Wealthsimple Investing Review: Is It Any Good?

Wealthsimple Investing Review: Is It Any Good?

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

One thing I would note is that Wealth Simple can’t accept non-Canadian residents. So, if you are an expat or planning to be one in the future, it is best avoided – I have helped several people in this very situation.

Introduction

Wealthsimple investing has drawn significant interest from different customers all over the globe thanks to the low-cost robo-advisor, discount brokerage and money management services it offers.

Canadian financial services firm Wealthsimple has built a solid reputation since its launch in 2014 for providing simple and affordable financial services online. Since rolling out as a robo-advisor, Wealthsimple expanded to include a cheap brokerage called Wealthsimple Trade, a peer-to-peer money transfer and spending app dubbed Wealthsimple Cash, plus other services. The company’s primary source of revenue, however, continues to be the robo-advisor, now known as Wealthsimple Invest.

In this article, you can learn if any of these services suit you as you get more detailed information about Wealthsimple investing, its many product offerings, and how it all functions.

Should you go with robo-advisor or discount brokerage in Wealthsimple investing?

Wealthsimple Invest and Wealthsimple Trade both offer low-cost investment options. It essentially comes down to two things when deciding between the two services: the time and effort you are willing to allot to manage your investments and your willingness to shell out more money for a service that is completely automated.

With Wealthsimple Invest, a robo-advisor, you can acquire an exchange-traded fund (ETF) portfolio that is specifically tailored to you if you have no interest in making your own investment decisions. Once you fund your account, almost everything runs automatically, especially if you set up pre-authorized payments to make regular investments. Select Wealthsimple Trade if you wish to choose your own ETFs, equities, and/or want to pay the least amount of fees.

wealthsimple investing robo-advisor
Wealthsimple Invest offers automated service.

Wealthsimple investing: Wealthsimple Invest fees

There are two kinds of fees that Wealthsimple Invest charges:

•           Portfolio management fee

This is a portion of the entire sum of your investment. Clients with balances under $100,000 pay a fee of 0.5% while those with balances over $100,000 pay a fee of 0.4%.

•           Management expense ratio

Each individual ETF has its own fee called management expense ratio (MER). The average MER on Wealthsimple’s ETFs is around 0.2%. Meanwhile, the costs associated with Wealthsimple Trade depend on the investments you prefer:

•           Stocks – There are no commission, account, or management fees of any type for buying, selling, or trading stocks.

•           ETFs – There are no commissions or account fees on ETFS, although there are thousands of MERs to choose from, such as those with fees that are as low as 0.05%.

Wealthsimple investing: Wealthsimple Trade

This discounted brokerage service can be attractive to those who wish to get more discounts in Wealthsimple investing costs and are interested in creating their own portfolios with select ETFs and stocks. Management fees on ETFs will still be charged, but all the account’s ETF and stock purchases, sales and trades are free.

Clients can maintain their portfolios in one of three account types: personal (non-registered), tax-free savings accounts, or registered retirement savings plans. Transactions are conducted online or using a mobile app.

Only ETFs and stocks that are traded on the New York Stock Exchange, NASDAQ, Toronto Stock Exchange, Toronto Venture Exchange, NEO, and Canadian Securities Exchange are available to investors. Limited securities are also offered on the BATS Exchange. Additionally, if a security is dual-listed, that is, listed on both a US and a Canadian exchange, only the Canadian-listed asset is accessible. Stocks must hit a $0.50-per-share minimum price and trade at least 50,000 shares on average per day.

Wealthsimple Trade also offers fractional shares, making stock purchases simple regardless of an investor’s available investment capital. Since many other bargain brokerages charge up to $10 each trade, free trades are also difficult to top from a financial standpoint.

Additional Wealthsimple investing service: Wealthsimple Cash

Wealthsimple Cash is a money-transfer and spending app that was first introduced in January 2020 as a no-fee hybrid savings and checking account. With no account or transaction fees, and no exchange fees for international transactions, it offers a secure way to send and receive money. There are no transaction restrictions, no minimums for sending or receiving money, and two-factor authentication is used for additional security. You can send or receive up to $5,000 daily.

No personal information is required for sending and receiving money via Wealthsimple Cash.

A Wealthsimple Cash Card has been made available since May 2022, enabling you to make regular purchases, withdraw money from ATMs, and earn 1% in cash or stock for all expenditures. The card is usable in any place where a Visa is accepted.

Wealthsimple Investing’s pros and cons

Pros:

•           Account setup is easy

The process of creating a Wealthsimple Invest account is quick and easy. You provide your personal information, including your social security number, then respond to a questionnaire about your finances and investment preferences. Your choices determine which of the three portfolio types—conservative, balanced, or growth—should you invest in based on your risk appetite and investment timeframe.

•           Deposit has no minimum

While many online investing platforms demand a minimum deposit of $1,000 when you sign up for a robo-investing account, Wealthsimple Invest doesn’t have a minimum requirement. Wealthsimple will invest the $5 you deposit into your account in the ETFs or registered retirement savings plans of your choice.

You can deposit as little as $1 into your Wealthsimple Trade account, which offers affordable brokerage services.

•           Fees are low

The portfolio management charge at Wealthsimple Invest is 0.4% or 0.5%, depending on your total investment amount, and the MER begins at 0.2%.

There are no costs to buy or sell using the online brokerage if you use Wealthsimple Trade to manage your own investments.

•           Automatic rebalancing

Automatic rebalancing, which is free when you sign up for Wealthsimple Invest, keeps track of portfolios in response to market fluctuations, deposits and withdrawals, shifts in your risk score, as well as changes to the ETFs themselves.

•           Dividend reinvesting

Your dividends are monitored and automatically reinvested the day after you receive them with Wealthsimple Invest.

