors in Canada means there are many, many low-fee options for parking my money, and this year I’ll be reviewing a few before making the big decision.
Today let’s talk about Nest Wealth.
Nest Wealth is a relatively new entrant on the robo-advisor scene but uses the same strategy of creating a customized portfolio based on your risk tolerance. Your portfolio is made up of ETFs which are low cost and easy to trade, and those low costs are passed on to the end user.
Nest Wealth Accounts
Nest Wealth offers all of the types of accounts you’d expect to house investments in, including:
- RRSP (and spousal RRSP)
- TFSA
- RESP
- LIRA
- RIF
Right now, I’m only interested in using the RRSP and TFSA options, but the broad spectrum makes Nest Wealth useful for most Canadians. Non-registered accounts are also available.
Nest Wealth Fees
The main reason that Nest Wealth made it onto my list of places to move my money is because of the low fees. First of all, Nest Wealth offers a cool fee calculator that lets you input your current fees and then tells you how much you’d save by switching to them, both per year and over your entire investment horizon. Most mutual funds are so expensive that this could result in savings of ten’s of thousands of dollars, but since I’m using a relatively low-fee investment strategy anyway, my savings would be in the realm of $5,000 over 20 years.
While most companies charge investment fees as a percentage of your portfolio’s value, Nest Wealth uses a flat rate subscription fee. Here’s their fee structure:
- Less than $75,000: $20 per month ($240 per year)
- $75,000 – $150,000: $40 per month ($480 per year)
- More than $150,000: $80 per month ($960 per year)
For larger portfolios, this fee structure is very appealing. For example, let’s say you have $150,000 invested with mutual funds paying the average mutual fund fees in Canada of 2.35%. That means you’ll pay $3,525 per year in fees.
With Nest Wealth you’ll pay $40 per month or $480 per year. That’s a savings of $3,045 per year!
For investors with smaller portfolios, however, the difference is less compelling.
Right now, I have around $35,000 invested, and I pay a 1.07% MER, for total annual fees of $374.50. That means with Nest Wealth I’ll save about $134.50 per year. But Nest Wealth also charges $9.99 per trade on top of that subscription cost, with a cap of $100 per year per account, which could cut my savings down to $34.50 per year.
If my portfolio were smaller, the savings would be even less. While any savings are better than no savings, there might be better options out there for small portfolio investors.
Nest Wealth Security
While Canada has one of the most stable banking systems in the world, it doesn’t hurt to do your research about a company before trusting them with your entire financial future. In this case, when you move your money to Nest Wealth, your assets are held by National Bank Correspondent Network (NBCN), a subsidiary of National Bank. National Bank is also a minority stakeholder in Nest Wealth. Nest Wealth is regulated by the Ontario Securities Commission (OSC), and NBCN is a member of the Canadian Investor Protection Fund, which covers each account up to $1,000,000 in case of insolvency or bankruptcy.
Nest Wealth Returns
The nature of robo-advisors is to use broad-based ETF’s to create a diversified portfolio that includes bond funds, stock funds, and cash. Nest Wealth follows this formula invests your money in the following seven asset classes:
- Domestic equities
- US equities
- Emerging market equities
- International equities
- Government fixed income
- Real return bonds
- Real estate
- Cash
The result is a diversified portfolio across both classes and geography, with the proportions adjusted depending on your risk tolerance. This type of portfolio isn’t likely to yield incredible market-beating gains, but as long as you stick with it for the long term and set reasonable goals, the compounding returns are suitable for the long-term investor.
Of course, no investment is 100% risk-free and factors like economic conditions, world events, etc., could negatively impact your investment returns. That’s why it’s important to be honest with yourself about your risk tolerance.
Nest Wealth User Interface
Not so long ago this wasn’t even a category when it came to evaluating various investment options, but the user interface is an important factor to me. The Nest Wealth user interface is easy to use and understand. If you have questions about your portfolio, you can connect with a Nest Wealth advisor either through email, chat or even over the phone (my least favourite option).
Here are some examples of their user interface. I’m a big fan of goal setting, so I love that you can set goals from the dashboard.
The Final Word
For investors with larger portfolios, Nest Wealth’s capped fee system is a great way to reduce your investment fees and get the most bang for your buck. For smaller investors like me, the savings are reduced and there may be a better robo-advisor out there for you. Personally, I think I’ll keep looking for a robo-advisor, but once my portfolio jumps the $50,000 mark, I’ll re-evaluate.
If you’re considering signing up for Nest Wealth, use the link below to get your first three months managed for FREE!
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