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Hello again and welcome back to the Millennial Revolution Investment Workshop! New readers, please click here to start from the beginning.
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! 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!
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:
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.