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Wealthsimple Review: How You Can Start Investing in a Balanced Portfolio

Wealthsimple Review: How You Can Start Investing in a Balanced Portfolio

One of the best ways to build over time is to invest. However, it can seem like a daunting task to get started. Many of us have a fear of investing and worry that we’ll do it “wrong” and lose all our money. This is where a service like Wealthsimple comes in. This is a company that can help you build a balanced, diversified portfolio so that you can begin building wealth for the future.

Thanks to the rise of robo-advisors, it’s easier than ever to get started and take advantage of passive investing. My Wealthsimple review will help you understand the ins and outs of this service so that you can decide if it’s right for you.

What is Wealthsimple?

Wealthsimple is a robo-advisor that helps you create a long-term investing portfolio. Like many robo-advisors, Wealthsimple uses the idea of asset allocation based on your risk profile to put together a portfolio.

In order to get started, you are asked questions about when you plan to retire, and ability to handle risk. Using this information, Wealthsimple can put together a portfolio for you, based on different asset classes. As with most robo-advisors, Wealthsimple works best when you plan for the long term, with a goal like retirement. Use dollar cost averaging to add a set amount of money each month, and Wealthsimple will automatically invest it on your behalf.

The idea is to use low-cost ETFs to limit your fees. This means that more of your money is building your long-term wealth, rather than going toward fees. Wealthsimple uses asset-based (a diversified mix of stocks and bonds) management to passively handle your portfolio. With the help of an algorithm, it adjusts as needed as you approach retirement.

Wealthsimple has a board of directors and investment team made up of long-time Silicon Valley folks and well-known and successful investment professionals. One of the members of the investment team is Eric Kirzner, the designer of the first ETF in North America, and a Professor of Finance at the Rotman School of Management.

It’s a simple strategy, but it’s one that’s been shown to work well for most people over time. It’s boring, but you’re more likely to see good long-term results when you use a company like Wealthsimple.

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Is Wealthsimple Safe?

One of the most important things to consider in a Wealthsimple review is the question, “Is Wealthsimple safe?” The good news is that Wealthsimple is considered one of the best financial services websites in the world. The company won the Webby for the best financial services website. Not only that, but it is the largest robo-advisor in Canada and has the highest count of assets under management ($4.3 billion), evidence of a large client base.

Wealthsimple is a big deal in Canada already, and it is also beginning to make waves in the United States. In 2017, the company is expected to open shop in London. It’s no surprise that Wealthsimple is one of the top 100 global fintech companies.

The next thing to consider when you try to figure out is Wealthsimple safe is what happens if the company goes out of business. It’s probably not likely to go out of business, but Wealthsimple is insured. Wealthsimple has a custodial broker, ShareOwner. This company is regulated closely by the IIROC. Plus, it’s also insured by the Canadian Insurance Protection Fund. This means that your account is insured for up to $1 million against insolvency or bankruptcy. If things do go bad

If things do go bad, your assets remain yours, and can choose to keep the money with ShareOwner, or move it elsewhere. It’s important to understand this for your peace of mind.

Wealthsimple Invest

The Wealthsimple brand is comprised of three main elements. The first is Wealthsimple Invest, which is considered to be Canada’s top robo-advisor service. The second is Wealthsimple Save, a simple, yet very popular, no-strings-attached online savings account. Last, but not least, is Wealthsimple Trade, a no-commission fee discount brokerage, where you can buy and sell thousands of ETFs, mutual funds, and individual stocks right from your mobile device. We’ll dive into Save and Trade a bit later, but first, let’s take a closer look at Wealthsimple Invest.

Wealthsimple Invest is built around the concept that the best way to invest is through a low-cost, passive investment portfolio that tracks the market. By automating your contributions, the idea is that you’ll come out ahead in the long term. As Wealthsimple puts it, it’s investing on auto-pilot. This is where the term robo-advisor comes in, because unlike the experience you get from meeting face to face with an investment advisor, you can open a Wealthsimple account, choose an investment profile, and purchase your investments from the comfort of your living room, using their website and mobile app.

Don’t be fooled by the term robo-advisor, with Wealthsimple, you still have the opportunity to talk to a real, live human. MapleMoney readers have the opportunity to book a free, 15-minute call with an experienced, Wealthsimple portfolio manager.

Coming Soon: Wealthsimple Crypto

In July 2020, Wealthsimple announced that they are entering the cryptocurrency game, and that clients will soon be able to buy and sell Bitcoin and Ethereum with Wealthsimple Crypto. According to Wealthsimple, you will need to open a new account to trade cryptocurrencies, but the platform will be part of the existing Wealthsimple Trade app. This means that you’ll be able to buy and sell stocks, ETFs, and crypto using the same mobile app. 

As with Wealthsimple stock and ETF trades, there will be no fees to buy and sell cryptocurrency. Instead, there will be a small spread between the market price and the transaction price, which is how Wealthsimple will make money on crypto trades. As of this writing, Wealthsimple Crypto is not yet available, but it is coming very soon. In the meantime, join the waitlist, and be among the first in line when Crypto goes live. 

