Questwealth Questrade Review

Questwealth Portfolios - Managed portfolios with low-fees

Questwealth Portfolios Have Arrived and Their Fees are Much Lower Than Anyone Expected

For the better part of twenty years, Questrade, the independent Toronto-based online brokerage, has been giving the rest of the Canadian financial industry traumatic fits about ongoing excessive investment fee charges.

Growing to become this country’s largest independent online brokerage, Questrade now manages $8 billion in assets and opens a staggering 30,000 new accounts each year. And does so under two fronts: self directed investing through their discount brokerage division, Questrade Inc., and through their relatively new, and ever expanding, managed investing division through Questrade Wealth Managed Inc. We’ll be focusing on the latter of these two divisions.

Questrade recently unveiled and reintroduced their robo-advisor managed investing service, Questwealth Portfolios, and, among other things, is now sporting even more ridiculously low fees. As a matter fact, they have driven fees so low that it is now tracking with the 0.22% fee that Vanguard Canada charges for its well-regarded asset allocation ETFs unveiled in early 2018.

Related: Questrade Review

Back in 2014, Questrade Wealth Management was only among a handful of entrants into the emerging Canadian robo advisor space. And as I mentioned briefly above, their robo service, formerly known as Portfolio IQ, was rebranded and relaunched under the new trademarked name, Questwealth Portfolios. This was done to better illustrate the significant improvements to their service.

To cut straight to the chase, their management fee is 0.25% for accounts between $1,000 and $99,999. It then drops to 0.20% when investing $100,000 or more. This is dramatically lower than the fees under their former Portfolio IQ moniker, which charged 0.7% under $100,000, 0.6% between $100,000 and $249,000, 0.5% up to $500,000, 0.4% up to $1 million, and 0.35% for account holders with $1+ million. Under their previous form, the average asset-weighted fee was 0.62%. For Questwealth Portfolios this drops to 0.23%. That’s a startling 63% decrease in fees.

Although Questwealth’s low fees give off a feeling of passive index investing, these portfolios, however, are actually actively managed by LA-based sub-advisor, One Capital Management LLC. In other words, they are managed by registered portfolio managers (with over 100 customer service agents) watching the markets and then adjusting the underlying holdings as needed.

Questrade managed investing

Questwealth has five portfolios on hand; varying the degree of equity risk with return expectations. The range goes from Aggressive portfolios, consisting of 100% stocks, to Conservative portfolios, which is 100% fixed-income. The remaining portfolio types fall in-between. Those types are: Income, Balanced, and Growth. Their equity holdings climb in 20% increments at each level as risk tolerance rises, while their fixed holdings lower by 20% decrements.

The portfolios’ underlying ETFs are composed of products from iShares, SPDR, Wisdom Tree, and First Trust. Because some bank-managed robo services stingily compose products using their own proprietary ETF’s (e.g., TD, and BMO), Questrade relishes on the fact that their offerings, on the other hand, are more diversified, potentially improving your long-term returns.

Now, you’re likely wondering how much of a difference equity weightings can make to your long-term goals? Based on Questrade’s past performance, the compound annual returns for their Aggressive Portfolios were 7.35% over one year and 10.98% over three years; Conservative Portfolios produced 2.16% and 2.8% , respectively, over the same periods. Those were under their higher Portfolio IQ fees. With the new, much lower, fees under the Questwealth banner, and assuming no global financial downturn is on the horizon, one can potentially expect higher realized gains.

Interestingly, Questrade now offers SRI (Socially Responsible Investing) versions of their five portfolios. Canadians had been asking for alternate, more socially responsible, investment options and so they now have the ability to invest in portfolios that align with their personal values. These SRI portfolios invest in companies that focus on environmental, social, and governance (ESG) qualities. This can include companies that hold themselves to high ethical standards and have a good track record on labour management, health and safety, anti-competitive practices, small carbon footprints, or even reduce/optimize the use of natural resources. These SRI equivalents, however, have a marginally higher fee, ranging from 0.2% on Conservative SRI to 0.35% for Aggressive SRI portfolios.

Back in 2014 when Questrade became the first robo advisory service to get regulatory approval to provide an online questionnaire to evaluate risk tolerance, it required customers to work through twenty questions. This has now been streamlined down to only ten; simplifying evaluations while becoming more user-friendly.

