Passiv Review: A Robo in Your Pocket

November 29th, 2018 by Potato

Passiv is a tool to help you manage your investments more easily. It’s still a DIY idea: you make your own investment choices, pick your own funds, and have to press a button to execute the trades, but Passiv makes it all easier to manage on an ongoing basis. In a nutshell, if other robo-advisors are like chauffeurs for your portfolio, Passiv is like cruise control. Passiv doesn’t pick any funds or your allocation for you, and there are no advisors to call or email to answer questions about your plan or risk tolerance, but it helps make investing easier.

How it Works

Very simply, Passiv connects to your Questrade account to get the information needed to help manage your portfolio in a more intuitive way. You set your own allocation and pick your own products.

But Passiv helps bury some of the complexity of investing in ETFs: it lets you drag a slider to set your allocation in percentages, instead of having to look up the prices and figure out how many units of each fund to buy yourself. It does the rebalancing calculations for you, and will figure out how much of each ETF to buy with new money, and you can choose whether to only rebalance with new purchases, or to include selling funds.

Screenshot of Passiv with sliders for asset allocation.

It will send you an email when new cash arrives in your brokerage account, providing the prompt needed to go in and set up your trades — not quite fully automated, but getting pretty close. Indeed, while I personally feel like I was doing fine unaided, this feature alone is cool enough that I’m going to keep using it (because then I don’t have to keep in the back of my head that I should check Questrade 3-5 days after I send money via a bill payment).

And it can even set up a series of (market) orders to execute it all for you in just one click. That’s a paid feature, but at just $5/mo it can take a lot of that last lingering complexity out of the picture that might be scaring someone away from using a brokerage account and ETFs. And the cost is low enough that you don’t really need to worry too much about the precise break-even point for this versus Tangerine or e-series or whatever.

The way it simplifies investing in ETFs while giving you full control is kind of like having a robo-advisor in your pocket.

Screenshot of Passiv making a one-click trade setup.

Suggested Pairing: All-in-One Funds

Combine with VGRO/VBAL to make something that’s cheaper than e-series (for portfolios of ~$30k+) and almost as easy (not quite automated, but close). The automatic trade feature buries a fair bit of the complexity associated with buying ETFs, and an email prompt to log in and press one button is approaching (but not quite the same as) the behavioural goodness of automation. While you can also choose a 3- or 4-ETF portfolio and have Passiv smooth over the complexity, it’s even fewer things to track if you want to use an all-in-one fund, and also has the benefit of hiding the relative performance of the constituent parts.

Behind the Scenes

Passiv uses what’s called an API to access certain information about your Questrade account from Questrade, and (with your permission) to send orders. If you’re not familiar with how APIs work, what you need to know is that there’s a special way for Questrade to securely hand off some information, but that you are not providing your password to Passiv nor full access to your account. At the moment, Questrade is the only brokerage Passiv interfaces with.

For the Core-and-Explore Crowd

If you can’t help but dabble in individual stocks (or sector ETFs or whatever), Passiv lets you exclude some items from calculating your rebalancing needs. That is, you can focus on keeping your core in line (and in one click deploy new cash to those ETFs) while still playing around on the side, and not have to worry about an automatic calculation deciding that you need to plow more money into your loser picks (or trim your winners) in the name of re-balancing.

And the Passiv team has created a special offer for BbtP readers: a 50% discount on Passiv Elite for 2 years.

Disclosure: I did not receive any payment for this post — I know it sounds like an ad, but I genuinely like the tool. At the time it was written there was no conflict-of-interest with Passiv. However, we are talking about working together somehow, so there may be a conflict in the future. I do not receive any compensation if you use the link for the special offer.

Financial Literacy Month 2018

November 21st, 2018 by Potato

It’s a buyer beware world when it comes to your finances in Canada, with lots of high fees and a fractured regulatory system where we’re lucky if they even close the barn door after the horse has left (hi there FSCO).

And it won’t get better any time soon: as Sandi points out in this Twitter thread, the Ontario government is strongly signalling that this is going to be the case for a while. Financial literacy may not be the best answer for how we would arrange our society given the choice, but at this point it is our last, best hope.

So happy financial literacy month!

So how do you get financially literate? As loud as the call is to add this stuff to the curriculum, it’s too late for anyone reading this to be helped by a developing mandatory program for high schools. Besides, just-in-time education seems to work better. Though that means you will have to take it upon yourself (or hope that whoever is already financially literate and reading this post has forwarded it to you) to seek out appropriate resources and learn before it’s too late.

There are lots of ways of doing that. You could subscribe to blogs like this one and follow along for a decade or so. You could hit up the reading guide. You could take a course. You can hire someone (but then you need enough to know that good advice costs money and isn’t free at your local bank branch).

