Wealthsimple is Canada’s largest and most popular digital wealth manager (also known as Robo-Advisors). They currently offer money management services to tens of thousands of clients in Canada, U.S., and the U.K. at a lower cost than available through traditional money managers.
The investment industry has seen some significant changes in the last decade, especially in the area of technology. The drive is not only to maximize returns, but also to automate investing, making it easy for you to make your money work for you…with very little knowledge of investing, human interference, or other resources being expended.
In addition to maximizing returns and automating the investing process, there is also a clamour to lower investment fees. Investment fees have continued to rise and studies have shown that they are significantly dampening portfolio returns for investors because active managers are rarely earning market returns.
This is where robo-advisors come into play. They take the “grind” out of the investing process by using proprietary algorithms or computer software that takes the investor’s investment profile – risk tolerance, investment knowledge, investing horizon, financial goals, age, net worth, etc. into consideration and finds a customized portfolio mix that fits their profile.
Robo-advisors design your portfolio using low-cost index funds (ETFs) that minimize your fees, boost your long-term returns, and are adequately diversified.
Wealthsimple Ratings Summary
This is based on assessing several factors including Management fees, Account Minimum, Investment Options, Value For Money, Ease of Use, Customer Support Options, and Referral program.
Wealthsimple is Canada’s largest and most popular digital wealth manager (robo-advisor) and to get you my readers started on your investment journey, they are offering to manage your first $10,000 FREE of charge! Use the links below to take advantage of this special offer.
Wealthsimple is a robo-advisor that was launched in Canada in 2014 by Michael Katchen. In 2017, they branched out to the United States and the United Kingdom, and now have over 75,000 clients and $2 billion assets under management. Their offices are in Toronto, New York, and London.
Wealthsimple is backed by one of the world’s largest financial companies, The Power Financial Group. Since launching in 2014, the company has been making a lot of waves and winning accolades, including winning the Webby Award for Best Financial Services website in the world (2016 & 2017), and Start-Up of the year at the Canadian Innovation Awards.
Wealthsimple Investing Strategy
If you have read my article on index investing for newbies, then you know about the differences between active and passive investing strategies.
In a nutshell, active investing strategies “actively” try to generate returns that beat the market, pay fund managers premium fees to do so, and at the end of the day, they rarely produce results worthy of the fees paid. Passive investing on the other hand is an attempt to earn market returns by holding an asset-mix representative of the “market” at a much lower cost and with less focus on picking ‘winners’.
There are many examples to show that in the long-term, passive investing often beats active management. If you are wondering how important limiting the fees you are paying “skilled” and under-performing fund managers is, you should consider taking a hint from Warren Buffett himself.
In 2007, Buffett made a bet that an S&P index fund would beat a basket of hedge funds selected by Protégé Partners, essentially wagering that “passive investing” would beat “active investing.” A decade later (on December 31, 2017), Warren Buffett was the clear winner, winning the bet to the tune of $2.2 million.
No wonder he says that he will ask his estate to be 90% invested in low-cost index funds after he passes.
“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.” – Warren Buffett (2016)
Wealthsimple invests your money using technology and a diversified portfolio of low-cost ETFs that are modelled based on the Modern Portfolio Theory as established by the Nobel Laureate, Harry Markowitz. The funds are then diversified on a global and industry basis, lowering your risk, investing cost, and maximizing returns.
Wealthsimple offer various account types to meet specific needs. These include:
Wealthsimple – Opening an Account
Opening a new account with Wealthsimple is pretty straightforward. The website/dashboard is very user-friendly and you should be up and running in less than 10 minutes.
1. Visit Wealthsimple via this link (you get $10,000 managed FREE).
2. Enter your details and answer the questionnaire. After completing your investment profile, you get a personalized plan and recommended asset allocation that is based on your risk category.
3. Choose an account e.g. RRSP, TFSA, IRA, etc. or transfer one from another provider
4. You have an option to setup regular automated contributions.
Wealthsimple Portfolios and Investment Offerings
Wealthsimple offer three basic types of portfolios:
- Conservative: 30% stocks/70% bonds
- Balanced: 50% stocks/50% bonds
- Growth: 75-90% stocks/10-25% bonds
Each portfolio-type consists of several index ETF’s to ensure adequate diversification as well as cost minimization.
