Investment Workshop 55: Wealthsimple

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So today we’re going to take one of these Robo-Advisors out for a test drive. Sound like fun? That’s because it is! Our Robo-Advisor that we’ll be evaluating will be WealthSimple. Why WealthSimple?

I’ve actually been following WealthSimple for a few years now and have really been impressed by their company’s growth from a relatively small Toronto-based fin-tech startup into the stable, mature company it’s become. At various times, I’ve also played around with their interface and have always been impressed. And most importantly, they’re an international company.

Most Robo-Advisors out there work only for American citizens, while WealthSimple supports Canadian, US, and UK-based users. Because of the international profile of our readers, this seems like it would be the best fit for us.

If you’d like to follow along with our Workshop, please click the below banner to open an account. While our Workshop is free, we use affiliate links to support the site so that we can keep offering this for free. Plus, you’ll get your first $10,000 managed for free!

Are They Safe?

But first and foremost, we have to answer the question: Is WealthSimple safe to use?

To answer that, first we go to their website and scroll all the way down. Buried in the legalese we can see the following line: “ShareOwner is a member of the Investment Industry Regulatory Organization of Canada (www.iiroc.ca). Customer accounts are protected by the Canadian Investor Protection Fund within specified limits.” ShareOwner is the brokerage under the hood that WealthSimple uses to trade in Canada.

But being the paranoid android that I am, we can’t just take their word for it, can we? So we head on over to the CIPF’s site. At the top, there’s the link “Member Directory” where we can search for ShareOwner, and voila! There they are!

 

On the American side, if we scroll down to the same legal section, we see the following sentence: “Wealthsimple US, Ltd. is registered as an investment adviser under the Investment Advisers Act of 1940 and uses Apex Clearing Corporation as broker/dealer for Wealthsimple investment accounts. Apex is a member of the Securities Investor Protection Corporation (SIPC)”

So similarly, by going to the SIPC’s website and again searching the member directory, we can find Apex Clearing to be a member.

 

So to answer the question: Is WealthSimple safe to use? Because the underlying brokerages in both Canada and the US are properly registered by the financial regulators and insured by an investor protection fund, I’m going to give them a thumbs up on this one.

How Do they Make Money?

Now let’s go to next question: How does WealthSimple make money?

WealthSimple has 3 pricing tiers depending on how much money you have with them: Basic, Black, and Generation.

Basic is the regular tier that gives you full access to their App. On this tier, your fee is 0.5% of your assets under management, but again if you’re Canadian part of that fee may be tax-deductible so your actual after-deduction fee may be around 0.3% to 0.4%, depending on your marginal tax bracket.

The higher tiers kick in when your balance crosses a certain threshold. When it goes above $100k, you become a “Black” member, meaning your fee goes down to 0.4%. You also get access to a financial advisor who you can book to conduct portfolio reviews for you once a year. You also get a Priority Pass membership that gives you access to airport lounges all around the world, which if you’re someone like me who travels so much is super useful.

Above $500k, you become a “Generation” client. The fee remains 0.4%, but it unlocks a bunch of other features. The main one being that the financial advisor you had access to in the “Black” tier will now do more for you, including meeting with you whenever you want, and building a fully personalized financial report for you. Not even all full-service financial advisors do this for each client, so that’s nice to have.

Note that when calculating these tiers, they take into account joint assets if you’re married rather than each individual account, so if you and your spouse’s assets add up to $500k, you both become Generation clients.

How Does it Work?

OK so enough about their pricing scheme. What’s it like to actually use this thing?

To find out, we opened an account.

Creating a username and password was simple enough, and once you do, you’re guided through a simple form where you put in your personal information.

After that comes the fun part: The Know-Your-Client, or KYC, questionnaire.

The questionnaire guides you through a bunch of hypothetical situations to figure out your risk tolerance. I’ve always found these things kind of silly, since nobody actually knows what their risk tolerance is like until they hit their first downturn, but hey, it’s better than nothing I guess.

Interestingly, it also asks the rather loaded question “When would you like to retire?” I put in 35 just to see if their tool would crash. I am happy to report it did not.

What the KYC questionnaire concluded for me was that I was a “balanced” investor, with a 50/50 equity/fixed income allocation.

And if you click “View Holdings” it tells you the exact ETF’s in your portfolio.

We’ll going to dig into the nitty gritty details of this portfolio in the next article, but for now let’s keep it going.

The next step is picking the actual accounts you want to open.

WealthSimple offers all the different kinds of accounts you would expect from any other brokerage, like Individual Investment Accounts, RRSPs/TFSAs (if you’re Canadian), or IRA/Roths (if you’re American). Because I already have my RRSPs/TFSAs with Questrade, I’m just going to open up a regular Individual Investment Account.

And voila! We’re done. There’s still a funding step but we can skip that for now so we can get a look at the interface.

Each account has a dashboard that, for now, shows there’s nothing in it.

On the right sidebar is the allocation that Wealthsimple has picked out for you. Fortunately, it’s not actually set in stone and can be changed at any time, so if you disagree with what the questionnaire tells you, you can just override it here.

The first thing you can change is something intriguingly called “Theme.” What the heck does that mean? Like, a theme song or something?

When we click into it we see what that means. You can pick 3 different options for your portfolio. “Standard” is their standard indexed portfolio. Socially Responsible Investing, or SRI, is another option which I’ve written about in the past, and “Halal” is an option for customers with religious restrictions on what they can and can’t invest in. I recommend sticking with “Standard,” personally.

The second thing you can change is your risk tolerance.

