Wealthsimple: Robo-Advisor Review

Founded in 2014, Wealthsimple manages over $3 billion CAD of assets and has over 100,000 clients throughout Canada, the U.S., and the U.K. As an automated investing service, often known as a robo-advisor, they construct investment portfolios using low-cost, index-based exchange traded funds (ETFs), which means your investment is divided into many different assets to maximize return and reduce risk. Fees start at 0.50% per year for balances up to $100,000, which is on the high side for robo-advisors but still about half the cost of a traditional financial advisor with arguably better results. Whether you want to invest or save, they offer a number of services that includes their Smart Savings account with up to a 2% interest rate and their new Wealthsimple Trading platform with zero commissions. Here’s everything you need to know about Wealthsimple’s features, investment style, and fees.

Overview

  • Autopilot investing
  • Offers socially responsible investments
  • Automatically rebalances your portfolio to reach your retirement goals
  • Has a savings account with a 2.0% interest rate in Canada and 1.75% in the U.S., which is higher than most banks
  • Offers 3 portfolio types depending on your needs – conservative, balanced, and growth
  • Provides access to financial planners through email, chat, and phone support
  • Allows investors from Canada, the U.S., and the U.K. to sign up
  • Paperless signup process
  • App on both iOS and Android
  • The new Wealthsimple Trading platform offers the lowest trading fees on the market (currently Canada only)

Things to consider

  • High advisory fees at 0.50%, other robo-advisors are around 0.25%
  • DIY investing offers greater returns with lower fees

Getting started

The entire process takes less than 5 minutes to set up your account with Wealthsimple. They ask you a number of questions including your age, investing goals, planned retirement age, investment experience, income, savings rate, assets, and debt to determine the appropriate portfolio for you. From there, they ask if you want to open a new investment account, transfer one from another bank, or open a savings account. Once completed, your account should be up and running within 5 business days. It’s that easy.

Account offerings

Country Accounts
United States Traditional IRA, Roth IRA, Rollover IRA, SEP IRA
Canada  RRSP, Spousal RRSP, RRIF, RESP, TFSA, LIRA, Non-Registered account
United Kingdom ISA, JISA, Personal


Wealthsimple has an extensive reward program. This company is growing fast for a good reason. The benefit of incorporating the following activities is hard to ignore.

Reward Program

Activities Rewards
Two-step authentication $100 managed for free for 12 months*
Mobile app $100 managed for free for 12 months
Auto deposits $1,000 managed for free for 12 months
Invite friends $10,000 managed for free for 12 months
Transfer an account (of at least $5,000) $10,000 managed for free for 12 months

*dollar figures are in CAD

Wealthsimple Investment Portfolios

Wealthsimple takes diversification to the next level by investing your money across the entire stock market using exchange traded funds (ETFs). The basic portfolio can be set up in one of three types across 13 different ETFs:

  • Conservative portfolio: 65% bonds and 35% stocks
  • Balanced portfolio: 50% bonds and 50% stocks
  • Growth portfolio: 80% stocks and 20% bonds

Within each of these, you decide if you want to invest in socially responsible investments or, in the U.S., a Halal investing portfolio that complies with Islamic investing principles.

Wealthsimple caters their investment portfolio depending on whether you live in Canada, the U.S., or the U.K. See the details of their Canadian allocation later in this post.

Wealthsimple Save

Wealthsimple offers some of the highest interest rates on the market, up to 2% in Canada and 1.75% in the U.S., with their Smart Savings account. The high interest rate, no minimum balance, and no balance fees make this my savings account of choice and perfect for building an emergency fund. The two-business-day withdrawal notice might be a turn off for some, but I prefer it because it allows you to more easily separate your savings from your spending accounts by making it a little more inconvenient to access.

Overview

  • No minimum balance
  • Unlimited transfers, never pay for transfers or withdrawals
  • No introductory rate
  • 0% for your first $100,000; after $100,000, variable rate between 1.6% and 1.35%*
  • No low balance fees
  • CDIC insured up to $1,000,000
  • Great for emergency funds

*subject to change

Things to consider

  • 2 business days to withdrawal

Wealthsimple Trade

Along with their robo-advising services and savings account, Wealthsimple now offers a way for you to take control of your investments with Wealthsimple Trade. You choose your own stocks and trade commission-free. Wealthsimple Trade is the only brokerage on the Canadian market that offers free trades, similar to Robinhood in the U.S. This app is a breath of fresh air because in my experience stock trading apps can be clunky, have high fees, and feel like they are stuck in the 1990s with an archaic user interface. Wealthsimple Trade brings investing into the 21st century with a clean and easy-to-use interface.

Wealthsimple Trade is currently only offered in Canada. They plan to release in the U.S. and the U.K. at a future date.

