If you’re shopping around for a robo-advisor in Canada, you must take a close look at Wealthsimple.
Wealthsimple is the leading robo-advisor in Canada, with over 175,000 customers and $5 billion assets under management (AUM).
Robo-advisors have soared in popularity in Canada and the U.S in recent years, due to their effective system of investing in exchange-traded funds (ETFs) with low fees.
Does Wealthsimple’s products and features justify its massive asset under management (AUM)? Or is the company all hype and no substance?
Let’s take a peek into all the details with this Wealthsimple Canada review.
During the March 2020 market crash, Canadian ETFs still saw an inflow of $2.9 billion.
Use: Robo Advisor
Wealthawesome Score: 4.8/5
- Broad product line
- Commission-free trades
- High interest savings account
- Many service options
- Easy application process
- Portfolio fees are a little too high
- Trade platform only available on mobile.
Summary: Wealthsimple is a robo-advisor with the best product lineup in Canada.
Top robo advisor in Canada
What is Wealthsimple?
Although Wealthsimple has launched a wide variety of products, at its core, Wealthsimple is an online investment management company. The company tries to live up to its namesake of keeping investing simple, which should be the overall goal of all robo advisors.
Wealthsimple was launched in 2014 and has since grown rapidly. In May 2019, the company received $75 million in funding, and there is potential for an Initial Public Offering (IPO) in the future.
Who owns Wealthsimple: Power Corporation of Canada owns the majority of Wealthsimple. Power Corp is a massive company, with a market cap of over $12 billion and owns numerous financial assets in Canada.
Wealthsimple Invest – Main Product
If you’re wondering how does Wealthsimple work, you’re probably thinking about Wealthsimple Invest. Wealthsimple Invest is the core product of the company.
Wealthsimple follows the strategy of passive investing, where you buy and hold ETFs that invest in its benchmark index. Your portfolio returns should track that market very closely.
Passive investing could potentially outperform active investing due to a few key reasons:
- Lower fees: Canadian mutual funds are notorious for having very high fees
- Lower transaction costs: Because you’re only buying and holding, you won’t be hit with many trading or transaction costs.
- Modern portfolio theory: By investing in the entire market across different countries and sectors, you will be well diversified. Diversification is key in this proven theory to minimize risk and maximize return.
How Does Wealthsimple Invest Work
Wealthsimple Invest is essentially a low-fee portfolio of ETFs that’s structured to meet your financial goals and risk tolerance.
It’s an easy three-step process:
Step 1. Figure out your risk tolerance and financial goals
Sign up for Wealthsimple here, and you’ll complete an online questionnaire that will determine your risk tolerance and financial goals. If you have any questions, an actual human advisor can help you over the phone, email or live chat.
You can even get a full portfolio review completed by a Wealthsimple advisor, something that I recommend you go through. This first step of figuring out your goals and risk tolerance is crucial, and I recommend you spend enough time going through this.
Step 2. Determine how much money you want to invest
Wealthsimple has no minimums, so you can invest any amount you’d like.
Step 3. Be placed in a custom portfolio
You’ll be placed in a portfolio of ETFs that suit your financial goals, risk tolerance, and time horizon.
What Wealthsimple Invests In
Wealthsimple keeps it straightforward by having only three main portfolios, with a different mix of stocks and fixed income. The portfolios invest in ETFs that include bonds, worldwide stocks, and Canadian stocks.
Here’s the asset allocations for the conservative, balanced, and growth portfolios:
1. Wealthsimple Conservative Portfolio Asset Allocation
Asset allocation: ~35% Equity, 65% Fixed Income
2. Wealthsimple Balanced Portfolio Asset Allocation
Asset allocation: ~50% Equity, 50% Fixed Income
3. Wealthsimple Growth Portfolio Asset Allocation
Asset allocation: ~75-90% Equity, 10-25% Fixed Income
Wealthsimple Portfolios Holdings (Canada)
Wealtsimple invests in a combination of eight different exchange-traded funds (ETFs), all of which are publicly traded.
The portfolios give you access to global exposure to bonds and stocks:
|iShares Core MSCI EAFE IMI Index ETF||XEF||Developed Europe, Australia, and the Far East|
|iShares MSCI Min Vol Global ETF||ACWV||50% USA with remaining in Japan, Switzerland, Hong Kong, and Canada, among other countries.|
|iShares MSCI Min Vol Emerging Market Fund||EEMV||300+ emerging market equities|
|BMO Discount Bond Index ETF||ZDB||Canadian Debt|
|BMO Aggregate Bond Index ETF||ZAG||A mix of Federal, Provincial, and corporate Canadian debt with maturity >1 year|
|Mackenzie US TIPS Index ETF||QTIP||Inflation-protected US government bonds|
|BMO Long Federal Bond Index||ZFL||Long term Canadian debt securities|
As you move from the Wealthsimple Conservative to Growth Portfolio, you should expect larger variations in your Wealthsimple returns in the short-term, because of the higher investments in stocks.
