Are you unsure whether Robinhood or Wealthsimple is a better choice for commission-free trading?
While commission-free trading sounds good in theory, brokerages have come up with clever ways of making money off of trading regardless – namely through widening bid-ask spreads or selling order-flow data.
In this head-to-head comparison, I will compare Wealthsimple Trade and Robinhood across these categories:
- Account fees
- Account support
- Asset class diversity
I will cover Robinhood vs Wealthsimple below and outline who comes out on top when each platform’s features are taken into account.
What is Wealthsimple Trade?
Wealthsimple offers multiple services (Robo-advising, self-directed trading, a crypto-brokerage, etc.), with Wealthsimple Trade being the company’s self-directed brokerage.
Wealthsimple Trade is a cost leader in Canada when it comes to trading because it offers commission-free trading of stocks and ETFs. Keep in mind that since Wealthsimple Trade has launched commission-free trading, a few other Canadian competitors have chosen to follow suit as well.
If you are looking to open a Wealthsimple Trade account, make sure to take advantage of this $25 sign-up offer.
Pros and Cons of Wealthsimple Trade
Wealthsimple Trade comes with its advantages and disadvantages as a discount brokerage.
- Commission-free trading of ETFs and stocks
- No account minimums
- Trading of fractional shares
- Few asset classes available for trading
- Limited types of investment accounts
- Potentially high foreign exchange fees
What is Robinhood?
Robinhood is a brokerage based in the US that was launched several years before Wealthsimple in Canada. It offers US citizens the ability to trade stocks, ETFs, as well as other investments without charging trade commissions.
Robinhood is not currently available to Canadian residents.
Pros and Cons of Robinhood
- Commission-free trading of ETFs, stocks, options, and cryptocurrencies
- No account minimums
- IPO access
- Trading of fractional shares
- Missing several investment asset classes
- Limited types of investment accounts
- Only available to US citizens
- Legal issues
Robinhood comes with its advantages and disadvantages as a discount brokerage.
Robinhood vs Wealthsimple: Comparing Fee Structures
Trading commissions are a key feature to consider when comparing discount brokerages. Although both platforms offer commission-free trading, additional fees involved with using both platforms are an important consideration.
Fee Structures – Wealthsimple Trade
Wealthsimple Trade does not charge clients commissions for stock and ETF trades.
One key fee to consider for Wealthsimple Trade is the currency conversion fee. This is a 1.5% fee that is charged when converting Canadian dollars to US dollars or vice versa. The 1.5% conversion fee is quite substantial and can lead to a lot of costs if trading US securities through Wealthsimple Trade.
Without a Wealthsimple Trade Plus account (which I will cover further on), Wealthsimple Trade clients can’t hold a US dollar account and will have to pay the conversion fee twice (when buying and selling) a US security.
A Wealthsimple Trade Plus subscription costs $10 per month (plus applicable taxes).
Additional fees include:
- Paper account statement – $20
- Special requests and investigation – $75 per hour
- Voluntary corporate action/election – $50
- Wire transfer (both incoming and outgoing) – $30
- Broker-assisted phone trade – $45
- Certificate withdrawal – $250
Fee Structure – Robinhood
Robinhood does not charge clients commissions for stock, ETF, options, and cryptocurrency trades.
Robinhood may charge clients certain American Depositary Receipt (ADR) custody fees. Robinhood clients will also have to pay certain regulatory trading fees (mainly insignificant), including:
- Regulatory fee: $22.90 per $1,000,000 of principal (selling only), rounded to the nearest penny
- Trading activity fee: $0.000130 per share (equity sells) and $0.00218 per contract (option sells), in both cases rounded up to the nearest penny (and no greater than $6.49)
Additional fees that Robinhood charges clients include:
- US $100 ACATS fee (transfers out)
- US $20 domestic overnight cheque delivery
- US $2 per month for paper statements
- US $20 domestic overnight mail
- US $50 international overnight mail
Robinhood is the winner here, despite both platforms offering commission-free trading, due to Robinhood also offering free options and cryptocurrency trades. Wealthsimple Trade’s foreign currency exchange fee of 1.5% is very high.
Robinhood vs Wealthsimple: Comparing Account Support
Account support at different brokerages is very important to consider when comparing platforms. Having the ability to keep different types of accounts together at one brokerage can simplify investing and planning.
