Wealthsimple: An Easy, Yet Sophisticated Way To Invest
This article is a review of the Wealthsimple robo-advisor platform and includes positive testimony from a real-life Wealthsimple investor.
I started investing at 19 without really understanding what I was doing. A bank advisor set me up with a portfolio of mutual funds, and for several years I paid a handsome fee for what amounted to underperforming investments and little-to-no advice.
If only I had found a smart, low-cost, rules-based approach to help guide my investing strategy, I might have been further ahead today.
Millennials, thankfully there’s a better way for you to get started. Online investment managers – often called robo-advisors – are changing the investing landscape and turning a tired, old industry on its head. Here’s my Wealthsimple review:
Wealthsimple Review
Wealthsimple is Canada’s fastest growing robo-advisor, and is now registered as a portfolio manager in every Canadian province and territory. Unlike the big banks, Wealthsimple offers a lightning fast onboarding process that allows you to set up an account in about 10 minutes from your computer or smart phone. There’s no sales pitch to tiptoe around, or endless paperwork to sign. You can do it all online.
Related: How this unconventional pairing can save you money on your investments
It’s that kind of simplicity and accessibility that led 28-year-old Joshua Colp to move the bulk of his investments to Wealthsimple two months ago.
Joshua, a telecommunications consultant from Moncton, N.B., didn’t know that robo-advisors existed in Canada until he stumbled on a blog post written by Canadian Couch Potato Dan Bortolotti. From there he found the Canadian online investment options fee calculator, created by Sandi Martin and John Robertson.
“This made me aware of other options and provided better insight into just how much I was paying before moving (to Wealthsimple),” said Mr. Colp.
After spending a long time investing in bank mutual funds, Colp made a conscious effort to reduce his investment costs and automate his finances. He tried investing on his own using a discount brokerage, but said he did not enjoy the amount of time and effort required to manage his own portfolio. Two months ago, Colp opened up RRSP and TFSA accounts at Wealthsimple and hasn’t looked back.
“It was the perfect solution for me,” he said.
There’s a lot to like about the Wealthsimple platform, and it starts with the initial account set-up. After creating an account, you’re given a six-question risk assessment designed to help choose the portfolio that best suits you.
Using an e-signature to sign documents electronically online eliminates the need to visit a physical location to fill out paperwork. In just a few minutes, you’re ready to start investing. Send funds from your bank account, transfer over an existing investment account, or set up automatic deposits.
“I literally have an automated bill payment set up to contribute to my TFSA and RRSP, that’s it. Set it, and forget it.”
Wealthsimple uses low cost ETFs to build your portfolio, at an average cost of 0.17 percent. You’ll see carefully chosen investment products from the likes of iShares, Vanguard, BMO, and Purpose.
The management fee, which is in addition to the charges for your investments, ranges from 0.40 to 0.50 percent a year. A $10,000 investment would cost you just $25 a year, plus about $17 in investment fees for the ETFs. Compare that to the industry average of $240 per year.
Related: Nest Wealth Review
We’re entering an age where Millennials are shunning models of old. Today, thanks to the Internet, and the FinTech revolution, a client can research and access information that was once only available to investment firms and advisors.
“We all have access to the same information and can understand it at a basic level, if we want. This is what the younger generation does and it plays out in other areas, such as shopping,” said Colp.
Wealthsimple is not a true “robo-advisor” in the sense that its clients can get financial planning and investment advice from an actual human being. Dubbed a Wealth Concierge Service, clients can get help and advice from a team of wealth professionals to discuss their portfolio, including risk tolerance and asset allocation, and answer any questions related to their investments, finances, or financial goals.
The team isn’t paid on commission and doesn’t charge any hidden fees.
The human element was put to the test when stock markets tumbled over a few days this August. While many investors panicked on the doomsday scenarios reported in the financial media, clients of firms like Wealthsimple received calm, reassuring messages via email, text, and instant message explaining what was happening in simple terms while reminding clients to stay the course.
Mr. Colp did log-on during the market turmoil to check on his investments and watch the robo-advisor at work. He received an email about what was happening in the markets.
