By Tom Bradley

There is some exciting innovation happening in the wealth management industry. I’m speaking of the emergence of robo-advisors. These firms have an on-line offering that is simple and relatively low-cost.

The robo movement started in the U.S. a few years ago. The two prominent ones are Betterment and Wealthfront. In the last two years, there’s been a wave of new firms starting up in Canada. Amongst the better known are Wealthsimple, Nest Wealth, and in our own back yard, WealthBar.

Being ever keen students of our industry and having a tech geek as our COO (Neil), we’ve followed this trend with interest (and even signed up with a couple of the services to try them out). No doubt, robo-advisors will have an impact on Steadyhand. They’re stealing the media limelight for sure, will likely affect our growth (Good or bad? We’re not sure.) and push us to keep innovating.

But rather than chase the robo trend as most Canadian financial institutions are desperately doing (it’s looking like a crowded trade), we’re more inclined to embrace our differences – specifically, the differences that we believe will have a positive impact on our clients’ lives.

Advice – Some of the robo-advisors offer, or will offer, clients the chance to talk to a real person. At Steadyhand, the personal touch is not an after-thought. We embrace the opportunity to collaborate with our clients on their investment plan and portfolio. While we have some useful tools on our website (and have ideas for more), our focus is on leveraging our experienced professionals – Chris, Lori, Scott, David, Salman and myself – who talk to clients every day.

Transparency – A key tenet behind the robo movement is transparency, although so far the results have been mixed. Certainly, none of the robo-advisors can touch us on this.

• It starts with our quarterly account statement. Our clients know how they’re doing (returns in percentage and dollar terms), what their overall asset mix is, and what they’re paying (also in percentages and dollars). Our clients pay us via our fund MERs (management expense ratios), which cover fund management, client service, advice, transactions, administration and taxes. Robo-advisors show what their fee is, but most don’t show the MERs on the ETFs or funds their clients hold.
  
• Our website shows clearly who is managing each of the funds and has videos with each of them.
  
• In our Quarterly Report, we talk openly about how we’ve done – the good, bad and interesting. We also outline the strategy going forward for each of our funds.
  
• In our blog, we keep our clients abreast of what we’re thinking and regularly reinforce what they should be focusing on.

Undexing – For the most part, the robo-advisors are using ETFs to implement their strategies, and most of the ETFs replicate the market indices (although some have elements of active management). At Steadyhand, we have no desire to look like the index. We have designed our funds and hired managers who are focused on providing above-index returns over the long term. While our individual funds have taken turns leading the way (i.e. they don’t all perform well at once), our balanced clients have experienced returns that are solidly ahead of indexed portfolios.

100% Employee owned – Our clients know they’re not dealing with a typical financial institution. We want to make a profit, but our entrepreneurial DNA is directed towards a bigger mission – we want to feel good about the impact we’re having on our clients. In the media, there’s been much written lately about veteran bankers and large institutions taking ownership stakes in the fintech firms. As Bay Street and the banks creep into the robo space, our DNA becomes even more unusual.

We’re an investment firm, not a technology firm – As Bob Hager said to me when we worked together, “It always comes back to stocks and bonds.” We’re genuinely excited about the fintech movement, because wealth management is in need of a serious shakeup. We’re trying to do our part, but we’re not doing it with algorithms and a steam of developers (sorry Neil). Investing is at the core of what we do and takes up a vast majority of our time and resources.