Battle to win clients against robo-advisors continues as leading industry player takes drastic steps
IN A drastic attempt to fight back in its battle against robo advice platforms, industry giant Charles Schwab has decided to slash minimums on most of its mutual funds on the OneSource platform – some as low as just $100, a dramatic 96 per cent fall from its previous $2,500 level.
Schwab, which is based in California but ran a business in Canada until 2002 when it was subject to a takeover from ScotiaBank, has decided that after the first investment of $100, subsequent minimums on the platform will be just $1 – down from $500 previously.
It appears that Schwab is trying to win back business in the increasingly competitive marketplace for smaller accounts – one that has been punctuated by the arrival of robo advisors.
According to Mallory Greene, community manager of WealthSimple, robo advisors are offering a genuine alternative to a previously unnoticed group of clients.
“The younger generation of investors have previously been overlooked by traditional financial advisors,” she said. “Robo-advisors have low account minimums and low fees. They aim to educate investors on passive, long-term investments. Investors have the opportunity to receive high-quality financial advice for a fraction of the cost.”
Greene believes that robo advisors are not a threat to traditional financial planners, however, just an alternative.
“Prior to robo-advisors, investors in Canada had just two options to manage their money: do it yourself or hire an advisor,” she said. “They didn’t want to personally manage their money or hire an investment advisor that they didn’t necessarily trust. There was an opportunity to build something that could invest your money in a very simple, transparent way.
“Robo-advisors fill a big gap for Canadian investment needs. Going forward, it’s evident that they will play a large role in the financial industry and change the way people invest.”
According to a Schwab spokesperson, OneSource funds will have new low thresholds because of the company’s ability to use omnibus trades to combine orders. He suggested that the company was simply formalising a practise that had been in place for some retail investors for many years.
Schwab, which is based in California but ran a business in Canada until 2002 when it was subject to a takeover from ScotiaBank, has decided that after the first investment of $100, subsequent minimums on the platform will be just $1 – down from $500 previously.
It appears that Schwab is trying to win back business in the increasingly competitive marketplace for smaller accounts – one that has been punctuated by the arrival of robo advisors.
According to Mallory Greene, community manager of WealthSimple, robo advisors are offering a genuine alternative to a previously unnoticed group of clients.
“The younger generation of investors have previously been overlooked by traditional financial advisors,” she said. “Robo-advisors have low account minimums and low fees. They aim to educate investors on passive, long-term investments. Investors have the opportunity to receive high-quality financial advice for a fraction of the cost.”
Greene believes that robo advisors are not a threat to traditional financial planners, however, just an alternative.
“Prior to robo-advisors, investors in Canada had just two options to manage their money: do it yourself or hire an advisor,” she said. “They didn’t want to personally manage their money or hire an investment advisor that they didn’t necessarily trust. There was an opportunity to build something that could invest your money in a very simple, transparent way.
“Robo-advisors fill a big gap for Canadian investment needs. Going forward, it’s evident that they will play a large role in the financial industry and change the way people invest.”
According to a Schwab spokesperson, OneSource funds will have new low thresholds because of the company’s ability to use omnibus trades to combine orders. He suggested that the company was simply formalising a practise that had been in place for some retail investors for many years.
