Wealthsimple is a discount brokerage located in Canada, but charges based on Assets Under Management (AUM). It has increased AUM (Assets Under Management) from CAD 400 Million in 2015 to CAD 15 Billion in 2021. They are an investment firm singularly committed to growing the wealth of their clients over time, and not chasing hot new trends.
This Wealthsimple review will rate the important characteristics that you need to know as a prospective client for the Wealthsimple Invest account. It will allow you to make an informed decision of where you put your money.
Who is Wealthsimple?
Wealthsimple is an online platform offering investors trading, exchange traded funds, robo-advisory services, a financial advisor, socially responsible investing (SRI), a free portfolio review, a tax free savings account, tax loss harvesting, and a free checking account, and a wealthsimple trade account. They do all this with no minimum account fees, no stock or ETF trading fees.
Wealthsimple offers all of these services by charging management fees of .5% on AUM under CAD 100,000 and .4% on accounts with CAD greater than 100,000, as well as currency fees when users deposit funds used to trade, payment processing fees, and fees charged for their robo-managed ETFs.
Wealthsimple is transparent about what they offer you in terms of investment accounts and individual stocks, and about disclosing how they make money from their clients. The company offers users the opportunity to invest their portfolio directly or have its robo-advisors allocate capital for them.
Regardless of which strategy you choose, the company charges the same .5% and .4% depending on AUM deposited which is a fairly high management fee for a discount financial institution.
Why choose Wealthsimple?
The company is the only firm in Canada offering zero commissions on trades. Also, the zero commissions apply only to stocks and ETFs, options, forex, mutual funds, and fixed income products are not directly tradeable. As a result, day traders can choose from a range of stocks and ETFs to buy and sell without the worry of fees eating into their profits. However, active traders should weigh the annual AUM charge versus the advantage of free stock and ETF trades and a robo advisor in Canada.
Wealthsimple offers investors both a basic account with a low risk tolerance or self directed investment experience; the choice you make is up to you. Recently, Wealthsimple also launched its Wealthsimple Cash product, giving customers access to a checking account and a dedicated debit card for spending. The card also rewards members with CAD 1% in cash, stocks, or crypto when they use the Wealthsimple cash card.
- Simple, easy access to a diversified automated investing product with access to financial advisors with credentials such as CFPs (Certified Financial Planners) and CFAs (Chartered Financial Analysts).
- CAD 0.00 fees for stock and ETF trades, and attractive cash back returns on their checking card paid in any of 40 crypto pairs or cash.
- Simple “set it and forget it” approach to asset allocation
- .5% of assets invested for accounts less than CAD 100,000 and .4% of assets invested for accounts greater than CAD 100,000 are far too high for the options Wealth Simple provides.
- .5% CAD on AUM (Assets Under Management) on less than CAD 100,000, and .4% on any amount above CAD 100,000.
- Very long wait times for internal controls to release funds to your account.
Security of Wealthsimple
The security for Wealthsimple accounts is layered and comprehensive. Everything is encrypted – Wealthsimple uses state-of-the-art data encryption when handling financial information and two-factor authentication (2FA) for account protection.
Accounts are held with their custodial broker, Wealthsimple Investments Inc., and are protected by up to CAD 1,000,000 by the CIPF.
Prior to founding Wealthsimple, Michael Katchen worked for many companies such as 1000Memories, a Silicon Valley-based startup. After Ancestry.com bought 1000Memories in 2012, Katchen developed a spreadsheet with tips to help his colleagues set up investment portfolios. Interest in the spreadsheet helped inspire the idea for Wealthsimple. In 2014, he returned to Toronto to launch the company now known as Wealthsimple to help people achieve their financial goals.
Acquisition of Canadian ShareOwner Investment
In December 2015, Wealthsimple merged with Canadian ShareOwner Investments Inc., which is a Canadian order-execution only broker-dealer. Through the acquisition, Wealthsimple became an owner of one of Canada’s discount brokerages (2015) alongside other owners of discount brokerages including Bank of Montreal and Royal Bank of Canada. The acquisition of Canadian ShareOwner Investment Inc. resulted in the assets under management exceeding CAD 400,000,000 across 10,000 customer accounts.
Current: Focus on product offerings
In 2015, Product Hunt Toronto honored Wealthsimple with its first-ever Product of the Year Award. In 2016, the 20th Annual Webby Awards named Wealthsimple its Best Financial Services website. In March 2016, Wealthsimple began to offer clients access to socially responsible investment funds.