Comparing account support is difficult between the two platforms because one is Canadian and the other is American. Examples of some Canadian accounts include RRSPs, TFSAs, LIRAs, and RESPs. Examples of US accounts include IRAs, Roth IRAs, 401K, 403B, and 529 accounts.
Account Support – Wealthsimple Trade
Wealthsimple Trade has a very poor account variety relative to other Canadian discount brokers. The platform currently only supports:
- Personal non-registered accounts
- Tax-Free Savings Accounts (TFSAs)
- Registered Retirement Savings Plans (RRSPs)
Wealthsimple Trade does not support other account types, including:
- Spousal RRSPs
- Locked-In Retirement Accounts (LIRAs)
- Registered Education Savings Plans (RESPs)
Wealthsimple Trade’s limited account support will likely require most Canadians to keep other important accounts with other financial institutions.
Account Support – Robinhood
If Wealthsimple Trade lags behind Canadian peers in terms of offering only a few different account types, Robinhood trails even further behind.
Robinhood only supports cash accounts and margin accounts in the US. It does not support tax-advantaged accounts like IRAs, Roth IRAs, 401Ks, 403Bs, and 529 accounts.
From an account variety perspective, offering only cash and margin accounts is almost the bare minimum.
Wealthsimple Trade is the clear winner when it comes to the variety of accounts offered (relative to Robinhood). Although it lags behind Canadian peers in terms of account support, it still allows both RRSPs and TFSAs.
Robinhood vs Wealthsimple: Comparing Asset Class Diversity
Another critical factor to consider when evaluating a discount brokerage is the type of investments that you can trade when using it. Zero-commission discount brokerages such as both Robinhood and Wealthsimple Trade usually have a less-diverse offering than commission-charging brokerages.
Asset Class Diversity – Wealthsimple Trade
Wealthsimple Trade focuses exclusively on the trading of stocks and ETFs. The brokerage does not allow you to trade other asset classes such as mutual funds, options, or ADRs.
When it comes to trading stocks and ETFs on Wealthsimple Trade, you don’t have the option to trade international stocks. Your trading is limited to stocks and ETFs listed on:
- Toronto Stock Exchange
- New York Stock Exchange
- NEO Exchange
- Canadian Securities Exchange
- BATS (with limited options)
The lack of asset class diversity for Wealthsimple Trade is likely due to the platform keeping costs low in order to sustain commission-free trading. If you are only interested in trading Canadian or US stocks or ETFs, this does not have a material impact on you.
Without a Wealthsimple Trade Plus account, trading US securities is also difficult because of the high fees. Clients with only a regular Wealthsimple Trade account can only open Canadian dollar accounts. This means that you are forced to convert your currencies both when buying and selling US-listed securities.
Wealthsimple Trade Plus allows clients to hold US dollar accounts.
Asset Class Diversity – Robinhood
Robinhood offers clients a broader range of asset classes when it comes to investing. These include:
Although the asset classes offered by Robinhood are more diverse than those offered by Wealthsimple Trade, the platform does not currently support the trading of bonds, mutual funds, and precious metals.
Robinhood is a clear winner when it comes to asset class diversity, offering not only stocks and ETFs like Wealthsimple Trade, but also options, ADRs, and IPOs.
Our Final Verdict
Despite Robinhood offering more diverse asset class choices and being slightly more competitive in terms of fees overall, Wealthsimple Trade’s superior account variety (relative to Robinhood) makes it my top pick out of the two.
Below is a quick outline of both discount brokerages and when it would make sense to use one over the other.
Use Wealthsimple Trade If:
- You are a Canadian resident
- Only want to trade Canadian and/or US ETFs and stocks
- Are looking to use tax-advantaged accounts to invest (in particular RRSPs and TFSAs)
You can open a Wealthsimple Trade account and get $25 free by signing up here.
Use Robinhood If:
- You are a US resident
- Want to trade a large variety of asset classes, including options, IPOs, and ADRs
- Are looking to invest through a regular investment account (cash or margin)
Although my comparison of Robinhood and Wealthsimple above looks at general features an investor would want to compare before choosing a platform, both options are currently mutually exclusive.
This means that if you qualify to sign up for one (i.e. you are a Canadian resident and can sign up for Wealthsimple Trade), you won’t be able to use the other.
If you are a US resident or citizen, Robinhood remains an excellent platform to consider using if you wish to avoid paying trade commissions.
If you are a Canadian resident, Wealthsimple Trade is an extremely competitive platform and one of my top picks here in Canada. You can learn more about the platform by checking out my Wealthsimple Trade review.