Investment Workshop 58: Funding our Wealthsimple Accounts

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

OK so we’ve opened our accounts, we’ve set up (and tweaked) our portfolio allocations, and our ETF makeup has been picked out for us. So what’s our next step?

Let’s get some money invested!

Linking Your Bank Accounts with Wealthsimple

The first step in getting your accounts funded is to link your bank account.

In the back-end, WealthSimple uses a third party financial data aggregator company called Flinks to perform the link between the app and your bank account. They do this so that you’re not actually giving WealthSimple your banking password, and is a similar setup to how Personal Capital uses Yodlee to handle all their bank authentication.

 

There’s also a link at the bottom of that window allowing you to perform the link the old fashioned way: with a transit number and a void check. So that’s another way of doing it if that’s what your prefer.

Once you’ve set up your bank account link, you can then choose to transfer money in either as a one-time event or as a scheduled amount weekly, bi-weekly, or monthly. In this case, we’re going to do a $1000 one-time transfer

After a few business days, our money has arrived.

 

If we click the “View holdings” link on the right tab, we can see our actual ETFs that we now own.

Note that WealthSimple automatically deploys it into our target portfolio for us. As we can see, as soon as our cash hits the accounts we are already rebalanced and invested. And as dividends come in, they also get automatically reinvested.

It’s important to note that generally with Robo-Advisors, you give up a certain amount of day-to-day control over your money. If you wanted to, for example, stay in cash for a bit because you think stock markets are going to dip in the next few days, you can’t do that. If you wanted to keep your dividends in cash rather than have it immediately get re-invested, you can’t do that.

This is a bit of a double-edged sword, and part of Robo-Advisors’ selling point that using a Robo-Advisor is “set it and forget it.” Once you set up your portfolio and bank account links, you don’t have to worry about maintaining it anymore. Their app just takes care of it all for you.

And while this may be great for people who for whatever reason don’t have the time or the energy to sit around and micro-optimize their portfolios, this also by definition means you’re giving up some control over your money.

Automated Funding with Wealthsimple

That being said, the value of having WealthSimple take care of things for you really comes into play when you see the kind of automated funding options they offer.

To set one of these up we go to Funding -> Automated

Auto-Deposit is just like what it sounds. You can set up a fixed amount to be deposited into your account every week, 2 weeks, or month. Pretty simple, and good for people with a steady predictable income.

Overflow is really interesting. Here’s how it works. You link it to your account, and you set a target balance for how much you’d like to keep in that account. Then, every month, WealthSimple checks the balance and automatically deposits any money over and above that target balance so any excess gets automatically invested for retirement.

It’s clever. I like it. We often advise people that they should keep some cash in an emergency fund equal to about 6 months of living expenses and then invest the rest, and this feature seems tailor made for that setup. You calculate how much your emergency fund should be, set that as your target balance, and that’s it! Every time you get paid into that account, at the end of the month anything you don’t spend gets invested while making sure your emergency fund never gets depleted.

Also, it’s nice to know that before each transfer WealthSimple emails you the day before with a reminder giving you an option to pause or cancel that month’s transfer, in case there’s a big purchase coming up.

Roundup is the last automated funding feature, but this one seems kinda goofy to me. You basically link WealthSimple to your credit card, and for every transaction you make, WealthSimple “rounds up” your purchase to the nearest dollar amount, and transfers that amount from your checking account each month.

So you basically end up investing some random amount equal to approximately $0.5 x # of credit card transactions you make per month. I’m really not sure why anyone would want that, or who it’s trying to help, but hey whatever. You don’t have to use it.

Rebalancing, Dividends, and Withdrawals

As mentioned before, using WealthSimple (or any Robo-Advisor) means giving up a certain degree of control over the day-to-day operations of your portfolio. This can be a good thing or a bad thing depending on who you are, and there are three area where this has an impact that you should be aware of.