In May 2016, the firm announced a partnership with Mint, allowing clients to sync their Wealthsimple investment account to Mint’s budgeting and personal finances software. Also that month, Wealthsimple launched Wealthsimple for Advisors, an automated platform for financial advisors. The service is intended for advisors who wish to maintain clients conveniently with accounts below the advisor’s minimum investment thresholds.
In January 2020, Wealthsimple launched Wealthsimple Cash for Canadian customers, a hybrid savings/checkuing account offering high interest on balances. Spending features such as a Visa Debit card, e-transfers, bill payments, and paycheck/checking deposits are planned to be established. These services have rather opaque fee structures, so consumer should be sure to read the fee disclosures before using the banking products offered by Wealthsimple.
In 2020 Wealthsimple sold their American and UK businesses to focus on Canada only. You now must be a Canadian citizen to use Wealthsimple in any capacity. The stated reason was to refocus on their core offerings, but their fee structure (CAD .5%/.4%) was probably detrimental to their competitiveness in the U.S. and U.K.
As of March 2020, Wealthsimple Trade became unable to handle the volume of trades customers were placing and began capping the number of users and putting some investors on to waitlists. In November that year, Wealthsimple Cash transitioned from a savings account to a peer-to-peer cash transfer app similar to Venmo or Cash App for added convenience. Having first launched in beta, the app was made widely available in March 2021. On 8 July 2021, Wealthsimple Trade announced that they would launch fractional shares in the platform, starting the following day.
Wealthsimple “Stadium” is a doll-house sized stadium Wealthsimple built to emphasize how much lower their fees are than traditional Canadian banks. They also explain how much it costs to acquire the naming rights of a large stadium (CAD 7.7 million per year), and again used that number to show that they are a unique wealth management company with an innovative fee structure that is lower than the industry average.
Wealthsimple Customer Service
Wealthsimple has real time chat available from 8am to 8pm M-F and 9 am to 6pm on Saturday and Sundays. Live humans can be reached at 1-855-255-9038 from 8am to 8pm M-F and 9am to 6pm Saturday and Sunday.
Although Wealthsimple promises the ability to access a live human, many users reported waiting more than an hour to speak to a human if they got through to one at all. Customer service should be a strength of Wealthsimple given the fee setup and basic product structure, but be careful if fast trades or customer service responses are important to you.
Wealthsimple asks their clients for no more personal information than necessary.
Wealthsimple collects personal information from our clients and prospective clients for purposes that include the following:
- complying with legal obligations and industry regulations for the Wealthsimple trade app, the Wealthsimple trade accounts, tax loss harvesting, the Wealthsimple invest account, and transferring to and from the diversified portfolio in Wealthsimple.
- to understand their clients’ financial positions better, needs and wants and personal circumstances so that Wealthsimple can provide advice, recommendations or account and product assessments
The company limits the use of personal information.
In addition to the purposes identified to the investor before or at the time of collection, the personal information Wealthsimple collects when opening an account is used for the following purposes:
- understanding client financial needs and delivering in depth financial planning and financial products and services that help meet them.
- helping Wealthsimple choose the portfolio that best fits client needs using modern portfolio theory and access to human financial advisors.
- detecting, preventing and suppressing errors, fraud, financial abuse and other unauthorized or illegal activities.
- meeting legal and regulatory requirements, including self-regulatory organizations.
- tailoring the app experience, including making recommendations for Wealthsimple products or services for improvements in personal finance.
- transferring client accounts to or from another institution.
Common questions I get asked about Wealthsimple
These are the most common questions I get asked about Wealthsimple, so I will try to answer these as best I can, to give you a better view on whether Wealthsimple is the right investment choice for you.
Does Wealthsimple compare to Robinhood?
Robinhood is best for frequent traders, while both Wealthsimple have a more robust offering of types of accounts and socially responsible investing opportunities. Robinhood emphasizes much more active trading than Wealthsimple, although they both have simple and easy to use interfaces.
How does Wealthsimple make money?
In addition to the CAD .4% (more than CAD 100,000) or CAD .5% (less than CAD 100,000) in deposits, Wealthsimple also makes money by charging currency exchange fees, transfer fees, payment processing fees, and fees for access to their robo-managed ETF’s, registered retirement income fund (RRIF), tax free savings accounts, and the Wealthsimple trade app.
Who owns Wealthsimple?
The beneficial owner of Wealthsimple is Power Corporation of Canada, a giant with CAD 180 Billion in AUM. They own 70.1% of Wealthsimple. The rest of the company is owned by management and board members.
Do I own my shares on Wealthsimple?
Shares are held in “street name” meaning they are held with Wealthsimple Investments Inc. but owned by you (the purchaser). You still retain ownership and all rights associated with ownership including dividends and voting rights.
