The world has gone almost completely digital: We order our meals with a few clicks and they’re delivered right to our door, we communicate increasingly online, and banking can be done right from our phones. And now, with the advent of robo-advisors, so has investing.
I’ll admit the prospect of handing my money over to what I initially thought (in my ignorance) was a robot was a bit nerve-wracking. However, I did my research (so you don’t have to) and decided to sign up for a Wealthsimple account. You’ve probably seen their commercials and, after receiving $50 million in funding last year and an additional $65 million this year, you’re going to be hearing much more about Wealthsimple in the future.
Below is a review of Wealthsimple’s features, sign-up process and other information you’ll find useful.
A Wealthsimple Review: The best robo-advisor for investors who value low fees and a super sleek user interface
You can learn about Wealthsimple’s pros and cons as well as consult the table of features Wealthsimple robo-advisor offers to Canadians. Ratehub.ca readers can benefit from a special offer – $10,000 managed for free when you open and fund your Wealthsimple account.
Wealthsimple Fact Sheet
|Best for||Wealthsimple is best for investors who value low fees and a super sleek user interface|
|Availability||All of Canada|
|Account Options||Non-registered, RRSP, TFSA, RRIF, RESP, LIRA|
|Trading Fees||Included in advice fees|
|Annual Advice and|
|Average MER||Avearge of 0.20%|
|Insurance||CIPF insured individual accounts for up to $1,000,000|
|Custodian||Canadian ShareOwner Investments Inc.|
|Dedicated Portfolio Manager||No|
|Promotional Offers Available||Get $10,000 managed for free for one year when you sign up for your first Wealthsimple account.|
Wealthsimple Pros & Cons
- No minimum initial investment
- Automatic contributions
- Socially responsible and halal investing options
- Fees range from 0.35% to 0.50% depending on portfolio size
- ETF MERs average 0.20%
- Unlimited human advice from team of portfolio managers
- Extra perks for large accounts including financial planning and VIP airport lounge access
- Extra tools like Roundup, Overflow, High-interest savings accounts, and Wealthsimple Trade
- Ratehub.ca readers get $10,000 managed for free for one year when they open a Wealthsimple account.
- Only three possible portfolio asset allocations
- Fees could be lower
So, what is a robo-advisor?
No, it’s not some Robocop-like figure punching numbers into a calculator and making trades. As Wealthsimple puts it, a robo-advisor is “a service that uses highly specialized software to do the job of wealth managers or investment advisors – people who decide what type of investments you should be making and then tinker with those investments over time.”
What is Wealthsimple?
Wealthsimple uses a proprietary algorithm to invest a user’s money in various exchange-traded funds (ETFs) based on a few questions meant to assess risk appetite. The investments are then adjusted as a user’s situation (or market conditions) change. To learn more about robo-advisors, check out our robo-advisors comparison chart.
How to Open a Wealthsimple Account
I’ll admit: I’ve been a bad saver. I had some money, earmarked for retirement, sitting in a low-interest savings account for too long. I, like many, thought the process of setting up an investment account was complicated, time-consuming, and daunting. I made an appointment with my bank; I cancelled the appointment with my bank. I remembered visiting a branch a few years ago for investment advice, which consisted of a glorified sales rep trying to hock mutual funds to me.
The thought of managing my own portfolio went about as quickly as it came because I just wasn’t confident enough in my own knowledge to do the job properly. And then I remembered Wealthsimple’s (brilliant) commercials and, after a bit of research, decided a robo-advisor was the best fit for my current situation. So, I decided to set up an account.
The process was, well, simple.
Done entirely online, setting up an account took a matter of minutes. It consisted of a number of questions about investment goals and personal financial questions. You’re also asked about your experience in investing and your risk appetite. There are three options to help you choose a risk profile:
- I can take some losses to earn more long-term
- I’m willing to take small loses to earn a little long-term
- I’m comfortable with losses to maximize what I earn long-term
Essentially, you’re asked to choose among low, medium, and high risk. Wealthsimple then places your investments in a conservative, balanced, or growth portfolio (all told, there are a total of 10 variations of those three portfolios). There are also socially responsible investment portfolios, which comprise companies that further socially responsible initiatives such as lowering carbon emissions, supporting gender diversity, and promoting affordable housing. Wealthsimple tells me one-third of its clients have socially responsible portfolios, and 50% of new users go the SR route.