Stocks are more volatile than bonds, so the potential for larger short term losses or gains are higher with the growth portfolio than the conservative one.
This also means that the growth portfolio has a higher long-term return potential than the conservative portfolio.
The illustration below is a useful visual that shows how in the short-term 1-year returns, the growth portfolio can vary greatly, but this volatility will narrow over a longer time frame.
Illustrative purposes only
Wealthsimple Conservative Portfolio Performance
Risk tolerance: Low
Time horizon: Short
With the conservative portfolio, you should expect the least amount of variation for returns, but a lower portfolio performance in the long term.
Wealthsimple Balanced Portfolio Performance
Risk tolerance: Medium
Time horizon: Medium
With the balanced portfolio, you should expect a medium amount of variation for returns, and medium portfolio performance in the long term.
Wealthsimple Growth Portfolio Performance
Risk tolerance: High
Time horizon: Long
With the growth portfolio, you should expect the highest amount of variation for returns, and the highest portfolio performance in the long term.
How does Wealthsimple make money: Mainly by collecting fees from investors in its portfolios.
On top of the fees that Wealthsimple charges, there are also fees charged by the investment fund managers of the portfolio. These fees are called the management expense ratio (MER).
- Conservative Portfolio MER: 0.16%
- Balanced Portfolio MER: 0.17%
- Growth Portfolio MER: 0.16%
Wealthsimple Other Products
Wealthsimple has an impressive and wide range of products. The company seems to be in tune with what Canadian investors are looking for, and has launched a series of products that are aimed to suit those needs:
1. Wealthsimple Trade
Summary: Commission-free stock and ETF trades
Wealthsimple trade is the most impressive new product that Wealthsimple has come out with. It is a platform that allows you to make commission-free stock and ETF trades, similar to Robinhood in the U.S.
The zero commissions is a fantastic offering, and could cut down on your trading costs significantly if you transact frequently.
Be aware that if you’re trading international or U.S stocks that aren’t traded on Canadian stock exchanges, there will be a foreign exchange fee added onto the trade. Another minus is that Wealthsimple Trade is only available as a mobile app and not desktop.
Read my full Wealthsimple Trade Review here
2. Wealthsimple Cash
- No-fee high-interest savings account
- No minimum balances required
- (Coming soon) Tungsten metal card
- (Coming soon) Use of ATMs, e-transfers, and bill payment
- (Coming soon) No foreign transaction fees
Wealthsimple Cash is also a fantastic new offering by Wealthsimple. The Wealthsimple savings account provides a higher savings interest rate than the big banks in Canada.
Currently only a savings account is offered, but the company is aiming to turn Wealthsimple Cash into a full-fledged chequing account with a debit card and use of ATMs and e-transfers.
3. Wealthsimple SimpleTax
- Tax-filing software: Easy to use and file taxes
- Free to use: The software is free to use, but you can choose to donate whatever amount you’d like.
In 2019, Wealthsimple purchased the Vancouver fintech company SimpleTax. SimpleTax is a free tax filing software for Canadians. It’s free to use, and accepts donations only.
The software is easy and intuitive, with a sleek looking design.
I think it’s a great acquisition by Wealthsimple, and it will only help to grow trust in its brand by providing these outstanding free services for Canadian customers.
You can use Simpletax to file this year’s taxes at simpletax.ca.
Wealthsimple Unique Investment Options
1. Wealthsimple Socially Responsible Investing (SRI)
- Ethical investing: Environment, social, and governance threshold
- Fast growing sector: 30% of assets in Canada are SRI
- Three portfolios available: Conservative, balanced, and growth option.
- Higher fees: Higher MER than normal portfolios
Socially responsible investing (SRI) has seen considerable growth, with more than $22 trillion invested worldwide in SRI funds. It seems more people are more conscience about choosing ethical ways to invest.
The fees for managing a Wealthsimple SRI portfolio will be significantly higher. For example, for the SRI growth portfolio, the MER is 0.43%.
This is almost triple the normal Wealthsimple Growth portfolio MER of 0.16%. Combined with Wealtsimple’s fee of 0.5%, you will be paying 0.93% total for the growth SRI portfolio, which is getting quite pricey.