The first is Rebalancing. We typically rebalance our portfolios once a year, selling our winners and buying the losers to restore our target portfolio allocation. This does involve a bit of spreadsheet calculations, though we’ve created a spreadsheet that you can download here to do this for you. WealthSimple does that for you automatically now. Whenever you add money, or when markets have caused your ETF percentages to drift too far off target, WealthSimple will do all the calculations and execute the trades to restore your pre-determined portfolio targets. This is mostly a good thing, unless you’re one of those weirdos like us who actually enjoy rebalancing.

The second is Dividends. Because none of the target portfolios have a cash target, any time a dividend gets paid their rebalancing engine will kick in and use that cash to buy more ETFs. For the most part, this is a good thing since for the vast majority of you who are in the accumulation phase of your retirement journey. When you get a dividend, you generally want that reinvested so it can help your portfolio compound and grow.

However, for those of you like me who are retired and need those dividends sitting as cash to live, this would irk me big time. I don’t want those dividends reinvested, and as of right now I can’t see a way to turn off that behaviour.

And finally, the third area is Withdrawals. When you make a withdrawal, the rebalancing engine kicks in and sells off assets in order to raise the funds you need, but again you have no control over what assets get sold off and at what price. This is, again, not an issue for the vast majority of you since you generally don’t need to make withdrawals while you’re working, but I have a pretty specific strategy for managing my withdrawals, and I’m not convinced that WealthSimple will allow me the control I need to do it.

That’s It

So that’s it for this week. We’ve discussed how to open an account, how to set up your portfolio, and how to set up ways to automatically put money into it. Next week, we’ll discuss my overall analysis of Robo-Advisors and how I think they fit into the FIRE space.


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:

1) Questrade

2) Passiv

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 58: Funding our Wealthsimple Accounts”

  1. Great writeup! I don’t really understand the roundup feature either.

    I’d also like to add that this is particularly perfect for someone in my situation, being a US Citizen living and working in Canada. It is a total pain in the ass to invest in Canadian ETFs because of US tax implications, so Wealthsimple makes it simple for me to invest Canadian dollars but be invested in US-listed ETFs for tax reasons.

    Also, for some reason I can’t seem to get my EQ Bank to connect to their overflow feature even though it’s listed. I recently decided to switch my main bank account that everything comes out of to an EQ account, and use it as a combined payroll deposits/emergency expenses account, but Wealthsimple doesn’t want to connect, at least for the Overflow feature 🙁 I’ve reached out to them to see if I they can get this fixed.

    1. Hi there, I have been using Tangerine to fund my Wealthsimple account and works really good, Tangerine also offers some features like EQ Bank

      1. Actually, Tangerine is the account I’m switching from. 🙂 I quite like Tangerine, but just decided I liked the idea of getting 2.00% interest on everything, including what I’m using as my normal daily chequing account. And I can confirm – my Tangerine worked great for the Overflow feature.

  2. Thanks so much for your input about Wealthsimple, Do you guys know about Wealthica? I just signed up and looks pretty good like a tool to see all your investments in one place for Canadians

    1. I use Weathica and have for a year or two now, and quite like it! It’s much better than anything else I’ve found (mostly, better than Mint). It connects to all my accounts quite nicely.

      Also, check out the free addon called P/L Timeline – it shows you pretty graphs of current balances vs total deposits, % total return, dollar value return, etc.

      1. I’m genuinely curious – where did you hear they sell your information? I’ve looked but I can’t find anything referencing that. In fact, I’ve found several things to the contrary, both on their site and elsewhere.

        1. We don’t sell user information. We might publish some anonymous aggregated data (like most sold stocks, most bought stocks, etc.) or we publish the total aggregated net worth on the platform (about $6 billion today) but that’s about it. We protect our users’ personal information. (Martin at Wealthica)

          1. Really? Is the definition of Sell now equal to Publish?

            Direct from Wealthica site:

            https://wealthica.com/pricing/

            How does Wealthica make money if it’s free?

            We built Wealthica for us and are using it daily to track our personal investments. We plan to monetize the Wealthica Dashboard by offering paid add-ons in the future. We also, offer a paid version of the Wealthica API that allows financial technology software providers to offer custom dashboards and use our data collection and aggregation technology to power their in-house software.

