“We’re on a mission to bring smarter financial services to everybody, regardless of age or net worth.”
– Michael Katchen, CEO, Wealthsimple
Wealthsimple Review Summary
Intro - Why Consider Robos Like Wealthsimple
Canada’s financial industry has been doing things a certain way for decades. To sum up that gold tarnished brass standard:
- Convince Canadians that their money is only safe with you – not risky new guys.
- Tell Canadians that they need to save 10-20% for retirement – show them “The Graph” that illustrates how compound investment returns will make everyone a millionaire.
- Sound super confident while repeating a whole bunch of financial acronyms and worlds like “asset allocation”, “diversification”, and “5-star fund manager”.
- Never ever bother people with small details such as the price they are paying for your services, or even how that price is arrived at. Instead, continuously state that your services are “free”.
- Rinse and repeat as each you promise to fix all clients’ problems by “putting them into this new, better fund,” – which of course has a bonus commission attached to it at that time.
To recap, when Wealthsimple says that their mission is to bring smarter financial services to Canadians – and to do it for a price tag that is upfront and far below the traditional model – that’s no small feat. Essentially, what Wealthsimple (and other companies like them) are doing is upending an entire industry business model that has working fabulously for many decades (just take a look at the dividend history of Canada’s major banks for proof). These new “Fintech” companies that offer an exciting new middle ground between the old Canadian way to manage money and the DIY methods that personal finance geeks have been touting for a long time, are collectively known as robo advisors.
What This Review Entails
Wealthsimple definitely isn’t the only dog in the Canadian robo advisor yard – but they are the biggest by a significant margin. (It’s worth noting that even Wealthsimple is a relatively small entity when compared to American robo advisors such as Betterment.) Check out our Complete Guide to Canada’s robo advisors if you want to read a bit more about why these new guys on the block are making such a big splash. We cover:
- Why they are super safe.
- Why they don’t have anything to do with robots.
- What they cost.
- Why we think they’re awesome.
Wealthsimple Review: Canada’s Market Leader
The good folks behind the curtain at Wealthsimple describe what they do as:
We provide world-class, long-term investment management without the high fees and account minimums associated with traditional investment managers. We invest your money in a globally diversified portfolio of low-cost index funds modeled after the same Nobel Prize-winning research used by the world’s savviest investors. Our cutting-edge technology helps you earn the best possible return on your money, while also lowering your tax bill. This means we do things like automatic rebalancing, dividend reinvesting, and tax loss harvesting—services that most people couldn’t afford until now or found too time-consuming and tedious to do on their own. Our financial advisers are always available when you need them. They can help plan your financial milestones and answer questions you might have about potential risks or what sort of investment accounts you should have.
Like their competitors, Wealthsimple wants to help you invest your money using the principles of index investment and asset allocation that have long been labelled as “couch potato” strategies.
In a nut-shell, what they’re going to do is “sit down” with you (through an email, online conversation, or on the phone) and discuss what route they think is best for you considering your savings goals and investment risk tolerance. Then they’re going to explain how after you put your money into your RRSP, TFSA, or other account, it will automatically get split up in the buckets that you agreed upon in your initial conversation. Wealthsimple’s advisors can answer almost any question that you might have (they might not be able to answer super complex corporate tax shelter stuff off the top of their head) and their customer service in regards to opening and using their platform has been widely reported as excellent. They’re going to do all that for you – for as cheap as possible! They are able to cut significant costs by relying on email, Facetime/Skype, and phone calls, as opposed to having an expensive brick and mortar location to maintain. They even partner with other Canadian FinTech companies such as Borrowell to produce products such as RRSP loans. More on costs later in the show…
The People Behind the Website
If you’re like most Canadians and terrified of putting your savings and investments in any sentence that also has “new” in it, then you should be reassured that the folks behind the computers at Wealthsimple are long-time professionals in the wealth management industry. First and foremost, you should know that Power Financial Corp. (one of Canada’s oldest and largest financial institutions with $780 billion+ in assets around the world) believes strongly enough in this type of wealth management to buy into the company for $50 million! Their impressive Board of Directors reads as follows:
Chairman of Wealthsimple, VP of Power Financial
Founder and CEO of Purpose Investments
Former CFO of the World Bank
CEO of IGM Financial
CEO of Wealthsimple
Needless to say, there are brains behind the aesthetic beauty that strikes you when you open their website!
