In 2018, more than 371 million Interac electronic funds transfers were sent in Canada worth a total of $132 billion. Even if you don’t live in the Great White North, you’re likely familiar with Interac’s services. They enable you to send money to friends, family members and associates directly from your bank account. With a few clicks of your mouse and your recipient’s email address, funds can conveniently be awaiting collection right in their inbox. All that is required is a password created by you to accept the transfer. It may come as a surprise that despite being password protected, these transfers can become easily compromised.
According to cybersecurity expert Claudiu Popa, transferring money by email is much more risky than most people realize. Financial institutions have sacrificed security in an effort to get a high number of people to use their services. This has resulted in skyrocketing rates of misappropriated electronic funds transfers. If your email account becomes compromised in a data breach, fraudsters can gain access to your information and use your messaging service’s server to intercept your transferred funds and deposit them into their own private bank accounts.
Worse still, financial institutions and Interac will do little to help you retrieve your lost funds, citing often difficult to find agreements that stipulate the conditions of using their services. If the bank deems your password and security question to be easily guessed or obtained by others, any loses you incur through theft will not be reimbursed. Instead, it becomes your responsibility to protect your email and passwords so as to not fall victim to cybercrime.
We Will Never Compromise Your Security
At SolidTrust Pay, your security is our top priority. Our corporate grade anti-virus and firewall protection is continuously monitored by our network of global security personnel. We are PCI compliant and use 256-bit SSL certificates to keep your personal information safe and secure. Despite the strength of our security infrastructure, if your account does become compromised, our recovery services ensure that you will be compensated for the full amount lost regardless of the strength of your passwords.
Unlike other e-wallet providers and payment processors, we have instituted a dual password system to better safeguard your personal and financial information. We require that all passwords be updated every 3 months and they must adhere to strict parameters. When creating a password, it must possess an uppercase and lowercase letter, a number, a symbol and be at least 6 characters in length. These requirements are the same for secondary passwords.
All SolidTrust Pay transactions require a secondary password, a TrustCard code or a Two-Factor Authentication (2FA) text message as an added security measure. Your secondary password cannot be reset or retrieved via email. This is to prevent an unauthorized person from resetting both the primary and secondary passwords linked to your account.
By requiring a secondary password for all payments and transfers sent from your e-wallet, we adopted Two-Factor Authentication (2FA) security protocols before they became best practice. We are continually striving to remain one step ahead of cybercriminals and cyberthreats, a mandate that guides our Corporate Philosophy.
When you choose SolidTrust Pay for your payment processing needs, you’re getting far more than a convenient and secure e-wallet – you’ll enjoy complete peace of mind knowing that your personal and financial information is securely stored, encrypted and only accessible by you.
In a previous post, we explored how artificial intelligence is transforming the financial industry, making investing accessible to anyone, no matter their financial literacy or expertise. One such breakthrough is the use of robo-advisors in the management of investment assets. Despite their name, robo-advisors do not provide in-depth financial advice tailored to your specific needs or life stages. Instead, they are online financial service providers that utilize specialized software and proprietary algorithms to make investment decisions on your behalf. By 2025, it is predicted that robo-advisors will have over $16 trillion worth of assets under their management. A staggering sum when you consider that the first robo-advisor was launched just over 10 years ago in 2008. Well known robo-advisor platforms include Betterment, Wealthfront and Wealthsimple.
Last week, we outlined 5 reasons why a robo-advisor might be the ideal tool to help you achieve your long-term financial goals. We are now going to explore the shortcomings of using a robo-advisor and offer insight into whether you should consider signing up with one. Robo-advisors are not the ideal financial tool for all investors, and depending on your goals, unique situation and level of financial expertise, a traditional wealth manager may be exactly what you need.
4 Disadvantages of Using a Robo-Advisor
1) Lack of Financial Personalization and Guidance
Robo-advisors are often marketed as being able to fulfill all the duties of a traditional financial planner. This is simply not true. Like a financial planner, robo-advisors can effectively create and manage your investment portfolio, but unlike a good planner, they cannot get to know you on a personal level and help you implement an investment strategy that makes use of all the financial tools and opportunities available to you to reach your specific long-term goals. Investment managers exist to educate and guide you to where you want to be with your money. It’s an ongoing process and having someone guide you and help keep you on track can make all the difference. Unlike their human counterparts, robo-advisors simply cannot do this.
2) Inability to Help You Meet Short Term Financial Obligations
Robo-advisors primarily focus on long-term investments and growing retirement nest eggs. If your financial goals include getting out of debt and building an emergency fund, their services often fall short. For this reason, robo-advisors are not a one-size fits all financial tool, and getting a handle on your overall financial situation is something robo-advisors cannot help you do. We all know that long-term financial planning is important, but if you’re not in a stable financial position today, your chances of sticking to your long-term goals dramatically decline. In these situations, a traditional wealth manager can offer you helpful advice for meeting your short-term needs.
3) They Falsely Claim that They’re the Least Expensive Investment Option
Compared to the financial services industry as a whole, robo-advisors do possess lower fee schedules and lower minimum investment balance requirements. Yet, there are financial advisors who charge approximately 1% of assets under management for their services. This fee is comparable to many robo-advisors. Similarly, if you lack a healthy sum of money to invest, there are wealth management alternatives for those just starting out. The XY Planning Network is a fee-only financial planning community of advisors with an affordable monthly fee structure. They cater to young and new investors who are just starting out and charge a flat fee which puts a cap on their charges.