Also, you can move up the waitlist by referring friends. The more people you refer, the closer your name moves to the top of the list. If you’re unfamiliar with the world of crypto, here’s an article on how to buy and sell Bitcoin and other cryptocurrencies

Types of Wealthsimple Accounts

What types of Wealthsimple accounts are offered? The most common account is the RRSP. Many Canadians like to use this account to save for retirement. However, you can also use Wealthsimple for other accounts, including:

  • TFSA
  • Personal taxable account
  • RRIF
  • LIRA

It’s also possible to open joint accounts. You can even open a corporate account and take advantage of lower corporate income tax rates. Plus, if you transfer an account from another broker, Wealthsimple will pay the transfer fees.

Wealthsimple Fees

In any Wealthsimple review, people want to know the fees associated with the account. What is Wealthsimple fee structure? It’s very straightforward. For MapleMoney readers, Wealthsimple will manage the first $10,000 in your account for free for the first year.

From there, up until you reach $100,000 in your account, your fee is 0.5% of your account value annually. Once you reach $100,000, your fee drops to 0.4% annually. This is a fraction of actively managed funds. Some actively managed accounts can charge 2% annually or more. You do need to be aware that there is a 20 basis point fee on currency conversions. If you need to buy or sell in U.S. dollars, that conversion will be charged. Additionally, expense ratios charged by ETFs aren’t included in the fee, so that will be extra. However, Wealthsimple makes an effort to use low-cost ETFs so that your fees are kept under control. Even with these fees, you are still likely to come out ahead.

And remember, you can get free management on your first $10,000 when you sign up through the partnership with MapleMoney. As my reader, you get access to this special deal, which can save you a lot of money to get started. Sign up from this page to take advantage of this opportunity.

Get Started

Finally, you do have to be aware of the taxes associated with paying the fees. Just like you’re charged GST on your regular purchases, you are required to pay taxes on the fees you pay with Wealthsimple.

When you have under $100,000, you get automatic rebalancing for your account, to make sure that your asset allocation remains ideal. Not only that, but any dividends you receive are automatically reinvested. You can also get help from money experts to get an idea of what to do with your portfolio next.

Wealthsimple Black

Once your account balance reaches $100,000, you qualify for a couple extra perks with Wealthsimple. Your fee includes tax-loss harvesting, which can help you make the most of your tax situation during tax time. On top of that, you get a full financial planning session regularly to be sure that you are on the right track. Not too shabby. 

Wealthsimple Generation

When you or your household exceed $500,000 on deposit across all Wealthsimple accounts, you qualify for Wealthsimple Generation. For the same small fee of .40%, Generation adds a number of additional services to the Wealthsimple Black level. You’ll receive more in-depth financial planning, tailor-made portfolios, a dedicated advisor team, which means a higher level of service, as well as 50% off a comprehensive health plan from Medcan. You even get an enhanced level of reporting at the Generation level, including income and retirement planning.

Wealthsimple Returns

As with all investing, returns depend on market conditions and what you’re invested in. You should also be aware that Wealthsimple returns aren’t going to be particularly exciting.

Wealthsimple is built on the ideas of Modern Portfolio Theory, the Nobel-prize winning theory that holds that your asset allocation matters more than the individual stocks you hold. The rise of indexing and ETFs in the last few decades have only made it easier to apply principles of asset allocation and Modern Portfolio Theory to the portfolios of ordinary investors.

Over time, your returns will compound to grow into a nest egg that can help contribute to a comfortable retirement. It’s worth noting that studies indicate that indexing outperforms stock-picking over time. Additionally, many passively managed index funds outperform managed funds over the long haul.

Wealthsimple performance has been in line with market performance, as the company uses a diversified mix of ETFs to help ensure that you have a degree of protection and risk that is appropriate for your age and your goals. No, you won’t see anything sexy with Wealthsimple. But you are more likely to see solid returns over time and build your wealth.

Socially Responsible Investing

If you’re interested in socially responsible investing (SRI), Wealthsimple has options for you. More people want to put their money into funds that reflect their values. Wealthsimple can help you do that with its SRI ETFs. These ETFs include low carbon, cleantech, affordable housing bonds, and more. The idea is to invest in companies that promote your social values. You can feel better about the way you make money with the help of SRI through Wealthsimple.

Wealthsimple Halal Investing

Wealthsimple has created an investment portfolio that includes only investments that align with Islamic investing principles. That means that any company making a profit from products such as alcohol, tobacco, gambling, pork, or weapons, is excluded from the Wealthsimple Halal portfolio. Halal investing also excludes income products, such as bonds and GICs, as they are considered debt instruments. The fees on a Halal portfolio are the same as with any Wealthsimple portfolio – 0.5% up to $100,000, 0.4% over $100,000, and $10,000 managed free for anyone you refer to Wealthsimple. I should note that the Halal portfolio does not invest in ETFs, rather it holds a portfolio of 50 carefully selected, individual stocks.