How Wealthsimple Works
You can read in more detail exactly what robo advisors do by checking out our all-encompassing article on them. For this specific Wealthsimple review it's probably easiest to simply state Wealthsimple and most other leading robo advisors are more similar than not in how they approach taking a piece of your paycheque and investing it in a wide variety of diverse assets.
Wealthsimple likes to highlight fact that they didn’t create this approach, but instead based it on the Nobel Prize-winning work in Modern Portfolio Theory done by Harry Markowitz. If you’ve read any of our articles on index investing with ETFs or any of Dan Bortolotti’s musings on the Couch Potato Portfolio, then you’re familiar with the basic ideas behind the way Wealthsimple will manage your money.
As a 100% devotee of index investing, a warm glow settled over me when I read the following on Wealthsimple’s webage: Expected returns are impossible to predict and out of your (and our) control. We prefer to focus on things we can control: fees, diversification and emotions. The stock market will take care of returns over the long term. The key is to stay disciplined and stick to your strategy in order to build wealth. You can read more about our investment strategy here.
There is absolutely full transparency at all time when it comes to your investments. Wealthsimple will show you your returns in a variety of formats.
For example, every $100 you put into Wealthsimple's "growth" portfolio (recommended for people with relatively high risk tolerances and long investment horizons) your money would be put into the following places: $15 into iShares Core MSCI EAFE (IEFA ), $10 into iShares Core MSCI Emerging Markets (IEMG), $22.50 into iShares Core S&P/TSX Capped Composite Index (XIC), $12.50 into BMO Short Corporate Bond Index (ZCS), $20 into Vanguard Total Stock Market (VTI), $7.50 into BMO Mid Federal Bond Index (ZFM), and $12.50 Vanguard US Total Market ETF (CAD-Hedged) (VUS). Basically, you just bought small slices of the entire US and Canadian markets, roughly 20 emerging market countries, dozens of companies from Europe, Asia, and Australia, short-term bonds, and mid-term bonds! All that in one easy $100 transfer to your bank. Basically you're getting the average of how the world economy does - which is a relatively great deal compared to how most people do when trying to pick their own stocks or mutual funds. To be honest, this portfolio is slightly more complicated than I think it has to be (I could do without the two different types of bond ETFs and Canadian-dollar hedging) for example), but the total cost is still very very low, and it simply does not get more diversified than this. Talk about not putting all of your eggs in one basket!
Finally, like most of the their robo brethren, Wealthsimple is CIPF-insured up to $1 million.
Wealthsimple Review: What Makes This One Different?
Many of Canada’s robo advisors share broad features, but Wealthsimple is unique in that they:
- Are the largest robo advisor in Canada.
- Have a $0 Account Minimum.
- Have the only mobile app in Canada that allows you to sign up for an investment account.
- Own their own broker (they purchased ShareOwner last year).
- Can invest in fractional shares (smaller account balances).
- Automatically reinvest dividend income from your investments back into the ETFs that have fallen below the portfolio target that you initially set.
- Are incredibly easy to use.
- Have design aesthetics that are off the charts.
- Are partnered with the Mint App.
- Pay the transfer fees that your bank will charge to switch over.
- Statements that offer a fully-interactive breakdown of your deposits, buys/sells, capital gains, and dividends, as well as your current balances.
Finally, Wealthsimple is one of only a few robo advisors that have embraced Socially Responsible Investing (SRI). I have to admit that this is not a major concern for me, but I understand that for a lot of folks my age this is a primary consideration. Your Friendly Fintech Front-runner describes SRI as:
“Investing in companies that meet a certain threshold of social responsibility. SRI takes into consideration environmental impact as well as social and governance concerns. SRI has become an incredibly popular way to invest, growing tenfold over the past 20 years—there are now $22 trillion in assets worldwide in SRI funds. In Canada alone, SRI accounts for 30% of all financial assets.”
