Can a flat fee robo-advisor compete?

Understanding robo-investing

Robo-advisors entirely automate the investing process by using algorithms to manage your portfolio based on your risk tolerance and financial goals. Typically, when you sign up for a robo-investing site, you answer a range of questions that let the company build a custom investing plan for you, based on their robo-investing platform and algorithms.

This automated method of developing an investment plan doesn't stop with building a risk-profile and an investment strategy. Robo-advisors are told how much you want to invest, and investors are often able to set up automatic deposits into the robo-advisor account — and this automatic deposits are used to grow your investment portfolio.

Robo-investing process usually includes services like automatic rebalancing, automatic reinvesting, tax-loss harvesting and adjusting the portfolio over time as your needs and market conditions change. You are generally charged a monthly fee for these services — usually between 0.2% to 0.7% of your portfolio's value.

Robo-investing has gained significant traction in Canada, with several well-known platforms to choose from, including: Wealthsimple, Questwealth Portfolios and Nest Wealth among the most popular options. The trend has even caught the attention of Canada’s Big Five banks, with services like RBC InvestEase and BMO Smartfolio now offering robo-investing options.

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Moka enters the Canadian market

Overall, robo-investing has been an affordable, passive way for non-investment-savvy Canadians to reap the higher earning rates of investments with little effort. There was little to improve until Moka introduced a unique approach combining micro-investing with traditional robo-investing services.

Moka, known initially as Mylo, was founded in 2017 and was bought out by Mogo in 2021. It aims to help Canadians achieve their financial goals through an innovative micro-investing app approach. The app automates saving and investing by rounding up your purchases to the nearest dollar and investing the remaining amount (which essentially amounts to spare change) into low-fee exchange-traded funds. Rather than paying a percentage of your portfolio, the app charges a flat fee of $15 monthly.

How Moka Works

When opening a Moka account, you link a bank account and debit/credit cards to the app. After that, whenever you purchase, Moka will round up the purchase amount to the nearest dollar. The difference between what you bought and the rounded-up amount is what goes into your Moka investment account. For example, if you get takeout for $20.75, Moka rounds up the cost to $21 and deposits the $0.25 into your investment account. On top of the round-up feature, the app creates "boosts" that let you make one-time deposits into your investment accounts to accelerate your savings. You can also make automatic weekly contributions into your Moka investment account — helping you create an automated way to consistently boost your investment portfolio.

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Investing with Moka

Much like traditional robo-investing, once you initially sign up, there is very little effort required. Essentially, you can “set it and forget it” and ideally watch your profits grow.

With Moka, during the sign-up process, you choose an investing comfort level among five different portfolios:

• Cautious Income
• Balanced Income
• Balanced
• Balanced Growth
• Equity Growth

Unless you change your financial strategy or goals, Moka will automatically invest your spare change into your chosen investment portfolio.

• Start investing today: Open a Moka account and start building your investment portfolio.

While robo-investing can be a smart option for those who prefer not to manage their portfolio or don’t want to pay a financial advisor, don’t expect to see stratospheric returns if you only invest your spare change.

Pricing structure of robo-advisors in Canada vs Moka

With very few exceptions, the fee structure of most robo-advisors in Canada is based on a percentage structure, meaning that you pay a percent of your total overall investment portfolio to the robo-investing company each month. Fees can range from approximately 0.2% to 0.7%, depending on which company you use. So, no matter how your portfolio performs, you’re giving the company a percentage of your investments each month.

Moka is different. Moka's unique model means that unlike other robo advisors where the fee you pay is a percentage of the net worth of your investment portfolio, Moka charges a flat fee of $15, per month. So whether you’ve invested $100 or $100,000 with Moka, you’ll only be charged this low monthly fee.

This pricing model is especially appealing to those with smaller investment portfolios. By offering a low, flat fee, Moka makes it feasible for almost anyone to start investing, regardless of their initial capital.

This accessibility may be especially appealing to first-time investors who don’t feel comfortable paying a percentage of their portfolio to an investment company no matter how well (or poorly) their investments are doing. It may also be a good choice even for enthusiastic investors with an extensive investment portfolio because you’ll pay much less in fees.

For example, if you have an investment portfolio of $100,000 and are paying a fee of 0.5%, you’d pay approximately $500 a year in fees, but with Moka, you’d pay only $84, which is a significant saving.

Open a Moka account

For a flat-fee, investors can invest in stocks, ETFs and mutual funds while taking advantage of the app's round-up feature — where extra dollars and cents are collected and used for additional investment opportunities. Moka clients also get access to five professionally managed portfolios along with robo-advisor advantages of automated portfolio trades, rebalancing and tax-loss harvesting. Open a Moka account, today, to activate the power of automatic investing.

Bottom line

Robo-investing can be the correct route for those who want a hands-off approach to investing. Moka takes that concept up by integrating a micro-investing feature that automatically rounds up purchases to the nearest dollar and invests your spare change, making investing even more automatic and frictionless.