“It was the first real unsolicited contact I had received (from Wealthsimple), which gave it even more weight to read, and it was reassuring.”
When I asked Joshua if he would recommend Wealthsimple to his friends he said he will, and in fact, already has. He said the online investment manager is a great alternative to do-it-yourself investing and using a traditional bank or investment firm.
Related: How to transfer your RRSP to Wealthsimple
“They may not be for everyone, but they are a great solution for many.”
Final thoughts on Wealthsimple
Wealthsimple offers the full array of accounts, from RRSPs, TFSAs, RESPs, non-registered accounts, spousal plans, LIRAs, and RRIFs.
If you’re interested in becoming a client of Wealthsimple, we have a special offer for you:
Boomer & Echo readers get a $50 cash bonus when they open up a new account with Wealthsimple and fund it with $500 within 45 days. Sign-up now to add this offer to your account.
This is Joshua Colp as mentioned in the article. Hello reader of this wonderful blog! If you have questions you’d like to ask someone who is using Wealthsimple don’t hesitate to comment back.
Thanks for all of your support! We’re so happy that you’ve loved the experience so far and that you are helping others become smart investors.
– The Wealthsimple team
As a millennial who (finally) took the plunge and started investing, I can’t say enough good things about my experiences so far with Wealthsimple. Even though I “knew” what I should have been doing in terms of setting up a couch potato investment portfolio, I hadn’t taken the steps to actually get it done, and I was confused about the process. Plus I didn’t really want to go to a bank, haha.
Wealthsimple was the absolute right combo of low fees, easy set up and not too much thinking to get me to take the plunge and start investing, and I’m so glad to have found them when I did – even if it did happen to be right before the market downturn! I would recommend them to absolutely anyone.
Thanks for the love, Des! We think you’re pretty awesome.
– The Wealthsimple team
Definitely considering signing up for WealthSimple, but will probably start off with $5-10k while also having a DIY portfolio of ETFs, still trying to learn the ins and outs of investing as a recent university graduate. If I sign up, it’ll be through the above link thanks!
Hi Tim,
We would love for you to try us out! Let me know if you have any questions, I’d be happy to help.
Best,
Mallory
mallory@wealthsimple.com
Community Manager
I don’t get it. Why not just use one of the model portfolios from Canadian Couch Potato or Vanguard? It would be simpler, have lower trading costs, and would save you the robo service fees.
It’s not simpler. There is still extra effort involved, in the form of rebalancing and trading. If that’s something you enjoy then the self-directed approach is the way to go. Personally I prefer a solution where I just send money off and the rest is done for me, thus Wealthsimple. Some people also don’t feel comfortable putting their investments in their own hands like that while Wealthsimple still gives them the comfort. I’m of the opinion that all of the options bring things to certain groups of people, but no single solution is right for everyone.
Hi Derek, there’s a group of Millennials that I’ll call, Reddit Personal Finance Canada, who believe in optimizing their portfolio and investments to the core. That means choosing the lowest cost ETFs across a number of different asset classes (Equities, Bonds, Gold, REITs, etc) and keeping them in constant balance. They’d also prefer to use an online discount brokerage like Questrade, which doesn’t charge fees for buying ETFs, thus lowering fees even more.
That said, this same group has a lot of questions, like when to rebalance and at what threshold, what to do when markets rise or fall hard, or why is Questrade’s platform so difficult to navigate.
Not everyone is cut out for DIY investing, and so services like Wealthsimple offer all the proper methodology for keeping costs low and asset classes in balance so that you don’t have to second-guess yourself or look for advice on an internet forum every time you make a trade. For that peace of mind, you pay what I would consider to be a reasonable fee.
I signed up for a WealthSimple TFSA a couple of weeks ago. I’m very happy with the onboarding process. I also have a TFSA with ShareOwner…so I’ll be comparing the two. But based on what I see so far, I’ll be opening a RESP at WealthSimple for my son and possibly and another RRSP account before the end of the year.
We’re so happy to hear that you’re pleased with your experience. Please reach out if there’s anything I can assist you with when setting up your RESP/RRSP!