I love blogs — I have one! — and follow many. But if you’re just starting out, I think there’s value to some structure, so books or courses are likely the better way to go.

I have a course on investing. I think it’s fantastic, but it’s not the only option. In a recent episode of the Canadian Couch Potato podcast Dan Bortolotti did a good take-down of the consumer-focused CSI course on investing (the segment starts at about the 37:50 mark), and I thought that the points he mentioned that a course should cover were really good, and also something that I think my course covers.

Need some other options?

In Toronto, Ellen Roseman and Teri Courchene teach courses through UofT’s School of Continuing Studies, with multi-day evening options (winter, fall), and a one-day workshop ($225).

Your local college or university’s continuing education department may have some offerings. Plus there are one-off seminars, like at the Toronto Public Library (and I’ll be presenting in the winter/spring).

And if you have a business (or are part of one), a somewhat common thing is to have lunch-and-learns, or other non-work-related educational seminars, where a someone comes in to speak to the group, which can be a good way to help improve your employee’s financial literacy. Sometimes these take the form of a sales pitch from the big banks and mutual fund companies (which you don’t want), but for a modest fee there are lots of independent people who will do this (I don’t advertise it but have done it once or twice, and know lots of others who do or would be interested if you can’t find someone).

Back to the online courses, Kornel Szrejber (Build Wealth Canada) has How to Invest (for Canadians), an online course focusing on ETFs ($125). Bridget Casey (Money After Graduation) teaches the online Six Figure Stock Portfolio (~$495 CAD) which includes trading as well as passive investing. Aman Raina (Sage Investors) has two How to Invest in ETFs for those looking to take a passive approach ($149), and a more expensive one for would-be active investors. And those are just the ones on investing — I’m not sure I could catalogue the books, challenges, programs, and courses out there for budgeting.

And a final tip for financial literacy month that comes from Sandi Martin: “Start talking to other people about money. Normalize conversations about the choices we make about our investments (beyond “I’ve got a guy” or whatever it is people say) and spending. If we imagine the bad/lazy/corrupted actors as the enemy, our job as the resistance is to conspire with each other by sharing information and overcoming the urge to either feel shame (because we’re not doing the “right” things and want to wait before we share until we are) or shame others.”

New RDSP Options

October 29th, 2018 by Potato

For the longest time, TD Direct Investing was the only game in town if you wanted to invest in a low-cost way in an RDSP. Big Cajun Man detailed the quirks of these accounts (and has provided lots of info on RDSPs in general).

Fortunately, there’s some competition now: National Bank Direct Brokerage is now offering RDSPs.

And NB is Nest Wealth‘s custodian broker, which means that there’s now a robo-advisor option for RDSP! I’ve long thought that the robo-advisor method would be really welcome for RDSPs, but it just hasn’t been an option for the first several years. I’m glad to see that it’s now possible, though there will be some manual processes to make it happen on Nest Wealth’s end (so you won’t yet see a link on their site — you’ll have to contact them and ask).

A few details: RDSPs are only available to those on their top-tier, $80/mo plan. That’s normally for accounts over $150k in assets, though you can opt to pay it if you want to open an RDSP even without the assets. Of course, you’ll have to decide if it’s worth it vs. using TDDI or NBDB (or high-fee mutual funds with other banks) if your accounts are small. There’s a $100/yr admin fee for additional accounts, and since your RDSP isn’t likely the only account you’ll have with Nest Wealth (e.g., if you’re opening one for your kids, then you may have your own RRSP/TFSA as well), you should expect that as well when doing your cost-benefit analysis. Still, that should be welcome news for a few people!

Disclosure: I’m a member of Nest Wealth’s affiliate program and have used the affiliate link above — see the side bar for more.

Robo-advisors and Taxable Accounts

October 25th, 2018 by Potato

Let’s make it clear up front that I like robo-advisors as an investing solution for many people — lots of people might save money learning how to DIY, but that is certainly not for everyone.

One lingering point of uncertainty was how they would deal with taxable (or “non-registered”) investment accounts. Once you’re out of TFSA/RRSP room, you’re left to invest in a taxable account, which means tracking and reporting requirements. Typical robo-advisor portfolios have upwards of 10 ETFs, and if you’re automating your contributions with bi-weekly contributions, you could be looking at hundreds of transactions to track for tax purposes. Their websites were certainly not clear on the point — if addressed at all, the language tended to say that they would “provide all necessary information” for taxes, which to my reading sounded like they would just dump the transaction reports from the custodian broker in your lap and tell you to handle it. That could be more work than the robo-advisor was saving you in the first place, and you might be better off with Tangerine or a simple 3/4-fund ETF portfolio on your own.