Can I trust Wealthsimple cash?
Wealthsimple Cash account deposits are held at a bank that is a member of the Canada Deposit Insurance Corporation (CDIC). Client funds are protected by the CDIC up to CAD 100,000 should the bank become insolvent.
Is it safe to link bank account to Wealthsimple?
Customer bank login credentials are never stored with Wealthsimple. Using the same encryption as your bank, your transactional and personal data is securely encrypted with both hardware and software encryption for account management, the robo advisor platform, the investment portfolio, and wealthsimple crypto accounts.
Is the Wealthsimple app legit?
Yes, Wealthsimple is safe. Assets on Wealthsimple Invest and Wealthsimple Trade accounts are held by ShareOwner Investments Inc., which is a Canadian Investor Protection Fund (CIPF) member and is
regulated by the Investment Industry Regulatory Organization of Canada (IIROC). They protect brokerage assets up to CAD 1,000,000 and cash amounts up to CAD 100,000.
Does Wealthsimple support retirement options, such as RRSP, TFSA, etc?
Yes, Wealthsimple supports both the Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Unlike a RRSP, you’re free to withdraw at any time without penalty, but there are government mandated limits for how much you are allowed to deposit every year.
Does Wealthsimple offer SRI (Socially Responsible Investing) options?
Yes, Wealthsimple offers WSRI (Socially Responsible Investments in North America) and WSRD (Socially Responsible Companies in Developing Markets).
Are Wealthsimple fees monthly?
Investment fees are calculated on a daily basis to calculate the yearly amount, however, you will be charged monthly. If you’re managing your own investments using Wealthsimple Trade, there are no fees to purchase or trade using the online brokerage.
What are the biggest negatives for Wealthsimple?
According to an informal poll of 1,500 users, the 3-5 day transfer times, 15 minute delay on stock price quotes, and the lack of options trading were the biggest negatives for real users of Wealthsimple.
Can you lose money with Wealthsimple?
Yes, all asset classes can lose money. However, if fraud is involved or other major issues (long technical outage, etc) the you are protected up to CAD 1,000,000 to cover the loss in your brokerage accounts. This does not cover normal market movements.
How do I get my money back on Wealthsimple?
Sign into your account and select Withdraw. The funds must have been in your account for a minimum of 5 days before you can withdraw the cash, a fact which is not advertised well by Wealthsimple and will anger many users.
Does Wealthsimple allow selling stocks?
Yes, stocks and ETFs can be traded at CAD 0.00 commission in Wealthsimple Trade.
Is Wealthsimple good for beginners?
Yes, Wealthsimple is dead simple to use. However, although they market their CAD 0.00 commission trading they charge between .04% and .05% of Assets Under Management (AUM) which are actually higher than most of the big banking investment accounts.
Can you cancel Wealthsimple at any time?
Yes, but first you have to cancel any pending deposits, withdraw your funds, cancel autodeposits, cancel outstanding orders, and turn off Roundups or Overflow. This could take up to a week because your funds have to be in your account for 5 business days before you can withdraw them to a bank. Once you have an account balance of $0 you can delete your profile in the Wealthsimple mobile app.
What happens if Wealthsimple goes out of business?
Your brokerage is protect by the CIPF (Canadian Investor Protection Fund) up to CAD 1,000,000. This does not protect you from market moves — only the insolvency of your brokerage.
Can you trade Forex on Wealthsimple?
No, Wealthsimple does not allow any type of Forex trading.
Are Penny stocks tradeable?
No, penny stocks are not tradeable by Wealthsimple. However, they recently enabled fractional share trading which empowers smaller investors to invest in any company.
Is day trading illegal?
Day trading is not generally encouraged in Wealthsimple trading accounts, however, it is possible. Assets are immediately available to sell after being purchased, and when an asset is sold, the proceeds are available to use towards a new purchase right away.
Does capital gain count as income?
Capital gains are generally included in taxable income, and in Canada they are taxed at 50%, which is quite high relative to the United States. This rate should help Wealthsimple investors keep their funds invested until they are ready to withdraw their investment earnings.
How much money do I need to have in cash?
You should always have an emergency fund tucked away in a safe, easily accessible place like the Wealthsimple Cash account. Wealthsimple suggests keeping at least three to six months of living expenses that’s in a safe place, just in case something happens to prevent clients from earning money for a time.
Does Wealthsimple have a physical location I can go to or mail to?
Yes, the Wealthsimple headquarters is located at 80 Spadina Avenue, 4th Floor. Toronto, ON M5V 2J4. They also have a New York office at 20 Jay Street, Suite 928. Brooklyn, NY, 11201.