Hey there, time traveller!
This article was published 3/2/2018 (995 days ago), so information in it may no longer be current.
Every time Brittney Dankewych buys a coffee, she is also saving for her future. And she’s not just setting aside spare change in a jar or piggybank. She’s investing the money into a diversified, balanced portfolio of exchange-traded funds (ETFs) managed by a portfolio manager.
That’s quite a cup of coffee.
Dankewych, however, isn’t collecting pocket change, depositing at the bank, accumulating it in savings and then depositing larger sums into an investment portfolio.
Rather, each time she spends money using credit or debit, a new app on her mobile phone helps her build wealth by rounding up each expense to the nearest dollar.
"So if I spend a $1.79 on coffee, which I do every day, my coffee now costs me $2," the 22-year-old Winnipeg receptionist says.
Called Mylo, the Montreal-based startup’s technology tallies users’ spending over a week — rounding each expense to the next highest dollar — and then deposits that sum in an investment portfolio aimed at reaching a specific goal: for example, retirement, buying a car or making a down payment on a home.
Available to Canadians since summer, Mylo could be a game-changer for young adults and others finding it difficult to save because it makes investing automatic and easy.
In some respects, the premise is not new. Plenty of financial institutions have mobile apps or loyalty card programs allowing us to set aside small amounts as we spend toward savings.
What is unique, however, is that Mylo allows Canadians to put their spare change to work in a managed investment portfolio and build wealth.
And when it comes to investing, young Canadians could use the help.
A November study published by the Ontario Securities Commission, for instance, found that while 80 per cent of 18- to 36-year-olds save, only half are investing.
Moreover, options to invest are often limited to high-cost strategies such as mutual funds.
In exchange for the ability to make small contributions to diversified, managed portfolios of investments, mutual funds often come with high management fees — generally between one and 3.5 per cent — that can act as a drag on returns.
Compounding problems is the fact that our collective-savings rate has been falling for 30 years, according to Statistics Canada data.
So it should come as little surprise that plenty of studies — including a 2016 study from the Broadbent Institute — have been sounding the alarm regarding Canadians not saving enough.
It’s these challenges the makers of Mylo aim to help Canadians overcome.
"We’re focused on a mission of financial inclusion," says Philip Barrar, CEO and founder of Mylo.
He points to the firm’s internal research, revealing for many Canadians investing "seems impossible… because they don’t know where to start and don’t think they have enough money."
Mylo offers a 21st-century solution to these challenges — a virtual spare change jar, Barrar says.
"It’s the same concept we used when were kids, only this puts it in a digital format."
The app has not just won over Canadian investors. Mylo has also attracted the backing of major financial institutions.
The venture capital arm of Desjardins Group in Montreal — the largest association of credit unions in North America — is an early investor, providing much-needed capital to get Mylo up and running.
"We see Mylo as the next generation of the piggybank," says Roland Leger, investment manager with Desjardins Venture Capital in Montreal.
"Since we’ve been using debit and credit cards, cash is much more rare and so is change."
Consequently, the real porcine-shaped porcelain container has fallen by the wayside over the decades.
Yet, while Mylo is a digital piggy bank, it takes this concept further, adding on a robo-adviser service allowing its users to purchase fractional shares of ETFs with small sums of money to invest in a managed portfolio.
This is how it works: after completing a short online questionnaire regarding goals and appetite for risk — that is how much can you tolerate your investment falling in value — Mylo builds a portfolio of ETFs based on your answers.
For example: if you just want to save money, but don’t want to see your investment fall in value at all, you’d get a very basic, conservative portfolio where your money is invested in a high-interest savings ETF — providing an annual return of about one per cent.
If you are an aggressive investor — you can accept your investments dropping significantly at times in exchange for higher long-term growth — then 80 per cent of your capital would be invested in stock-based ETFs with 20 per cent in a fixed income (bond) ETF. (Mylo also offers three other options in between these aforementioned choices.)
As for fees, because all Mylo strategies are passive — meaning they emulate the performance of an underlying index, such as the S&P TSX Composite in Toronto, or the S&P 500 in the U.S — you pay much less than you would for mutual funds.
So with Mylo, the management expense ratios (MERs) associated with the ETFs in its portfolio options range from five to 37 basis points (0.05 to 0.37 per cent) instead of 100 to 350 (one to 3.5 per cent) of your invested assets per year.
Still, Mylo does involve an additional fee for use of its technology and basic portfolio management, such as automatic rebalancing: $1 per month.
So far, the product is resonating with Canadians, particularly those who are "digital natives — people who are fluent with their mobile phones," Barrar says.
Even before the app launched, 10,000 people signed up on a wait-list.
Dankewych was one of the early adopters, hearing about Mylo through Facebook.
"They made it sound super intriguing, and if I signed up early, I wouldn’t have to pay the membership fees."
Still, she was skeptical.
"It was like, ‘Give us all your banking info and we will save you money.’ I was like… ‘hmmm.’"
So Dankewych asked her bank, which gave her the green light.
"It turned out to be one of those pleasant surprises — ‘Oh wow, it actually works.’"
To date, Dankewych estimates saving about $1,000 — though some has already been used to pay off a credit card.
With a baby on the way, however, her focus is now on a bigger goal — a down payment for a home.
"Right now, the app tells me I’m at three per cent of my savings goal."
While Dankewych has a long way to go, each cup of coffee brings her a sip closer.
"A lot of young people like myself don’t know a lot about investing and where we want our money to go," she says.
"But when Mylo makes it that easy with a few simple options… anybody can do it."