Canadian portfolios may contain any of the following funds:
- XIC – iShares Core S&P/TSX Capped Composite Index
- VTI – Vanguard Total Stock Market
- VUS – Vanguard US Total Market ETF (CAD-Hedged)
- IEFA – iShares Core MSCI EAFE
- IEMG – iShares Core MSCI Emerging Markets
- XSH – iShares Canadian Short Term Corporate + Maple Bond Index ETF
- ZFM – BMO Mid Federal Bond Index
- ZHY – BMO High Yield US Corporate Bond Hedged to CAD Index
Investors in the U.S. have several ETF options including:
- VTI – Vanguard Total Stock Market
- VOE – Vanguard Mid-Cap Value ETF
- VBR – Vanguard Small-Cap Value ETF
- DXJ – WisdomTree Japan Hedged Equity Fund
- VGK – Vanguard FTSE Europe ETF
- BND – Vanguard Total Bond Market ETF
- MUB – iShares National Muni Mond ETF
- TIP – iShares TIPS Bond
Wealthsimple – Account Features and Benefits
There is no minimum amount to start investing with Wealthsimple. This means that no amount is too small and you can start investing today with whatever you can set aside.
Accounts with deposits less than $100,000 fall under Wealthsimple Basic, while those with assets greater than $100,000 qualify for Wealthsimple Black.
All accounts benefit from the following:
Automatic Rebalancing: Say adieu to manually re-balancing your portfolio once or twice per year. At Wealthsimple, re-balancing is done automatically to ensure your asset allocation remains on track.
Personalization: You get a customized portfolio that is tailored to fit your specific financial needs and comfort level with risk.
Free Financial Advice: You can call, text, or email with in-house financial advisors if you have any questions or want to review your portfolio/financial plan.
Automatic Deposits: You can easily schedule automatic deposits into your wealthsimple investment account. This makes it easy to automate your investing (even with small contributions) and build wealth.
Dividend Re-Investing: Dividends are automatically re-invested and no action is needed on your part.
Security: In Canada, Wealthsimple/Share Owner Investments Inc. is insured by the Canadian Investor Protection Fund (CIPF), which means that if they go bankrupt, your investments are protected up to $1 million. U.S. investors are insured up to $500,000 by the Securities Investor Protection Corporation (SIPC). U.K. investors are protected by the Financial Services Compensation Scheme (FSCS) up to £50,000.
Also, they use state-of-the-art encryption to ensure that your personal and financial information is kept secure.
In addition to these benefits above, accounts that qualify for Wealthsimple Black also get:
Tax-Loss Harvesting: If your account will benefit from tax-loss harvesting, the folks at Wealthsimple will assist you through tax-loss selling, enabling you to save money on taxes.
VIP Airline Lounge Access: You can now live like you earned it! As a Wealthsimple Black client, you get a priority pass and VIP access to over 1,000 airline lounges around the world – over 400 cities and valued at $399/annum.
Full-Service Financial Planning: You get a full-service financial planning session with Wealthsimple experts.
Wealthsimple Account Fees
One of the big attractions of robo-advisors is significantly lower fees for managing your investments. Accounts under $10,000 (with our promo link) are not charged a management fee for the first year i.e. you get wealth management services for FREE!
- Wealthsimple Basic accounts: under $100,000, the management fee is 0.5% per year
- Wealthsimple Black accounts: over $100,000, the management fee is 0.4% per year
These fees do not include MER’s that may be charged directly by managers of the ETF’s (funds) held in your account. As per Wealthsimple, this additional fee is approximately 0.20% and are automatically adjusted into the price of the underlying assets/funds.
One big plus for Wealthsimple is that the fees you pay are transparent, known upfront and posted on their website. There are no hidden fees – no trading, account transfer, or other fees. To recap on fees (because FEES are IMPORTANT!), robo-advisors charge much less in fees than traditional mutual fund managers.
Robo-Advisor vs. Mutual Funds Fee Example
Wealthsimple Basic: On a $50,000 portfolio, you can expect to pay fees amounting to:
- $50,000 x 0.70% (0.50 + 0.20) = $350
Mutual Funds (average fees on equity mutual funds): On the same $50,000 portfolio, you can easily pay fees up to:
- $50,000 x 2.35% = $1,175
Savings with robo-advisor: ($1,175 – $350) = $825
I think we can all agree that this is a lot of money saved in fees per year!
Transfer Fees: If you choose to move your account from another financial institution to Wealthsimple to save on fees, they will cover the transfer fees if your account value is over $5,000.
Wealthsimple – Socially Responsible Investing
Wealthsimple offers socially responsible investing (SRI) portfolio options, if that’s your preference. These SRI portfolios reflect investments in funds that follow companies with social and environmental impact, including those with low-carbon emissions, that support gender diversity, promote affordable housing, uphold human rights, etc.
