Some in the financial services industry believe that a large gap exists between traditional financial advice and do-it-yourself investing. The question is whether this gap – real or perceived – needs to be filled. WP asks Questrade CEO Edward Kholodenko to weigh-in on the subject.
Here’s what he had to say:
When online retail trading was in its infancy back in 1999, there was a lot of resistance to the idea of removing the barriers between individual investors and the markets. It took a few years for “discount brokerages” (as they were once called) to take hold, but they did. The business matured and the benefits quickly emerged: transaction costs dropped; transparency and liquidity increased; there was increased accessibility and competition. The overall industry had a minor shake-up, but as electronic trading flourished, it found its place amidst all the other investment models.
Forward to 2014 and this time the technology revolution is in wealth management and advisory services. The media has dubbed the new type of service robo-advisor, although I prefer to call it online wealth management. Just as with online trading, some of the same benefits are emerging: lower costs, transparency, accessibility, increased choice for the consumer.
Is this new type of service going to change the advisor industry completely? No. An online wealth management service like Portfolio IQ (Questrade Wealth Management Inc’s service) is filling a gap – what I believe is a very large gap -- and offering an opportunity to people who don’t see the advisor model as a viable option for them.
Will some Canadians leave advisors for Portfolio IQ? Absolutely. Now let’s ask the next question: will some Canadians leave their trading accounts for Portfolio IQ? No doubt they will. Maybe their priorities changed, or maybe they want the convenience of a professional portfolio manager watching out for their investments.
In the end, we must realize that as Canadians adopt robo-advice, it’s because they’ve found a solution that serves their needs.