Wealthsimple SRI portfolio includes the following ETFs:
|iShares MSCI ACWI Low Carbon Target ETF||CRBN||Global stocks with a lower carbon exposure than the broader market|
|iShares Jantzi Social Index ETF||XEN||Canadian stocks, excluding companies with a poor social responsibility record based on broad ESG criteria|
|Vident International Equity Fund||VIDI||Developed and emerging economies with sustainable growth, based on criteria such as human rights and low corruption|
|PowerShares Cleantech Portfolio||PZD||Cleantech innovators in the developed world|
|BMO Mid Federal Bond Index ETF||ZFM||Fixed-income exposure via Canadian government bonds, in order to optimize for risk|
It’s worth noting that people that are much more involved with SRI than I am have stated there are many different standards of “socially responsible”, and that these ETFs do include some companies that individuals might object to. You may want to do a bit more research if this is important to you.
You should also realize there is a relatively small price premium (.2% MER or so) to investing this way since the ETFs that are being used are a little more niche-oriented than your basic bread-and-butter index ETFs.
Wealthsimple Review: How Much Does It Cost?
Wealthsimple has recently re-structured their fees and now have two basic levels in terms of costs and features.
1) For Wealthsimple Basic accounts of up to $100,000, there is a .5% fee that includes any trading, account fees, rebalancing costs, or transfer fees. Everything already mentioned in this article is included at that price point.
2) An account reaches newly-launched Wealthsimple Black status when it hits the $100,000 mark. Once you hit $100K, in addition to the Wealthsimple Basic benefits you get:
- .4% MER fees
- Automatic Tax-loss Harvesting
- Full-service Financial Planning
- VIP airline lounge access – Enjoy Global access to more than 1,000 airline lounges in over 400 cities.
To me, this is where Wealthsimple really starts to shine. The lower .4% MER is really quite cheap considering what you get for that fee. The tax-loss harvesting alone could save you enough to replace that .4% if you are investing outside of a TFSA or RRSP. I have not experienced Wealthsimple's full-service financial planning yet, but with 100K+ in assets invested, you might start to have a few more complications beyond maxing out your registered accounts and buying insurance. Finally - who doesn't love the feeling of being a VIP? If you've never been inside these airline lounges, they can actually make layovers enjoyable (not a typo). Think of the most luxurious Starbucks that you've been to - and everything is FREE - that's VIP lounges at some airports. Obviously I don't recommend making investment decisions on the basis of who has good baristas and comfy chairs - but hey, when it comes to perks, that's a cool perk.
Types of Accounts Available
As a leader in the robo advisor space, Wealthsimple offers the full monty of accounts including:
Once you choose your account and have taken your risk tolerance quiz, your investment funds will be split between many asset classes including Canadian equities, international equities, real estate, and various types of bonds.
How Does Wealthsimple look?
The Wealthsimple dashboard is obvisouly easy on the eyes and lets you know at a glance:
- What your expected returns are at various ages.
- Your savings on fees versus traditional Canadian options
- How many free trades you’ve saved on
- Total portfolio performance
The activity report gives you a more in-depth look at your deposits, investments, dividends, fees, and withdrawals. Each item can be toggled on or off to show you exactly what has went on in your account since you last checked. Some people may choose to never look at this screen, but it’s comforting to know that it’s there for transparency purposes.
Wealthsimple Funding Page
You can see from this screenshot how easy it is to keep track of your automated investing (your best option for building wealth according to most studies) and/or do a one-off shot of cash.
Is Wealthsimple Safe and Secure?
As robo advisors have been growing in popularity the last couple of years we’ve been getting a ton of questions about if online platforms like Wealthsimple are safe and secure - both with our money and information. While there is likely nowhere on the internet that is completely “hack proof” (if they can get into politician’s emails, Sony’s database, retail giants like Target, and even the credit rating companies, then I hesitate to guarantee anything) Wealthsimple and other robo advisors are about as safe as you can get from everything that I’ve read. Even Canada's major banks have jumped on the robo bandwagon, check our our BMO Smartfolio Review and RBC InvestEase Review for more details.