The higher costs go towards making sure that the companies invested in meet the SRI thresholds. Over one year, this doesn’t make much of a difference in returns, but compounded over the long-term can be a significant difference.
Because of the higher fees, the SRI portfolios will likely underperform the normal portfolios over the long-term.
2. Wealthsimple Halal
- Build a Halal portfolio: Your investments will comply with Halal law
- Investment screening: By third-party Shariah scholars
- Uses individual stocks: Instead of ETFs, uses stocks
- Three portfolio available: Conservative, Balanced, and Growth
- No fixed income: Instead of fixed income, the portfolios use cash.
If you follow the Islamic principles of investing, there are several rules you must follow. You can’t take on or profit from debt, so bonds and other fixed income is not available.
You also can’t invest in companies that profit off things such as gambling, alcohol, tobacco, pork, and weapons, among other things.
Wealthsimple Halal abides by these rules, and is a good option for those who also follow these principles.
The portfolio is available for anyone to invest in, but be aware that it is an all equity portfolio.
Special Offer: Get $10,000 Managed For FREE
You can open almost any type of investment account in Canada with Wealthsimple:
- Spousal RRSP
- Non-registered Account
- Wealthsimple Cash
Sign up for Wealthsimple here and get $10,000 managed for free.
1. Wealthsimple Roundup
- Invest your spare change: Your purchases are rounded up and invested
- Link your bank account: Amount deducted from bank account.
- Savings account: Can save instead of invest
You can invest your spare change by linking one of your bank accounts to an investment account and enabling roundup on your Wealthsimple app.
Your purchases on your debit cards will be rounded up, then added to your investment account the next week, if the total is more than $5.
The fee will be the normal charge, depending on what portfolio you are with.
It’s a neat way to save a few extra dollars each month.
2. Wealthsimple Black
- Invest $100k+: Get a Wealthsimple Black account
- Lower fees: Drops from 0.5% to 0.4%
- Tax-efficient features: Access to tax-loss harvesting and tax-efficient funds
- Priority Pass Airport Lounge: 10 free visits per year
Wealthsimple black is for those investors who can deposit at least $100,000 into their accounts.
The main benefits of a Wealthsimple black account are lower fees of 0.4% instead of 0.5%. For savvy investors there is also access to tax-loss harvesting and tax-efficient funds.
For the frequent travelers, the free priority pass airport lounges is a neat perk and is worth a few hundred dollars a year.
3. Wealthsimple Generation
- Invest $500k+: Get a Wealthsimple Generation account
- All the same features as Wealthsimple Black above
- Medcan Comprehensive Health Plan Discount
Wealthsimple generation is for those who can invest more than $500,000 with Wealthsimple. You get all the same features as Wealthsimple Black, but includes a Medcan comprehensive health plan discount which can be valued as several thousands of dollars.
4. Wealthsimple Overflow
Overflow is an interesting feature for building good investing and savings habits:
How it works:
- Connect savings or chequing account with Wealthsimple
- Set a max balance of how much cash you want in your account
- Once a month, anything over that amount will be transferred to your Wealthsimple account.
Example: if you set your overflow amount to $1,000, any amount of money over $1,000 will be transferred to Wealthsimple once a month.
How to Open a Wealthsimple Account
It’s easy to open a new account with Wealthsimple and is only a few simple steps. You will be ready to go in minutes:
- Visit the Wealthsimple website here ($10,000 is managed for free)
- Enter your information
- Answer the investment questionnaire. With this questionnaire, you’ll receive a customized plan with your recommended portfolio. The plan is customized to your risk tolerance, time horizons, and investment goals.
- Choose an account to open such as a TFSA, RRSP, LIRA, etc, or you can transfer one from another provider.
- Transfer in your money. And that’s it! You’re ready to invest.
The platforms available are:
- Both iOS and Android, and desktop also
- Note that there is only iOS and Android app for Trade, no desktop. This is a big minus in my opinion. You will need seperate apps for the Wealthsimple Trade and Invest accounts.
Is Wealthsimple safe and legit?
- 256-bit encryption: Uses the same encryption as all the major banks for digital protection.
- 2-factor authentication: Added security feature that you can enable
- $1,000,000 Insurance: CIPF coverage
Wealthsimple is regulated by the same organizations as your regular banks, so they are just as safe and legit as a traditional bank. If they weren’t as safe, they wouldn’t have passed regulations.
The funds you invest are held with Wealthsimple’s custodial broker, ShareOwner Investment Inc, which is a member of Canadian Investor Protection Fund (CIPF). Your assets are protected up to $1,000,000 if Wealthsimple were to go bankrupt or insolvent.