            Come on people. At least make an effort to understand what you’re agreeing to when you take on a “free” service. It ain’t free.

            I will give Wealthica credit though for transparency. It allowed me to make an informed decision. Unlike Wealthsimple.

            1. > Really? Is the definition of Sell now equal to Publish?

              I’m not sure I understand. Where do we say we can sell your information? We don’t sell or publish nor we plan to sell or publish any user information other than aggregated anonymized data, for example the most bought or sold stocks in a period, as mentioned previously.

              1. We don’t sell … any user information other than aggregated anonymized data.

                Thank you. You sell data scraped from your clients. Was that so hard?

                Do you provide an option that allows me to use your service without allowing you to include my data in your aggregated anonymized data?

                If you do, I might have a change of heart.

                1. The only data we currently “use” or “publish” is the total aggregated net worth on the platform, we publish it on our own blog at https://wealthica.com/blog/ as an indicator about investors we reach. It’s the equivalent of financial advisors publishing the total amount of assets under management. Do they sell you data because they publish their total assets under management?

                  I don’t think you can call it selling something, but if that’s how you feel about it then I can’t argue further.

                  As I also mentioned earlier, we plan to publish some anonymous aggregated data as insights for Canadian investors (most bought stocks, etc.) and again this would probably be published on our blog. We currently don’t sell or have any plan to sell anonymized aggregated data.

                  Unfortunately, you can’t opt-out from aggregated anonymized data, not because we wouldn’t like to offer that option but because implementing it and making sure the data of users that opt-out is not included in our reports or calculations would require a significant development and operational effort, we’re still a startup with limited revenues and we need to choose our priorities wisely. I’ll take note anyway and think about it for the future, maybe that could be an option that is part of our future Premium Subscription.

                  Thank you for the feedback anyway 🙂

  3. Not to be a downer however I’ve noticed something with Wealthsimple that I don’t like. When you buy or sell an ETF or a stock, the buy/sell price is slightly off of what it should be. I currently have my accounts via BMO InvestorLine while a friend of mine set up their account with Wealthsimple (they were just starting out and I thought that since buying and selling ETFs was free, it would be a good starting point for them to go with Wealthsimple and the setup was super easy). Lo and behold, we would do identical transactions at the same time (Wealthsimple for her, InvestorLine for me) but the bid/sell prices were off quite a bit. Wealthsimple apparently makes the bid/sell unfavourable for their client and in the end, they pay the equivalent of a brokerage commission because they end up paying more when they buy something or get less when they sell something. Yes, I pay $9.95 per trade but I deal with several hundred thousand dollars a pop so that $9.95 is next to nothing per unit.

    This is something that Wealthsimple should tell their clients upfront. Instead, they say that they make their money based on F/X converting CAD to USD. I don’t doubt that but they also make money by screwing their customers with the bid and sell price. For that, I give them a thumbs down for dishonesty. If they were upfront with that, I wouldn’t take issue with them but this upsets me. Buying 20 units could end up costing you $1.50-$2.00. In the end, that free meal is not exactly free. Still cheaper than $9.95 however, long term, it could end up costing more than you thought and we’re all aware here how hidden fees can end up eating up a portion of your returns.

    All I’m saying is buyer beware. If you’re still ok with that, then do as you please. I just want to make sure you get the best bang for your buck.

    This blog has always been upfront and I’m sure MR weren’t aware of this but I wanted you all to know.

    I haven’t tested this out through Questrade yet however would be nice to know if its the same spiel or if purchasing ETFs through them is actually commission free.

    1. Hi Dave – sounds like you’re talking about “Wealthsimple Trade”, which is different than “Wealthsimple”. The regular Wealthsimple that Wanderer is talking about in this article is a roboadvisor. You can never place trades yourself for ETFs or stocks, you just add money to the account and they automatically invest it for you. They also have a product called “Wealthsimple Trade”, which is a completely separate app from the regular one, which seems to be what you’re referencing – where you can go in yourself and purchase actual units of stocks/ETFs/etc.