Admittedly, when it comes to the purely tech side of things I’m a little less sure of my expertise. Here’s what I know, Wealthsimple states that they use “bank-level security”. This includes a 128-bit SSL certificate that uses the latest encryption methods available to make sure your personal information and passwords don’t end up in the wrong hands. They also reference the fact that they use industry-standard backups and firewall technology to prevent large-scale problems from manifesting, and automatic backups occur throughout the day - every day. Logically speaking, any type of internet security problems with keeping information safe and secure would mean almost instant death for a company like Wealthsimple. They have to know that as a relatively recent type of company in Canada, that they are under the microscope in terms of Canadians feeling safe and trusted with their money (especially relative to the ultra-stable presence of the big banks). Given that reality, I have to believe that Wealthsimple is doing absolutely everything possible to keep information and money safe and secure - and that it is the absolute highest priority. If you look at their Board that we highlighted above, you have people who have overseen the safety of people’s money for generations in Canada. That all leads to me sleeping well at night.
When it comes to asking if your money is safe with Wealthsimple, that I can answer more confidently. Your money is absolutely safe and secure with Wealthsimple!
Here’s why I can say that:
1) Wealthsimple (and most of Canada’s other robo advisors) are registered as portfolio managers. This means that they have a legal fiduciary duty to clients. The reason this is so important is that they must by law recommend and give advice that is in the client’s best interests. Absurdly enough, this is not the case with many of Canada’s “financial advisors”.
2) When you invest with Wealthsimple your money in insured by the Canadian Investor Protection Fund (CIPF). This means that clients’ money is protected up to $1 Million per individual account. This means that if you have a TFSA, a RRSP, a RESP and a non-registered personal account, you’d collectively have $4 Million worth of investments automatically insured. The CIPF’s website states that since the regulatory body opened up shop in 1969 only 20 members have ever went insolvent. The key part here is that even in the case of these few insolvencies, the CIPF has paid out $43 million, net of recoveries, and no eligible customers have suffered a loss of property.
3) If you use the Wealthsimple high interest savings account your money is insured by the Canadian Deposit Insurance Corporation (CDIC). This means up to $100,000 is automatically insured without you filling out any extra paperwork. Wealthsimple does have optional additional coverage for up to $800,000 per account available, although why you’d want to keep that much money in a high interest savings account is beyond me.
4) Even if the thriving robo advisor world were to take a complete nosedive and for some incredibly ridiculous reason Wealthsimple were to suddenly go bankrupt - the answer to “Is my money safe with Wealthsimple?” would still be: YES! Chances are that way before Wealthsimple ever went completely broke, another financial entity would buy them up and business would continue as usual. However, even if Wealthsimple went under, your money is technically held by Canadian ShareOwner Investments Inc (ShareOwner) - which is regulated by the Investment Industry Regulatory Organization of Canada (IIROC). That means that while Wealthsimple would be out of luck, your personal money and investments would be just fine. Your money could never be taken out of your account(s) and used to shore up Wealthsimple’s balance sheet or pay for any Wealthsimple expenses!
Wealthsimple High Interest Savings Account
While I am not a big fan of parking your retirement nest egg in the Wealthsimple High Interest Savings Account (HISA), I think it’s a really cool option for people saving for their short term goals. Previously people wanting to save for something that they may need money for in the short-to-medium term such as a house downpayment, new furniture, a car purchase, or even just an emergency fund, had to store it in a bank account seperate from their robo advisor-based investments.
Wealthsimple changed all that when they recently became the first Canadian robo advisor to offer a high interest savings account option. The 1.1% non-teaser rate is a really solid effort that is certainly superior to the high interest accounts offered by Canada’s major banks! To top it all off, these accounts will cost you absolutely $0. (Technically I can’t say they’re free because Wealthsimple takes a .25% cut BEFORE you get your 1.1% interest payment. I think that’s a very transparent way of showing the costs and benefits of the account because they show your interest rate net-of-fees instead of hiding them in fine print.) To me, the real benefit to these accounts is that you can now keep all of your investments on the same easy-to-use online platform instead of having to remember yet another password and toggling between screens in order to keep track of your savings and investment goals.
Open Your TFSA or RRSP Today and Get $10,000 Managed for Free
Because our readers are right in the sweet spot of potential Wealthsimple customers they have decided to extend a special promo offer code as part of our Wealthsimple Review. If you click here and open an account, Wealthsimple will pay any fees associated with moving your investment accounts over to them, and manage up to $10,000 for free for a full year! It will literally cost you nothing to try this fresh new approach to investing in Canada. We'll keep this Wealthsimple review updated going forward so you don't have to worry if any information is not applicable.