Here’s where you can override what their algorithm says your risk tolerance is to whatever you want by sliding the slider up or down. You might have to repeat some questions in the questionnaire, but it doesn’t seem to restrict you in any serious way.

So that’s it! In about 10 minutes we have opened up our account, set up our risk tolerance, have a portfolio picked out and ready to go and we are ready to start funding it!

But Wait!

But wait! Before we do that, we probably want to go through the portfolio they picked out with a fined toothed comb and see how they built it, what they chose, and how their investment strategy stacks up against a simple indexed portfolio. Which will all happen in the next article. So stay tuned!

In the meantime, if you’re curious about checking out their platform yourself, please click the below banner to open an account. While our Workshop is free, we use affiliate links to support the site so that we can keep offering this for free. Plus, you’ll get your first $10,000 managed for free!

Ready to learn more? Read on to the next Workshop article!


WORKSHOP TOOLS

How much does it cost to participate in the Investment Workshop? NOTHING. Because that's how we roll. All we ask is that you sign-up using the following affiliate links to keep it free forever:

For Canadians:

Questrade

For Americans:

1) Vanguard

2) Personal Capital


Or, prefer to use a Robo Advisor? Check out Wealthsimple, and get your first $10,000 managed for free!


Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.


22 thoughts on “Investment Workshop 55: Wealthsimple”

  1. I’ve only been using Wealthsimple for about a year. For me as a new investor, they are great to just throw money into if you do not know what you are doing and don’t want to learn. Their breakdowns into your accounts show you where your money is going and how based on your setup.

    Starting to progress into self directed investing, I’m quite excited to see that they have the Wealthsimple Trade released with future developments in the works. I am most looking forward to being able to transition the robo-advised accounts into the self directed accounts. Essentially I lose them re-balancing the portfolio, but they did an excellent job of creating a starting point to manage from there and then saving the 0.5 fee that they charge.

    Great article for those that are not aware of what is out there for platforms and options. I just sent that link to my significant other because she was weary about the legitimacy of it and you helped to clear that up for her. Thanks for everything you guys put out and looking forward to the next.

  2. Robo advisors are a good options if you’re really looking for a hands-off approach to simplified investing. Sure beats the expensive mutual funds.

    Tax-loss harvesting is great and all, but you really have to have some bad years / timing to take advantage. If you’re invested for the long-term, and markets are going up more often than not, no loss to take advantage of.

    1. Not so regarding tax loss harvesting and robo advisors.

      First, they’re automated so can take advantage of movement that would pass by humans. Second, they also include protection against the IRS’s “wash sale” in their automation. Lastly, even long term investors can benefit as you can use up to 3k to offset W2 income in any give year as well as capital gains. Excess losses also never expire and carry over from one year to the next. Even long term investors are going to get hit with RMDs, or an actual need for, you know, money to live on, and those accumulated losses will be right there to take advantage of. If one has investments in taxable accounts it’s hard not to incur some capital gains so why not automate some tax savings?

      But I’m not a CPA, just a hard working MBA, so take what I say with a grain of salt but Imma make use of Schedule D and Form 8949.

  3. Interesting! I began with a target date fund, then used Schwab robo advisor, and now I’m trying to set up my own self-managed investment accounts. Your articles are very insightful! Thank you for continuing to share!

  4. Thanks! Really interesting how you walk us through these platforms.

    I’m using Fidelity for my tax-sheltered Roth IRA and Empower Retirement for my tax-deferred 401k.

    Are there any benefits to using these robo-advisors other than for allocation suggestions? Does tax harvesting work for tax advantaged retirement funds? I’m just not seeing the benefit to using Robos yet .

    I will be able to live off my pension in 10 years so my current allocation is aggressive at 90% equities and 10% bonds. When I tried out Betterment it seemed to keep telling me that’s too aggressive and couldn’t understand my situation. Based on your 50/50 allocation I wonder if I’m doing the right thing. JLCollins has been my go-to for allocation advice but I trust this forum as well.

    Thanks again!

    1. Generally, robo-advisors (and KYC questionnaires in general) don’t quite understand target allocations for FIRE people, and don’t take into account other factors like pensions or annuities. You’re right, if I had a pension like you I’d be a lot more aggressive on my portfolio.

  5. In Canada, they have a new cash account that give 2.4% interest rate. I let my 3 month cash reserve into this account. No longer need to do HISA hopping. Just for that, i found they are worth it.

  6. “This portfolio is built to maximize long term growth. We expect it to have the highest returns as markets trend upward over time, but to also suffer the largest short term losses during a market decline.”

    *****

    Seems an odd way to describe a 50/50 asset allocation — almost as though they accidentally used the description from a more equity-heavy (e.g. 80/20) allocation here by mistake.

    Also, did they give you 15% emerging market equities (the largest equities component) by default, or did you adjust that amount yourself? For investing beginners, especially, I’d have expected emerging markets to be the smallest component of an equities portfolio.

    Just wondering …

  7. So weird. What’s the difference between International Equities and Global Equities? It makes no sense. To me Global Equities is all equities regardless of country or geographical location. Looks like nonsense to me. Who’s the moron working at Wealthsimple that came up with that? Someone who doesn’t know what equities are?
    Sheeesh! Doesn’t inspire me one bit to even consider investing with those jokers.

  8. You know what is much better, much simpler, cheaper and easier than using these Robo advisors?

    Just open an account at a brokerage firm such as TD Ameritrade, buy index equity and bond funds. And you’re done.

    Why the hell would anyone bother with using these Robo advisors?????????????

  9. Now you are doing promotions for companies?!!!

    What a total sell out.

    Looks like you are living of off your income, rather than investments.

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