After filling out your profile, you can then open accounts, which include TFSAs, RRSPs, RRIFS, and RESPs. Once that’s done you can start investing. You can choose one-time deposits (linked to outside bank accounts), transfer accounts (if you already have, for example, a TFSA that you would prefer Wealthsimple to manage), or set up regular contributions from a linked account. Once you decide to transfer funds, it takes a few days for the money to show up in your account.
Ratehub.ca readers get $10,000 managed for free for one year when they open a Wealthsimple account
Of course, no investment service is without its costs. Fortunately for Wealthsimple users, the fees are much lower than industry standards. They charge a management fee of 0.5% for accounts up to $99,999 and 0.4% for accounts above $100,000. Those who reach $100,000 in managed funds receive Wealthsimple Black status, which offers tax-efficiency features like tax-loss harvesting. Wealthsimple Black clients also get VIP Priority Pass membership for airline lounges around the world.
All new clients have their first $5,000 managed for free for the first year. Users are also charged management fees by the fund managers of the investments within accounts (which Wealthsimple estimates at around 0.2% annually). That’s more affordable than the 1% charged by a typical advisor (which is on top of mutual funds most advisors recommend, which can cost an additional 2%). It should also be noted that Wealthsimple does not have a minimum account size – so you can start investing with as little as $1.
Is Wealthsimple good?
Wealthsimple prides itself on its simple investing strategy, which is based on Nobel Prize-winning research. It focuses on diversification across various asset classes; passive management; and its customized portfolio based on risk tolerance. See? Simple. And the recipe has been a success so far. Since Wealth Simple’s launch in August 2014, its growth Portfolio has grown by 30.7% (net fees) as of Jan. 29, 2018. Its balanced portfolio had 16.6% growth and its conservative portfolio had 11.5% growth. And remember those socially responsible portfolio options mentioned before? They’ve had similarly impressive performance since being launched in March of 2016.
The SR growth portfolio grew 27.7%; the SR balanced portfolio grew 18.6; the SR conservative portfolio grew 10.6%. Recently, my portfolio took a bit of a dip when markets recently took a hit. However — in what I considered a nice, personal touch – Wealthsimple sent a mass-email from Chief Investment Officer Dave Nugent to clients in an attempt to assuage anxiety about portfolio dips. It’s a long-term game, after all, and I’m sure the calming words worked a charm for many investors who may have begun to worry. That sort of communication is common. Wealthsimple sends monthly statements, tax information, and investment advice.
Another great feature is a forecasting chart within your profile, which estimates how your portfolio will perform within your investment timeframe based on your planned contributions. I’ll have to get back to you in about 35 years to share my final thoughts on Wealthsimple’s performance, though.
The human touch
For those who desire a little more hand-holding, Wealthsimple offers access to portfolio managers – real human beings –, all of whom previously worked in the traditional wealth management space managing investments for high net-worth clients. The portfolio managers, which are available to all Wealthsimple clients, can help clients feel more confident in choosing the portfolio and accounts that are best suited for their investment goals. So, while the initial signup process will determine the best investment plan for your specific goals, clients also have access to actual human beings to fine-tune the plan – which can come in handy when personal financial goals change.
Is Wealthsimple safe?
Those apprehensive about the security of their investments with a robo-advisor can rest easy.
“Wealthsimple has a dedicated security staff who build and maintain state-of-the art security infrastructure, and continually monitor our systems for any potential risks,” Rachael Factor, communications director at Wealthsimple, says. “Our clients’ funds are protected by the CIPF, which is the standard for investment accounts in Canada.”
Is Wealthsimple right for me?
According to Wealthsimple, 80% of their clients are 45 years old and under. Most are investing toward retirement, a big purchase like a first home, or general, long-term savings. (Wealthsimple recently launched its own high-interest savings account, so it will likely draw a growing number of short-term savers as well).
Wealthsimple offers a great investment option for all types of investors, from first-timers to seasoned vets.
Those who desire a “set it and forget it” approach will benefit the most, as Wealthsimple’s offering ensures your money will work toward achieving your eventual investment goals. They provide a great alternative to traditional portfolio managers and, indeed, big bank investment advisors.
Those who want more personal control over their individual investments may prefer a self-directed approach, however.
Still not sure Wealthsimple is right for you?
Check out our robo-advisor comparison table to find the best Canadian robo-advisor for your savings goals.