Why robo-advisers shun specialty funds


Typically, robo-advisers will offer five to 10 basic portfolio options.Wealthsimple Handout/The Canadian Press

With investment dollars flooding into online platforms such as Wealthsimple, Justwealth and Nest Wealth, the average investor could be forgiven for assuming that these robo-advisers represent a one-stop shop for any sort of customization imaginable.

In this, the average investor would be mistaken.

In particular, connoisseurs of exchange-traded funds, accustomed to all kinds of targeted strategies that take advantage of specialty funds, may be surprised to learn the robo platforms discourage such speculation. Indeed, they refuse to provide specialty fund options at all.

Jonathan Needham, national sales manager at Toronto-based ETF producer Vanguard Investments Canada Inc., said when it comes to portfolio construction, robo-advisers stick to ETFs that track the major capped indexes, steering well clear of anything that looks like a sector-specific specialty fund.


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