Features

  • Unlimited commission-free trades, currency conversion fees apply if you purchase U.S. stocks
  • No account minimum
  • Instant execution
  • Easy one-tap sign up for existing clients
  • No paperwork
  • Available on iOS and Android

Things to consider

  • No RRSP accounts (yet)
  • No options trading (yet)
  • No U.S. dollar accounts (yet)
  • Not all stocks are available to invest in

As I advocate in my book, Kicking Financial Ass, investing in a low-cost index fund is the best way to create wealth over the long term. With Wealthsimple Trade, you avoid the trading and costly advisory fees associated with traditional financial advisors and robo-advisors. Keep in mind its limitations, the biggest being that not all stocks are available, though they are adding more every week. Also, if you are looking to invest through an RRSP, Wealthsimple Trade does not currently offer those accounts, so you may be better off with Questrade or another online broker that I list below.

Canadian Discount Brokerage Features

Broker Minimum Deposit Commission Fees Foreign Exchange Fee (buy and sell)
BMO InvestorLine $5,000

None for TFSA

$9.95 $100/year if balance < $25k 1.65%
CIBC Investor’s Edge None $6.95 $125/year if balance < $25k 1.55%
Qtrade Investor None $8.75,

$7.75 for investors aged 18 to 30

$25/quarter if balance < $15k 1.02%
Questrade $1,000 $0.01 per share
Min: $4.95Max: $9.95
$0 but $24.95/quarter if balance is < $5k 2.50%
RBC Direct Investing None $9.95 $25/quarter if balance < $15k 1.06%
Scotia iTRADE None $9.99 $25/quarter for low activity, $0 if balance > $25k 1.55%
TD Direct Investing None $9.99 $25/quarter if balance < $15k 1.35%
Wealthsimple Trade None $0 $0 1.50%

My opinion is if you currently bank with one of the big five in Canada, using their platform is most likely the most convenient for you to set up and get started. The fee structure is similar and being able to transfer funds between accounts almost instantly is a nice advantage. Price per trade has come down over the years, with the majority of brokerages offering around $10 a trade. Moreover, they provide RRSP’s which Wealthsimple Trade currently lacks.

Brokerage Summary

However, if you want to trade more or use dollar-cost averaging, meaning investing regularly over time, with a user-friendly platform, my top 4 suggestions in no particular order are:

  • Wealthsimple Trade

Wealthsimple Trade provides an easy-to-use platform with no commissions, minimum balances, or fees. Keep in mind that as of this writing they do not offer U.S. dollar accounts, which means whenever you buy and sell U.S. stocks, you convert back and forth in CAD paying the currency conversion fees. If you are incorporating a buy and hold strategy this shouldn’t be much of an issue, but if you are trading stocks in USD, the currency conversion fees can add up. Furthermore and as previously mentioned, they do not currently offer RRSP or TFSA accounts, so Wealthsimple Trade is ideal if you have already maxed out your retirement account contribution limits. 

  • Qtrade Investor

You can’t go wrong with Qtrade Investor. They were ranked the #1 brokerage by Globe and Mail 8 out of the past 13 years and ranked #1 by MoneySense. They continuously invest in their platform with an attractive interface and have the lowest currency conversion fees among the brokerages. As an added benefit, they offer lower commissions for those aged 18 to 30.

  • RBC Direct Investing/Scotia iTRADE/TD Direct Investing

RBC Direct Investing, Scotia iTRADE, and TD Direct Investing all offer similar commissions per trade with RBC standing out with the lowest currency conversion fees. Platforms are similar with TD having a slight edge in sleekness, and all three offer no minimum balance requirements.

  • Questrade

Questrade is a great platform that is continuously improving its service. However, watch out for the high currency conversion fees when purchasing U.S. stocks and the $1,000 account balance minimum to invest.

Wealthsimple ETFs

These are the ETFs used for Wealthsimple Canada along with their average annual returns, expense ratios, and investment type:

ETF Description Average Annual Return (Since Inception) Expense Ratio Investment Type
CRBN iShares Trust MSCI ACWI Low Carbon Target 4.1% (2014) 0.20% Socially Responsible
IEFA iShares Core MSCI EAFE ETF 4.8% (2012) 0.08% Stocks
IEMG iShares Core MSCI Emerging Markets ETF 1.7% (2012) 0.14% Stocks
PDF Purpose Core Dividend Fund 8.0% (2013) 0.55% Stocks
PHR Purpose Duration Hedged Real Estate Fund 4.5% (2014) 0.65% Stocks
PZD Invesco Cleantech ETF 5.5% (2006) 0.68% Socially Responsible
VIDI Vident Financial LLC 11.2% (2013) 0.61% Socially Responsible
VTI Vanguard Total Stock Market ETF 6.9% (2001) 0.04% Stocks
VUS Vanguard U.S. Total Market Index ETF (CAD-hedged) 11.5% (2011) 0.15% Stocks
XEN iShares Jantzi Social Index ETF 4.0% (2007) 0.50% Socially Responsible
XIC iShares Core S&P/TSX Capped Composite Index ETF 6.2% (2001) 0.05% Stocks
XSH iShares Core Canadian Short Term Corporate + Maple Bond Index ETF 2.5% (2011) 0.09% Bonds
ZFM BMO Mid Federal Bond Index ETF 2.08% (2009) 0.22% Bonds
ZHY BMO High Yield US Corporate Bond Hedged to CAD Index ETF 6.7% (2009) 0.62% Bonds

I’ve also included their Canadian portfolio allocation methodology along with estimated returns based on their portfolio mix.