•           Account options

You can choose from a wide range of options with Wealthsimple Invest, such as registered retirement savings plans, tax-free savings accounts, registered education savings plans, locked-in retirement accounts, life income funds, non-registered (personal or joint accounts without limits), registered retirement income funds, cash (for savings and spending), as well as corporate account options.

However, Wealthsimple Trade accounts are presently only available for use with personal, tax-free savings accounts, and registered retirement savings plans.

•           Micro-investing options

You can connect your debit and/or credit card to your Wealthsimple Invest account using the Wealthsimple RoundUp tool. Your daily purchases will be rounded up by Wealthsimple and any spare change will be deposited into your Wealthsimple Invest account.

•           User experience

Wealthsimple has a user-friendly app and a clean website. You can keep track of your tax-free savings accounts and registered retirement savings plans to make sure you don’t make excessive contributions to your registered accounts.

•           Reputable brand

Wealthsimple has over 2 million users and assets under management worth $15 billion. Additionally, Fintech 100 has named it one of the top 100 Global Financial Technology Companies every year since 2016.

•           Passive investing

Wealthsimple investing is low-cost and passive using ETFs. Warren Buffett and others have promoted the investment strategy of buying and holding, and historically, ETFs have outperformed actively managed mutual funds long term. Another benefit of passive investing is that it results in higher net returns because of the low fees.

•           Transfer fees can be covered

Wealthsimple will cover the administrative transfer fees if you invest more than $5,000.

•           Socially responsible investing options

Investment options include both Halal and socially responsible investing. These can be suitable to investors who back businesses that highlight environmental and social issues, have a good track record regarding human rights and corruption, or those who wish to maintain their money according to Muslim beliefs.

Cons:

•           Few human advisers

Only users with at least $100,000 in their Wealthsimple accounts can connect with human advisers. A support center is open during business hours for account-related queries, such as about application.

•           Tax optimization

Your investments are monitored for losses and profits when you have a Wealthsimple Invest Black account, a premium service available to customers with at least $100,000 in their Wealthsimple accounts. This allows you to adopt a technique known as “tax-loss harvesting” to lower your tax payments on capital gains.

•           Limited portfolio options

Wealthsimple Invest’s limited selection of portfolio alternatives compared to those offered by some other robo-advisors may be a drawback for investors who prefer certain portfolio personalization.

•           No physical branches

Advisers cannot personally meet with investors. You can contact or email the Customer Success team if you need to speak with a live person during regular business hours.

•           Higher MER for socially responsible investing

Compared to the 0.2% yearly fees charged to other investments, the costs levied on socially responsible investing options are significantly higher and can reach over 0.4%.

wealthsimple investing stock market chart
Stock market chart on virtual screen (freepik)

Is Wealthsimple investing safe?

Your money should be invested according to your needs and risk tolerance. That holds true regardless of the investment service you select. Wealthsimple is designed to serve a broad range of clients, so if you don’t want that individualized attention but would like an easy approach to construct and manage a portfolio with little to no maintenance, it might be right for you.

Also, Wealthsimple Trade and Wealthsimple Invest accounts are protected under the Canadian Investor Protection Fund (CIPF). Meaning, securities and cash missing from those accounts—except market losses—are eligible for a maximum of $1 million in losses per account type. Wealthsimple Investments Inc. is a member of the Investment Industry Regulatory Organization of Canada.

Wealthsimple investing downside

It is evident that Wealthsimple makes it simple to invest, trade, and manage your money with a user-friendly website and app, live human specialists for assistance, as well as lack of transaction and trading fees and minimum investment requirements.

However, there are certain disadvantages in using the services of Wealthsimple, such as:

•           Investment options: Clients of Wealthsimple Invest are restricted to pre-selected boilerplate portfolios and have no access to other ETFs. Wealthsimple Trade customers are also restricted to a small selection of stocks and ETFs and are not allowed to trade bonds, overseas equities, precious metals, or any of the other asset classes available through other bargain brokers.

•           Fees: While the annual fee for Wealthsimple Invest might look small, fees could actually go up to 0.6% (or 0.8% for socially responsible investing) if you have a six-figure portfolio. Meanwhile, clients of the free basic plan of Wealthsimple Trade who eyes US stocks and ETFs may find the 1.5% currency conversion fee to be too expensive. To avoid such exorbitant foreign exchange fees, there’s an option for a $10-a-month Wealthsimple Trade Plus plan to hold investments in US equities.

•           Account types: Wealthsimple Trade only offers personal, tax-free savings accounts and registered retirement savings plan accounts, in contrast to other discount brokerages that provide a full range of accounts, such as registered education savings plans, locked-in retirement accounts, registered retirement income funds, life income funds, and margin accounts.

Should you still try Wealthsimple investing?

There is no doubt that Wealthsimple Invest’s robo-advisor services will be a huge asset to prospective investors who could otherwise continually put off creating a portfolio. In the long run, investing in a broadly diversified portfolio of low-fee ETFs will always generate higher returns than bank interest, and it is a surefire strategy to prevent inflation from eroding the purchasing power of your assets.

In a similar manner, do-it-yourself (DIY) investors who use the commission-free Wealthsimple Trade service to purchase and sell stocks and ETFs will surely save money on fees.

On the other hand, Wealthsimple Invest clients with larger portfolios might want to look into alternative robo-advisors that might provide lower costs, and DIY investors who want more options in the kinds of investments and accounts they can choose from should look into alternative discount brokers.

You don’t receive interest on the funds in your wallet while using Wealthsimple Cash, but many people will be attracted by the 1% cash and stock refund on all purchases and no-fee features, which include the absence of exchange fees on international transactions. 

You should also avoid it as an expat, or future one.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 438.5 million answers views on Quora.com and a widely sold book on Amazon

Related Blogs