4) Your Choices Are Limited
There exists a plethora of asset classes to invest in. If you’re seeking to create a diversified portfolio that includes investment choices outside exchange-traded funds and stocks, you will likely not be satisfied with the limited options provided by most robo-advisors. If you want to play an active role in selecting the type of assets you invest in, a traditional investment manager will work with you to create a diversified portfolio that reflects your choices.
Should You Choose to Invest With a Robo-Advisor?
Like any investment tool, robo-advisors provide benefits to investors with specific needs. If you’re young, have more than 20 years until retirement, wish to build a simple portfolio and lack investment experience or are simply unsure where to begin, a robo-advisor is an excellent option for you. On the other hand, if you have short term financial obligations to meet, you’re closer to retirement and fear that your investment strategy is falling short, you want a face-to-face relationship with your financial advisor and you enjoy having a say about the assets in your investment portfolio, a traditional financial planner or investment manager will better serve your needs.
If you’re still unsure whether you should use a robo-advisor, financial experts advise to err on the side of caution and opt for a human advisor. In times of economic uncertainly robo-advisors will do little to soothe your nerves and talk you out of making rash decisions. Robo-advisors also do not know about your particular needs. If you have a special needs family member that requires long term care or are one mistake away from losing your job, a human advisor can better adjust your financial plan around these circumstances. Of course, there is nothing wrong with using a robo-advisor to manage your money until you find the right financial advisor for your unique needs.
Would you use a robo-advisor to manage your investment portfolio? Let us know in the comments section below. If you enjoyed this post, please subscribe to our Blog and follow us on Facebook and Twitter for news, updates and more helpful content!
In celebration of Victoria Day and the official start of cottage season in Canada, our office will be closed Monday, May 20th. Our Customer Support and Verification departments will be unavailable on this date. If you require assistance, you may leave a support ticket for us at any time by clicking HERE, but please be advised that it will take us a little longer to respond to your inquiry. Please also allow additional processing time for deposits, withdrawals and e-currency exchanges.
Is investing an art or a science? The answer to this question will vary depending on who you ask. Wealth managers and investment advisors will lean towards the artistic side, drawing parallels between what they do and the creative process of artists. If art is the expression and application of creative skill, then it becomes possible to understand how wealth managers use their knowledge and skills in creative ways, connecting disparate pieces of information to reap positive economic returns for their clients.
If you ask economists and market analysts the same question, they will favour the scientific approach to investing. These experts will draw on statistics and cutting edge research to illustrate how passive investing, which is the process of limiting the amount of buying and selling within a portfolio, yields higher returns over time. Proponents of this system often explain how buying index funds that follow one of the major market indices, like the S&P 500 or Dow Jones, yield better long term results than permitting a portfolio manager to take advantage of short term price fluctuations in the market, a process known as active investing.
As a recent addition to the financial services industry, robo-advisors are firmly situated on the scientific side of the scale. They consist of online services that utilize specialized software and proprietary algorithms to make investment decisions on your behalf. Unlike pure passive investing, modern robo-advisors can make adjustments to your portfolio as your situation and the market change. They will collect data about your needs, investment capital and risk tolerance, and determine where best to invest your money. With trillions of dollars already under the control of robo-advisors, should you fire your wealth manager and let a robot make investment decisions for you?
This is the first part of a two-part examination into the advantages and potential pitfalls of relying on a robo-advisor to manage your financial investments.
5 Advantages of Using a Robo-Advisor
1) Affordable Investment Management
It should come as no surprise that personalized service can be expensive. Traditional investment managers charge high fees to manage private portfolios. These fees typically range between 1% and 2% of your annual portfolio value. Robo-advisors generally charge between 0.50% and 1%, with an annual management fee far less than what wealth managers charge.
2) Low Minimum Investment Balances
Professional investment management firms will often demand a minimum investment balance from their clients. This may be anywhere from $5,000 to $100,000 depending on the company and the level of active management that you seek. Robo-advisors have made investing accessible to all, enabling investors with a small net worth to gain access to professional management services.
3) Algorithms Backed by Nobel Laureates
Many robo-advisor platforms, such as Betterment and WealthSimple, rely on scientific models that are backed by Nobel prize-winning research. From 1990 Nobel Prize winner Harry Markowitz to 2013 winners Eugene Fama and Robert Shiller, robo-advisors use cutting edge investment research to drive the growth of the financial assets under their management.
4) Ideal for Novice Investors
We all know that investing for the future is important. It’s a message that has been deeply embedded in our minds from an early age. Unfortunately, investing is complicated. Should you purchase stock or invest in real estate? What about emerging markets and ETFs? Perhaps buying mutual funds and bonds would be a safer alternative? Despite the fact that we would all like to reap the benefits of investing, few of us possess the knowledge and discipline to do it effectively. Robo-advisors are perfectly suited to help new investors. With low minimum deposit requirements, you can focus on growing your investment capital while your digital advisor manages the day-to-day details of your portfolio.
5) Superior Tax Efficiency
Taxes have a major impact on your investment rate of return. For this reason, robo-advisors strive to invest with a high degree of tax efficiency. They do this by relying on low cost index-based exchange traded funds, or ETFs. These funds rarely trade securities which generate taxable capital gains. Robo-advisors also offer tax-loss harvesting, which is an investment strategy whereby capital gains are offset through the sale of investment positions that have experienced losses.
Stay Tuned for Part 2
Next week, we will explore the disadvantages of relying on robo-advisors for your investment needs. We will also offer insight into whether you should retain the services of a financial professional or embrace technology and use a robo-advisor to help guide your personal investment strategy.
Have you used a robo-advisor? Let us know in the comments section below. If you enjoyed this post, please subscribe to our Blog and follow us on Facebook and Twitter for news, updates and more helpful content!