Wealthsimple is also owned by Power Financial Corporation, which is one of the world’s largest financial companies.
Wealthsimple vs Competitors
1. Questrade vs Wealthsimple Trade
Questrade is a discount brokerage popular among do-it-yourself (DIY) investors in Canada.
Wealthsimple Trade is aimed directly at enticing customers from Questrade, and it has a very strong case with its lower fees.
- Wealthsimple Trade offers $0 commission trading for both ETFs and stocks (buy and sell). Questrade offers free ETF purchases only, and you must pay for ETF sells, and stock buy and sells.
- Questrade supports more accounts such as RESPs, LIRA, Margin, and Corporate.
- Questrade has $1,000 minimum for opening an account, and Wealthsimple Trade has no minimums.
- Wealthsimple has only a mobile app, but Questrade has desktop and mobile.
It depends on your needs, but either of these brokerages are solid choices for your trading needs. If you’re a frequent trader who is comfortable with trading on your mobile device, Wealthsimple is the better choice. But if you need access to accounts such as RESPs, Questrade will be the better choice.
2. Wealthbar vs Wealthsimple
Wealthbar is another Canadian company that is very similar to Wealthsimple. Because they are both robo-advisors who follow passive ETF investing for its investors, let’s focus on how they differ. I see two main ways in which the two companies are different:
- Wealthsimple: 0.5% on $0-$100,000 and 0.4% for amounts over $100,000
- Wealthbar: 0.6% on the first $150,000, 0.4% on the next $350,000 and 0.35% above $500,000
Wealthsimple offers zero-trade commission on trades and Wealthbar does not, which I think is its killer feature. With both accounts offering savings accounts, the zero commissions is a big bonus.
Wealthsimple also has lower fees or equal for accounts under $350,000, so that’s another plus.
3. Tangerine vs Wealthsimple
Tangerine is owned by Scotiabank, and better known as an online bank. The company also provides investment funds, which is what I will compare here:
- Wealthsimple: 0.5% on $0-$100,000 and 0.4% for amounts over $100,000
- Tangerine: 1.07% on its investment funds
Savings Rates: Wealthsimple offers a higher interest rate on your savings deposits than Tangerine.
Trading: Wealthsimple allows you to trade your own ETFs and stocks with no commissions. Tangerine does not even offer trading.
My opinion: Wealthsimple is a better investing platform with commission free trading, lower fees and a higher interest savings rate, but Tangerine has more banking features. Once Wealthsimple adds more banking features, I can’t think of any reason why you’d choose Tangerine over Wealthsimple.
4. Mylo vs Wealthsimple
Mylo is another Canadian fintech company that touts passive ETF investing. Where the companies differ is that Mylo is mostly focused on investing your spare change, and they have additional features surrounding that, such as a multiplier for your round ups.
Mylo doesn’t offer nearly as many products or features as Wealthsimple. If you’re interested mainly in investing your spare change, consider Mylo.
If you’re looking for more products and features such as a savings account, a trading account, and actual robo advising with human advisors you can talk to, I think you’re better off with Wealthsimple.
Read my full Mylo Review here.
Other Options as a Canadian Investor
Let’s take a look at a few of your options for how you can start investing in Canada. A robo- advisor isn’t your only option, and you should consider all your options beforehand:
1. Do-it-yourself (DIY) investor:
Difficulty and time spent: High
Fees: Very low
Platform examples: Questrade, Qtrade
2. Robo-advisor (Like Wealthsimple)
Difficulty and time spent: Low
Platform examples: Wealthsimple, Nest Wealth
3. Financial advisor
Difficulty and time spent: Low
Fees: Generally high
Platform examples: RBC, TD, Assante
Read my full breakdown of 7 other investment options in Canada here.
- Log in to your Wealthsimple account through your computer (not your mobile app!).
- Click on your name on the top right of the screen
- Go to the Withdrawals tab
- Select the account and amount you want to withdraw, and click “Set withdrawal.”
You Should Use Wealthsimple If:
- You want a low-fee robo advisor in Canada
- You want access to savings accounts
- You want access to a zero-commission trading account
- You want access to a human advisor for advice
Don’t Use Wealthsimple if:
- You are knowledgeable enough to be a do-it-yourself (DIY) investor
- You need to see someone face to face for advice
Is Wealthsimple worth it? To me, it absolutely is. Wealthsimple has the most robust product line of any robo advisor in Canada.
The company seems well in tune with its customers and its product and features has proven so.
I’m excited to see what they will come out with in the future.
Sign up for Wealthsimple here and get $10,000 managed for free.
If you want to invest but aren’t sure where to start, read my guide on how to start investing in Canada here.