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It's time to give some serious thought to the idea of farming out your investment portfolio to a robot.

Okay, not an actual robot. Robo-advisers do manage your portfolio in a robotic way, but they also have people to talk to and friendly, engaging websites that shame what almost every other financial firm in the country offers online. Mostly, what robo-advisers offer is discipline. If you need more of that in your investing, give some thought to this new but credible niche of the advice business.

Start your research right here with the second annual Globe and Mail Robo-Adviser Guide. Eleven firms are included here, compared with nine last year. The players aren't just growing in number. The level of competition is rising as well, particularly in the area of costs. Most firms now include trading costs in their advice fees, and several are using cheaper investments than last year for portfolio building.

Here are some need-to-know things about robo-advisers.

Who are these firms?

Most robo-advisers are startups by people with experience in the investing industry.

However, Bank of Montreal is now in the business through BMO SmartFolio and the conglomerate Power Financial has an ownership stake in Wealthsimple.

Who are their clients?

Millennials were expected to be a prime market, but the average age of clients for firms in the guide is 43.

What exactly do online advisers do?

They build portfolios based on a client's risk tolerance, goals and personal profile, and they rebalance periodically so the target mix of stocks and bonds is maintained. Some robos offer light financial planning, but the main attraction is having your portfolio run for you at a low fee.

How big does my portfolio need to be?

Many firms have no minimum.

What kind of investments do they use?

Mostly exchange-traded funds, which are a low-cost version of mutual funds that trade like a stock. A minority of firms use mutual funds or pooled funds in addition to ETFs. Pooled funds are mutual funds designed for high-net-worth investors.

What are the fees?

There are three levels of fees to consider – advice fees, ownership cost for the investments held in client portfolios and the stock-trading commissions associated with buying and selling ETFs.

Advice: These fees are typically around 0.5 per cent annually for small accounts and less for people with more money to invest.

Fund fees: You don't pay these directly – they're taken off the top of ETF and mutual fund returns (net returns are what you see reported). The ETF portfolios used by online advisers have weighted average fees in the area of 0.25 per cent.

Trading commissions: Most firms now cover these through the advice fee.

The total cost of using an online adviser is the advice fee plus fund fees plus trading fees, if any. As a rough estimate, an investor with $50,000 might pay total fees of $375 to $500 a year, or 0.75 to 1 per cent.

Where are online advisers available?

A few firms are registered to do business in all provinces and territories, but some are focusing for now on Ontario, Alberta and British Columbia.

Who exactly holds my money?

Your assets sit in an account held at a third-party custodian, typically a brokerage firm. These brokers are members of the Canadian Investor Protection Fund (CIPF), which provides up to $1-million in coverage in case of investment firm insolvency.

How are fees paid?

They're taken from the cash in client accounts on a monthly or quarterly basis. Firms will keep enough cash in client accounts to pay fees.

What do online adviser portfolios look like?

Typically, seven or eight ETFs covering government and corporate bonds and Canadian, U.S. and international stocks.

How are online advisers regulated?

Most firms are registered with provincial securities regulators as a portfolio manager, a recognized designation with specific requirements. For example, people providing advice to clients must have earned a senior investment industry designation such as Chartered Financial Analyst (CFA) or Chartered Investment Manager (CIM), and have industry experience. Portfolio managers also work to a fiduciary standard, which means the interests of clients come first. Many investment advisers are not fiduciaries.

What if I receive bad advice that costs me money?

As portfolio managers, online advisers are part of the independent Ombudsman for Banking Services and Investments (OBSI). If an online adviser does not resolve a dispute to your satisfaction, you could ask OBSI to consider your case and see whether compensation is warranted.

Second annual Globe and Mail Robo-Adviser Guide

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