– Mallory
mallory@wealthsimple.com
Community Manager at Wealthsimple
I realize that this is a more “echoey” article. However, I looked at the Wealthsimple website, as I imagine at some point becoming more passive with my money as I get further into retirement, not that I am hugely active now.
I have to say the fees were a bit shocking right off the bat. For 100,000 they charge $475 per year. So, at a million that is almost $5,000. They compare this to an industry average of about 5 times that (!?!?!?!?!), which is a world I have never experienced.
On my side, although I have some money in mutual funds and investment units at a higher percentage rate of around 1%, overall to move my holdings to them would be a giant increase from the current near zero levels. I suppose moving just those elements I pay the fees on would make sense. The rest is a harder pill to swallow when future results are unknown.
One thing I like is that they have a corporate account arrangement. That probably holds the prospect of simplified accounting if I dump everything corporate in there. It is also nice to see someone knows we exist with this need, which is rare in the industry.
To ask a really “boomeresque” question, I wonder if anyone is looking at how to transition boomers from DIY to managed money when they get tired of the game?
Hi Robert, I believe the industry average comparison looks at a typical Canadian mutual fund investor paying trailing commissions in the 2-2.5% range per year.
Rob Carrick wrote a column recently that looked at what investors pay to hold a portfolio of ETFs in a fee-based account and the average was around 1.02% for advice and 0.15% for the ETFs, for a total of 1.17% per year.
http://www.theglobeandmail.com/globe-investor/investment-ideas/fee-based-financial-advice-defeat-bay-street-secrecy/article26550755/
A portfolio with Wealthsimple, on the other hand, would cost 0.50% per year.
Your question about transitioning boomers from DIY to managed money is an interesting one. The other question for retiring boomers is how this service would manage a portfolio in the ‘decumulation’ phase.
I’ll ask Wealthsimple these questions and maybe report back with another article.
Echo – please get the facts right – there are no funds in Canada that pay TRAILING COMMISSIONS in the 2.-2.5% range per year. Those are ALL FEES IN, which trail fees would account for less than half.
Hi Rob, sorry – poor wording there on my part. You’re right, that’s the (still incredibly high) all-in cost of investing in mutual funds in Canada.
@Echo
I am in the midst of changing to a more cost effective and passive strategy and have looked at Wealthsimple as an option for me. It seems to me that it is geared more towards millennials. I am 49 and am looking at 12 more years to retirement. Do you think a service like this is right at this stage?
Any platform or advisor can offer you appropriate options for your needs. You can’t say Wealthsimple wouldn’t be a good fit solely based on being 12 years from retirement
Hi Randy,
Millennials represent a significant portion of our clients, although our clients range in age from 18-92. We will build your portfolio based on your financial goals and time horizon, and you will have the chance to speak to a Portfolio Manager before we invest your funds.
If you have any other questions, feel free to send me an email at mallory@wealthsimple.com. I would be happy to help!
Best,
Mallory
Robo has only been around for a short time
I think it may be too early to jump
In to this
Your thoughts
I think Robo has a future, but that it’s probably more along the lines of what Wealthsimple is doing than what some other Robos have done. In the US we’ve seen a number of Robos being bought by existing “regular” dealers and integrated into their model.
I clicked on the “options fee calculator” link and put in 250K and its shows that NestWealth was the cheapest at 240$ /year. Their website says $80/mth for over 150K which would work out to $960 a year. AM I missing something?
Also, Is there a website that compares all these canadian robo advisors. I am having a had time deciding between all of them.
Hi Albert – It was a cell reference error from last night’s update that’s been fixed now. Sorry for the inconvenience.
Hi Albert,
Let me know if you have any specific questions about Wealthsimple, I’d be happy to help!
Best,
Mallory
Community Manager
I would be very interested in a detailed answer to Albert’s question above. I have no trouble finding comparisions in US Robos, such as Swell, Wealthsimple etc. I would like to be able to access this info in Canada.
Albert
Also, Is there a website that compares all these Canadian advisors. I am having a had time deciding between all of them.
Thank you,