Questrade notes that over a 30 year investment time frame a $20,000 investment in a global neutral balanced mutual fund at 2.17% MER will be worth $107,440. By contrast, a balanced Questwealth portfolio with an MER of 0.42% (0.25% plus 0.17% MER for underlying ETFs) would see the same $20,000 grow to $182,716 over 30 years — a difference of $75,276 (+70%). You’re reading that right. You can potentially earn 70% more when you invest through Questwealth compared to an equivalent mutual fund.

As cost continues to become one of the major driving factors when making investment decisions, it’s nice that Questrade has continued their reputation of being aggressive in pushing down fees, putting enormous pressure on other financial institutions to at least try to stay competitive, making investing become more about our personal long-term goals and less about their short-term balance sheet gains.

Replies to this Post

  1. Alden E

    Nice to see Questrade is stepping up the game in its managed investing department. I was always eying them but never pulled the trigger because well their prices just weren't as low as i wanted when they were called Portfolio IQ. Never would have imagined they'd change the prices this much. Good for them.

  2. Braden

    Already have a self-directed RESP with Questrade but am not happy with my returns for these past 5 years. Only up 5%. Was hoping for better results. Seeing as this managed fees have really come down a lot I think it seems like a better plan to shift my registered plan with them instead.

    I will call them up and ask if there is a way to shift my RESP from self-directed to managed without deregistering and re-registering, which would result in CRA doing a 30% withholding or something. I obviously want to sell off my holdings inside the RESP — having only cash — but then i want to have a managed RESP to shift this cash into so CRA doesn't get upset with me.

    Anyway, good write up and thanks for bringing this to my attention. It's definitely changed my direction. And awesome timing — just before the end of the year! :mrgreen:

  3. Rodney D

    Thanks for writing this. Read your awesome questrade review and wanted to find more articles about this company and found this via Google search.

  4. Clay

    Heads up @Eric, just be aware that Questwealth portfolios have a mix of U.S. equity which can (and will) have dividend payouts that are reinvested. That's all good, but the issue comes in because you plan on having it inside your TFSA. IRS has a withholding tax of 15% on dividend payouts. The Canada/US treaty on dividends only applies to registered retirement accounts (ie, RRSP), not TFSA. Keep that in mind. So you technically may be loosing out on some profits if you hold your money in a TFSA account than if you were to open a RRSP portfolio account.

    But it's up to you. Maybe your investment choices have already planned for that and are willing to take a small hit, benefiting on bigger returns? If that is the case then good for you.

    Btw, i believe you need to fill out a W8 form (Questrade has them available online) where you need to fill out to have your tax rate at 15% instead of something higher (30%)? I can't remember. Someone else here might be able to elaborate.

  5. Ignatius

    Anyone know there percentage weighting they apply to each sector? Any technology?

  6. Eric Straub

    Sounds like I will be shifting my entire TFSA into a Income portfolio in December. Dont wan't to mess with my TFSA contributions limits so will wait to the last minute. Thanks for this fascinating article.

  7. SmartyPants Investor

    @helen, when you open a questwealth account you can do so under $1,000 and won't be charged a thing. It's only above $1,000 that the MER applies, and when they begin investing your money into the portfolio of your choice. You'll be fine.

    @bill, yup the code works. I opened my account with it.

  8. Bill

    Will i be able to use the questrade offer code that is on the review page just fine?

  9. Khalil

    Let's just hope the U.S. economy continues to bull along for the next decade so this managed service can really capitalize on things.

  10. Helen McCormick

    Good god! That's really good! And just in time for Christmas! Curious, i will open an account later today, but i want to open with an amount under $1K. Is this fine? Your piece didn't say if there was a charge for under $1,000.

  11. Harlan

    Still debating if i should open one of these portfolio accounts as Growth or be more conservative by going with Income. Does anyone have any suggestions. Their returns for Aggressive is quite impressive but knowing my luck it might lead to a down turn. Hence, why i want to be more reserved.

  12. Lance Bunnel

    I remember way back when e-trade was the ruler of this kingdom. Funny how times have changed. And it always come back to who is the most aggressive in wanting the crown. Apparently, its Questrade's turn. You can feel they want to be #1.

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