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As you’ve no doubt gathered by this point if you’re a regular fan of our show, we’re pretty big fans of Canada’s robo advisors. Yes, they’re not the absolute lowest-cost option out there, (see our robo advisor review for a comparison to DIY online index investing through a discount brokerage) but the uptake we’ve seen in terms of percentage of our friends and readers who are able to successfully implement a robo advisor-based index investing plan relative to the number that were able to set up their own brokerage account and start index investing – is through the roof!
There’s no secret sauce when it comes to robo advisors. They’re a pretty straight forward value proposition: we’ll rebalance your basic index ETF portfolio for you, help you with some advice along the way, communicate primarily online, and do it all for a price that is roughly a fifth of what Canadians have traditionally paid for financial advice in the form of mutual fund commissions/fees.
The flip side of that coin is that because there is nothing really proprietary about robo advisors, they have been sprouting up all over the place here in Canada. You can use our robo advisor calculator to find out which company might be the best fit for you in terms of cost and types of accounts offered, but as each robo advisor strives to differentiate itself from the rest of the pack, some unique perks have evolved. Canada’s largest robo advisor is Wealthsimple (see our full Wealthsimple review) and they have recently rolled out two pretty interesting little programs for Canadians to take advantage of over the last few months: Wealthsimple Black and the Wealthsimple High Interest Savings Account.
Wealthsimple Black: Jet-Flyin’ Tax Efficiency
In a bid to attract all of your investment dollars and to bring in some medium-to-big sized fish, Wealthsimple has launched a “premium service” that has me thinking twice about limiting myself to DIY investing. On top of all the cool stuff every Wealthsimple customer gets such as $0 account miniums, $10,000 managed for free for a year as you test out the service, the only mobile app that lets you sign up for an investment account, automatic dividend reinvestment, automatic rebalance, advice on stuff like “Should I put money in my TFSA or RRSP”, a partnership with the Mint app, and beautiful online statements/account summaries, Wealthsimple is willing to up their game for premium customers.
For Wealthsimple users that deposit more than $100,000, access to Wealthsimple Black means that you will get:
1) Automatic access to tax-loss harvesting. If you don’t know what this is – don’t worry – you’re definitely not alone. That said, it could be quite a valuable strategy for you over the long term. The basic idea is that as certain times of the year approach, it can make tax-strategy sense to sell some of your investments that have lost money over the last 12 months or so, and then re-invest the money after claiming the loss on your taxes. The main goal is to use this “loss” to offset some of your other investments or income that have done well over that same time period.
Of course, if you invest entirely through your TFSA, RRSP, and/or RESP, then you have no need for tax loss harvesting – because your investments are all sheltered nicely from the tax man already. Also, if you have an income of less than $60,000 or so, it probably doesn’t make a ton of sense to worry about tax loss harvesting simply because you’re not likely paying enough taxes to worry about harvesting the savings.
Where tax loss harvesting can really start to pay off is for people with non-registered accounts (who have usually maxed out their TFSA and RRSP) and some pretty substantial overall holdings. If this sounds a bit complicated – that’s because it is. All the same, it’s a cool strategy that Wealthsimple’s portfolio managers are ready to help you out with.
2) Priority Pass to 1,000+ Worldwide VIP Airline Lounges. Once you hit Wealthsimple Black level you will instantly receive a sweet card that can instantly transform your airport experiences. If you’ve ever done a multi-airport hop that included at least two layovers, then you know how envious you can get when you search for a prime spot along with thousands of other travellers, only to glimpse a walled off area that was teeming with free snacks, elaborate caffeinated concoctions, faster wifi, and big comfy furniture. If you tried to sneak into this little airport oasis (*guiltily raises hand*) then you were no doubt asked for your access card… To which you then cringed in equal parts jealousy and embarrassment.
Wealthsimple Black membership now entitles you to rub shoulders with these first class big shots. Admittedly, making investment decisions based on what company lets you get a free $2 coffee and a better wifi connection probably isn’t a good idea – but let’s be honest here in saying it’s a pretty darn cool perk! Perhaps you have ponied up a few hundred bucks for one of these passes already, or are a member of an “elite diamond platinum” frequent flyer loyalty program that lets you into these exclusive areas. But if you’re a casual traveller like myself, this is likely the easiest way that you’re going to get access to this country-club-in-an-airport world.
3) Lower overall fees (.4%). It’s quite common amongst robo advisors to charge a lower percentage commission as your investment portfolio grows. This makes sense as obviously they get to make more money for doing not a whole lot more work. Wealthsimple is willing to pass those savings on to you.
4) Increased one-on-one time with a full-service portfolio manager. As you get more investments, your overall financial plan might get a little more complicated. Wealthsimple invests more in you, as you invest more with them.
The Wealthsimple High Interest Savings Account
If you’re not familiar with high interest savings accounts, I definitely recommend that you check out our online banks comparison where we look at the best options in Canada.
Basically, high interest savings accounts are a place to park your cash for short term goals. They offer a middle ground between earning next-to-no interest in a chequing account and actually investing your money in an asset that is going to fluctuate in value such as stocks or ETFs. You can get your money out of the account at any time without penalties (unlike most types of bonds), and they’re great places to save for stuff like a new vehicle, your next trip, an emergency fund, or a housing down payment.
Wealthsimple is the first robo advisor in Canada to offer access to this type of account, and while there might be slightly better interest rates available out there through some of the purely-online financial entities, their initial rate of 1.1% beats any of Canada’s major big banks. If you’re wondering what you have to pay for this service – the answer is $0. Now – that’s not the same as saying it’s free. Wealthsimple is right up front in saying that they are taking a .25% cut – it’s just that they take it off before you get your 1.1%. I think the idea there is to be transparent in telling users exactly how much they will receive without having to decode fine print.
A few other frequently asked questions about Wealthsimple high interest savings accounts:
1) Is my money safe?
YES! All Wealthsimple high interest savings accounts are covered by Canadian Deposit Insurance Corporation (CDIC) and have automatic insurance coverage up to $100,000. Wealthsimple also offers up to $800,000 in additional coverage options upon request.
2) Will I only get 1.1% for like 6 months – then watch it vanish?
NO! This 1.1% is a simple, easy-to-understand rate that might go up or down as the Bank of Canada adjusts overall interest rates, but there is no teaser rate here. It will stay at 1.1% for the foreseeable future.
3) Do I have to pay transaction costs?
NO! It’s completely free to transfer money in and out of your Wealthsimple high interest savings account. You will not see money disappear through fees and/or commissions in this account for any reason.
While I’m not a huge user of high interest savings accounts, I like the fact that Wealthsimple keeps evolving their product lineup and trying new things. I also think that the 1.1% is nothing to sneeze at relative to what most Canadians are getting at their banks. If you subscribe to the idea that a lot of robo advisors’ value comes from ease-of-use and simplicity, then adding a high interest savings account to the platform is a great way to say, “Hey, this is your one-stop shop for investments – if you want to keep your financial management super simple and all in one place, then this is where you can do that.”
Disclaimer: Young & Thrifty has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Young and Thrifty are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.
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