I had heard from a few users of difficulties along these lines, but didn’t have hard data, so I put some general warnings in the book and in a Because Money episode and left it at that — after all, most people will have plenty of RRSP and TFSA room and never need to worry about adjusted cost base (ACB) or realized capital gains/losses. But hearing some horror stories, it looks like a few are really falling down here and making life hard on users who are specifically trying to avoid this kind of complication when investing.

So I reached out to people on Reddit and my newsletter subscribers for user experiences, and also contacted several robo-advisor firms to learn more about how they handle this. I don’t want to bash anyone here for not stepping up, and I did not reach out to every firm so this is certainly not exhaustive, but I’m happy to say that there are at least three good options for those with taxable accounts:

Justwealth

I spoke with Andrew Kirkland of Justwealth, and they saw that the tax documents produced by the custodian broker would leave their users with some work to do. They wanted to go above-and-beyond, so they produced more usable realized gain/loss reports. At this point that is a manual process for them, but they’ve had two tax seasons as a firm to give them experience, and are working toward automating this.

I received sample reports and for what it’s worth the information you need for your tax reporting is summarized and easy to find.

Nest Wealth

Their unique flat-fee cost structure makes Nest Wealth better-suited for large accounts, where you might be more likely to have used up your TFSA and RRSP room. So I’m glad to have heard from them that they also help simplify reporting by tracking ACB and producing a simple realized gain/loss summary. They also sent me a sample of their reports to review and confirm that in my opinion a typical user would be able to find the information they need for taxes.

Wealthsimple

As the most popular robo-advisor, it’s good to see that Wealthsimple is tracking ACB for its clients. However, I have to add a tiny, itty-bitty asterisk to that, because some of their clients don’t seem to know it.

Documentation is comparable to regular broker. They will prepare a report with all transactions for the year. The ACB calculation you have to do yourself.

Most of the responses I got were about Wealthsimple, so it’s possible that there’s a PBKAC issue, or that older accounts (the account’s age, not the client’s) are on a different brokerage platform (because behind-the-scenes, Wealthsimple bought their own custodian brokerage but started on VB and some clients might have still been there in the last tax year and, well, it’s a long story). It’s also possible that their user documentation and guides just aren’t super-clear even when they are doing the work.

For example, they use non-standard terminology, which I mean I can’t totally fault them for because “non-registered” is just the worst descriptor for an account ever and writing for a lay audience is a constant challenge, but calling taxable accounts “personal” accounts is not super-clear either. To quote one user who got back to me:

They use “Personal, Joint, Corporate, and Smart Savings”. As a person who knows nothing, that confuses me. I don’t know what my accounts are. They’re all ‘Personal’ to me.

But of course, many people have no problem with it:

They track everything for me. Taxes this year was a breeze.

I’d say that if you’re starting from now, odds are good that if you go with Wealthsimple, they will track your ACB for you and make tax reporting easy.

Giant Caveat

For some reason, a few people like to spread their money out: opening accounts with multiple robo-adviors, or dabbling in DIY investing while also having a robo-advisor invest for them. A robo-advisor or brokerage or any firm cannot provide you with adjusted cost base information if they don’t have access to all the transactions that are happening for you. So if you’re out of RRSP/TFSA room and open up multiple taxable accounts, you are setting yourself up for a fair bit of work, as whatever numbers your robo-advisor provides will no longer be accurate. It will be up to you to track across your accounts.

To put the caveat more plainly, try to stick to one brokerage/robo-advisor if you have a taxable account. Having multiple accounts means that you will be the only one able to track your ACB/capital gains and you will have to ignore the figures a helpful robo might provide you.

Quick disclaimer: I am a member of referral programs for some of the robo-advisors mentioned — see the sidebar for affiliate links and deals. However, this is not in any way a sponsored post, and in at least one case the causality worked the other way around.

That Kleenex in the Wash

October 17th, 2018 by Potato

I’m a big advocate of keeping your portfolio simple and easy to manage. As I was doing laundry and found, yet again, that I’d left a Kleenex in the pocket of a pair of pants and had to pick out little bits of fluff, it got me thinking of this.

It’s so easy to over-estimate our ability to handle a little more complexity, to think that even when you’re busy it’s not big deal. Then you find that Kleenex in the wash. Again. This isn’t even an unforseeable or unavoidable error. It’s happened before, and yet it’ll probably happen again. Probably before the year is out, even.

It’s another reminder to me that we have to arrange things in a way that accounts for the fact that we all have periods of inattention or sleep deprivation, and even at the best of times human error happens. If the plan is to ignore things for a year or to at a time, there’s less room for execution risk.

A simple portfolio is more robust to negligence and human error.