Wealthsimple for Advisors

One of the challenges of running your own financial planning or investment advisory firm is having a platform capable of doing everything from onboarding clients, opening and managing accounts, and looking after regulatory compliance. Small investment firms simply don’t have the resources to develop their own proprietary software. Thankfully, Wealthsimple for Advisors can help, by delivering low-cost investment planning products and services to advisors, enabling them to focus on what matters most, their clients. Through Wealthsimple, advisors have access to a range of ETF, mutual fund, and individual stock portfolios.

Wealthsimple for Work

This Wealthsimple review wouldn’t be complete without mentioning the cool benefits of Wealthsimple for Work. If you own a business, you can get help managing your Group RRSP. That’s great because it takes some of the hassle and difficulty off your plate. If you want to offer a benefit to your employees, this can be a good way to do it.

If you sign up for Wealthsimple for Work, you don’t have to worry about administration fees. You just pay your matching contribution, and that goes right to your employees.

Wealthsimple Save

Wealthsimple Save refers to one of Wealthsimple’s flagship products, their high interest, online savings account. Currently, the account is earning a very generous 2%, well above the savings rates being offered by most major banks. What I love about Wealthsimple Save is that there is no catch – no hidden fees or confusing introductory offers. No matter your balance, or how often you transact, you’ll earn a great rate of interest. There is no monthly fee, and you don’t pay for transfers or withdrawals. Wealthsimple Save account holders can benefit from a couple of clever features that actually make saving money a lot of fun; Roundup and Overflow. Let’s take a closer look at how they work.

Wealthsimple Roundup

When you enable the Roundup feature on your Wealthsimple App, anytime you use your debit card, your purchase is rounded up to the nearest dollar and the spare change transferred to a Wealthsimple Invest or Save account. Over time, what starts as spare change can really add up, especially when you’re earning interest on your savings.

Wealthsimple Overflow

Wealthsimple Overflow works just like it sounds. You determine the balance that you want to maintain in your account every month, and Wealthsimple will automatically transfer any overflow to, you guessed it, a Wealthsimple Invest or Save account. Before doing so, they will send you a reminder in case you want to adjust the amount your keeping in your account. Just like with roundup, these automated savings can really add up over time.

Wealthsimple Trade

Wealthsimple Trade marks Wealthsimple’s foray into the world of online stock trading. Wealthsimple Trade is similar to many of the Big Bank discount brokerages, in that you have the ability to buy and sell thousands of individual stocks and ETFs at the touch of a button, with one big difference. Wealthsimple trade won’t charge you anything to do it. You may be wondering how this is possible when most online brokers charge commission fees ranging anywhere from $4.95 to $9.95 for stock or ETF purchases. According to Wealthsimple, their low-cost model of using technology, combined with a small, dedicated team, make no-fee trading a reality. You can open a Wealthsimple Trade account within minutes by downloading the Wealthsimple App. I should note that there is a currency exchange fee of 1.5% for US trades.

Wealthsimple Review: Bottom Line

What is Wealthsimple? What began as one of the world’s best robo-advisors, has evolved into so much more. At the heart of their product lineup remains Wealthsimple Invest, their low-cost, passively managed robo-advisor platform, which offers three tiers of service: Basic, Black, and Generation. Not to be outdone is Wealthsimple Save, a no-fee online savings account that will earn you a high rate of interest with no conditions. You also get Wealthsimple Trade, an online discount broker with zero trading fees, for investors who prefer to be a bit more hands-on. And with creative investment options such as their Halal and Socially Responsible Investing portfolios, Wealthsimple has demonstrated that they care about what’s important to you.

Overall, Wealthsimple is a great option for just about anyone wanting to get started with long-term investing. If you aren’t interested in stock picking, but you know that investing needs to be part of your plan, Wealthsimple can be the way to go. With its adherence to time-tested principles, and your ability to use dollar cost averaging to your advantage, it makes sense to consider Wealthsimple for building wealth long-term.

Comments

  1. Phil Caines

    How can you both be writing an objective review while at the same time making a commission from the company through referrals? You should frame this as an editorial or testimony, a review with a clear incentive to profit from sign ups is inherently biased. Realistically, if you compared the value of Wealthsimple to that of iShares balanced etf, you could point out the tens of thousands of dollars that the average investor would be out during the lifetime of their investment portfolio. Too bad that your judgement is clouded.

    • Tom Drake

      Hi Phil, I’ve reviewed many products and services and built up trust over the past decade. My reviews are not based on affiliate commissions, in fact, the leading stockbrokers pay a higher commission and I would make more money telling people to go with them, but I believe Wealthsimple is the easiest way for people to start investing.

      As for the value of ETFs, I covered the additional fees in this post. You should also have a look at this post, especially the section, “Couldn’t You Just Do All This Yourself?”

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