Portfolio Assumed Annual Growth Rate* Asset Split Asset Mix (ETF Ticker)
Unhedged Growth 5.4% Equity: 80%
Fixed Income: 20%
XIC: 22.5%
VTI: 20.0%
IEFA: 15.0%
XSH: 12.5%
VUS: 12.5%
IEMG: 10.0%
ZFM: 7.5%
Growth SRI 5.4% Equity: 80%
Fixed Income: 20%
CRBN: 27.5%
XEN: 22.5%
ZFM: 20.0%
PZD: 15.0%
VIDI: 15.0%
Unhedged Balanced 4.0% Equity: 50%
Fixed Income: 50%
XSH: 30.0%
ZFM: 15.0%
PDF: 10.0%
VTI: 10.0%
PHR: 10.0%
IEFA: 7.5%
XIC: 7.5%
IEMG: 5.0%
ZHY: 5.0%
Balanced SRI 3.6% Equity: 50%
Fixed Income: 50%
ZFM: 65.0%
CRBN: 20.0%
XEN: 15.0%
PZD: 7.5%
VIDI: 7.5%
Unhedged Conservative 3.4% Equity: 35%
Fixed Income: 65%
XSH: 42.5%
ZFM: 15.0%
PDF: 7.5%
ZHY: 7.5%
XIC: 7.5%
VTI: 7.5%
PHR: 7.5%
IEFA: 5.0%
Conservative SRI 2.9% Equity: 35%
Fixed Income: 65%
ZFM: 65.0%
CRBN: 20.0%
XEN: 15.0%

*after 0.50% annual advisory fee

The maximum return that you can expect to receive is 5.4% per year with their growth portfolio’s with an 80% equity and 20% bond split. Keep in mind that this is an estimate and real returns can be above or below that figure.

For Americans, these are the ETFs for Wealthsimple U.S.:

ETF Description Average Annual Return (Since Inception) Expense Ratio Investment Type
ANGL VanEck Vectors Fallen Angel High Yield Bond ETF 7.89% (2012) 0.35% Bonds
BND Vanguard Total Bond Market ETF 3.81% (2007) 0.05% Bonds
DXJ WisdomTree Japan Hedged Equity Fund 2.88% (2006) 0.48% Stocks
MUB iShares National Muni Bond ETF 3.75% (2007) 0.07% Bonds
TIP iShares TIPS Bond 3.67% (2003) 0.19% Bonds
VBR Vanguard Small-Cap Value ETF 7.84% (2004) 0.07% Stocks
VGK Vanguard FTSE Europe ETF 3.53% (2005) 0.10% Stocks
VOE Vanguard Mid-Cap Value ETF 7.34% (2006) 0.07% Stocks
VTI Vanguard Total US Market ETF 6.42% (2001) 0.04% Stocks
VWO Vanguard FTSE Emerging Markets ETF 5.61% (2005) 0.14% Stocks

Overall Thoughts

There is a lot to like about Wealthsimple’s offerings, including its diverse lineup of robo-advisory portfolio choices, high-interest savings account, and no-fee trading platform. Note that you do not have to sign up for all three of its offerings. If you only want the high-interest savings account to build an emergency fund, you can. Or if you would like to use Wealthsimple Trade to DIY invest without the automated robo-advisor portfolio, you can do that too. Wealthsimple, Wealthsimple Save, and Wealthsimple Trade are three distinct offerings, each at the top of its class. My only caveat is their robo-advising service has relatively high fees compared to other robo-advisors and a lot higher than if you were to invest on your own.

Legal Disclaimer: The views expressed by Mr. Dumont on Money Sensei are solely his and not intended as investment advice nor a guarantee of any financial return. Mr. Dumont is not an investment or tax professional, so the information contained on the blog is not a substitute for professional advice. The contents of this blog are accurate to the best of his knowledge at the time of posting, but rules and laws are ever-changing. Please do your research to confirm that you have the current information.

Required fields are marked.

Comment rules:

  1. We are all here to learn so please be respectful. This means no insults or your comment will be deleted.
  2. To prevent spam please use a real name or initials.
  3. Have fun and thanks for contributing!

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Join The Money Sensei School