      That difference aside, your findings are very interesting! I use Wealthsimple Trade, and while their quoted prices are 15 minutes delayed, I’ve looked up the actual bid/ask prices externally when placing trades and found that the actual transaction price was quite spot-on. If you don’t mind my asking, what ETFs did you try, and how many different transactions did you make to conclude they must be intentionally screwing customers over? Were you placing market trades, limit trades…?

      1. No need to take my word for it. Here’s the thing. I’ve done my homework. I know what I saw when my friend and I did this. If you think they aren’t doing this within their Wealthsimple portfolios because it’s not through their trading app, well, that would be a bit naive on your part. Yes, we tried it multiple times between her account and mine simultaneously and no, it doesn’t matter what you try to buy or sell.

        A 15 minute delay allows for a lot of funny business. Quite strange they don’t provide live quotes, don’t you think? Maybe it’s because people would figure out what’s really going on pretty fast.

        1. Yeah. That’s complete and utter nonsense, so I wouldn’t be taking your word for it; or even your anecdotal-but-incorrect observations.

          You might actually try being logged in into two parallel accounts/platforms at the same time and run the test YOURSELF. Relying on a friend to execute those trades is likely what has led you astray.

          As I have self-directed investments with both Questrade and Wealthsimple Trade, I normally have both platforms open. I use the Level 1 quotes on Questrade to put in my limit orders on Wealthsimple Trade. Never a glitch… no skimming off the top. In fact, I’ve placed market orders and buy limit orders above the strike price with Wealthsimple Trade, and they have always been filled at the best market price available–which is also a regulatory obligation for the broker, by the way.

          And just in case you still have doubts, make use of the https://web.tmxmoney.com/quote.php?qm_symbol=ZCN, where you can see the last 25 trades of any ETF/stock in real time [link is for ZCN.TO, but replace tickler symbols as needed]. National Bank [80] shows as the broker executing the trades on behalf of Wealthsimple. It is a transparent world out there in the trade execution world, in this sense.

          So I call bull on your mistaken or outright misinformed conclusion. You’re entitled to your opinion, even if wrong, but not to your own facts!

          1. Comprehension appears to be a problem for you as you didn’t read what I wrote. I processed the trades on both InvestorLine and Wealthsimple on my iPad and my friend’s iPad at the same time, same moment. One index finger on each iPad. How much clearer do I have to be? InvestorLine provided a much more favourable price.

            You on the other hand are comparing 2 platforms that offer buying ETFs for free. Do ya maybe think they’re working in the same way? When you compare a paying platform against a “free” platform, come back and give me your informed opinion. Also, do you think all trades are completed publicly? That’s funny. If your brokerage can fill both sides of a trade internally without going onto public markets, they do.

            Do you really believe there’s such a thing as a business giving a free lunch? Bah ha ha ha ha!

  4. Good article. Thanks. But I’m from Germany / EU. Any hints which tools or platforms we can use? In your article it only says US or Canadian citizen. That’s why I’m asking for.

    Best,
    Sven

  5. Hi Wanderer and Firecracker,

    So happy to see that your investment series continues. I know the previous investment series (with Questrade) is a little older, but I just started following along since we’ve been locked in due to Covid-19.

    I do have a question re: Questrade. I know it is off-topic here, but I’m uncertain if you are still responding to comments under older posts.

    Wondering if I can transfer cash balances in my Questrade accounts to other Questrade accounts? If so, how do I go about doing this?
    **This feels like it should be so simple, but for the love of God I cannot figure it out. I’ve attempted multiple times but always log out of the account no further ahead (on this issue).

    Thanks to you both for all you do. I’ve been following along for a short time now. I never thought FIRE would be something I would pursue (it seemed a little extremist), but you’ve turned it into a reasonable and recheable goal. It’s life-changing!

    Thanks to your excellent readers as well. The comments are very often insightful and adding much to my learning.

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