Some of the funds available for inclusion in SRI portfolios include:
- PZD – PowerShares Cleantech Portfolio
- CRBN – iShares MSCI ACWI Low Carbon Target ETF
- VIDI – Vident International Equity Fund
- ZFM – BMO Mid Federal Bond Index
- XEN – iShares Jantzi Social Index ETF
Wealthsimple for Work
Wealthsimple for work is aimed at helping businesses manage their employee pensions/retirement plans using low-cost, passive investing strategies. Employers get access to easy and cheap professional fund management, and employees get to save efficiently for retirement.
Wealthsimple Halal Investing
Wealthsimple also offers a diversified low-cost investing portfolio for adherents of the Islamic faith who want their investments to stay in keeping with Islamic principles. Halal portfolios do not invest in companies that profit from gambling, tobacco, weapons, etc.
Wealthsimple Smart Savings
This is Wealthsimple’s answer to the high-interest savings account rates offered by online-only banks. The smart savings account offers 1.70% interest rate per annum. There is no minimum balance and unlimited transactions. A management fee of up to 0.25% per year applies.
August 16, 2018 UPDATE!
Wealthsimple just launched a waitlist for their newest product – Wealthsimple Trade! When you think about going “full” DIY with Investing, you are thinking about a scenario where you buy and sell stocks and exchange-traded funds (ETFs) directly through an online discount brokerage, and you design your investment portfolio as you wish. This is what Wealthsimple Trade will offer and much more.
Unlike other existing discount brokerages in Canada, Wealthsimple Trade will come with $0 trading commissions and no account minimums. Yes, you heard that right! You will be able to trade over 8,000 popular stocks and ETFs (U.S. and Canadian) for absolutely FREE. In other words, you get unlimited free trades (compared to the $10 you pay with most other brokerages per trade).
To join the waitlist, you can simply enter your email on their website and wait for an invite. Current clients of Wealthsimple who invite other friends will get a leg up as they move one step up the ladder with each friend they refer.
September 18, 2018 Update
Wealthsimple introduced Roundup in September 2018, a feature that helps you invest your spare change in a low-cost ETF portfolio. When you open your Wealthsimple Investing Account, you can turn on Roundup on the app and link your credit or debit cards. Whenever you make a purchase, the amount you pay is rounded up to the nearest dollar. The spare change is added up each day and withdrawn into your investment account once a week.
December 2018 Update
Wealthsimple introduced a new feature, Overflow, which allows you to specify how much money you want to keep in your chequing account for day-to-day expenses. Once a month, they automatically check your account and any extra cash you are not needing is automatically moved to your Wealthsimple investment or savings account! This feature is great for those who want to reach their financial goals fast!
Is WealthSimple Right For You?
Wealthsimple is the most popular robo-advisor in Canada and they continue to pick up pace in the U.S. and U.K.
The reality is that robo-advisors are starting to become mainstream because investors no longer want to be fleeced of their investment returns by “skilled” managers who cannot differentiate between skill and luck, and who often under-perform their benchmark indices (i.e. the market).
While you can choose to go full-bore DIY and manage your investment portfolio on your own through a brokerage, not everyone has the confidence, investment knowledge, and time to get their hands dirty managing their investments.
Wealthsimple (and other robo-advisors) is for you if you want a professionally managed investment portfolio at a low-cost, and without much effort on your part. The package offered by Wealthsimple already includes dividend re-investing, portfolio rebalancing, and financial planning – all at a low fee.
Since there is no account minimum for investing with Wealthsimple, it means that you do not need to be a high net worth individual to take advantage of sophisticated global diversification and professional money management.
If you are a high net worth individual or have an account value above $100,000, you can get even more value for your money. When you consider the premium features, such as lower fees, tax-loss harvesting, full-service financial planning and other perks, the pros of Wealthsimple are hard to ignore.
If you want to compare between robo-advisors in Canada, check out my full list.
At the end of the day, you want your money to work for you. If you can lower investing fees (by using robo-advisors or DIY investing), and generate market returns (long-term), your wealth will increase.
- Investment Fees
- Account Minimum
- Customer Support Options
- Investment Options
- Ease of Use
- Value For Money
- Referral Program
Wealthsimple is Canada’s largest and most popular digital wealth manager. Since launch in Canada in 2014, they have since expanded to the U.S. and the U.K. Wealthsimple offer a simplified way to manage your investing, lower your fees, and increase your wealth.
Disclaimer: Savvy New Canadians has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Savvy New Canadians are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.