Wealthsimple Review

It says something when a young investor who is new to Wealthsimple tells Business Insider, “my IRA dropped $138 but I wasn’t worried.”

After all, the goal of any good robo-advisor – heck, any financial service, period – is to keep customers reassured and loyal even as the market does what it does, going up and down and up and down and up and down.

All that to say, Wealthsimple must be doing something right.

This is born out by a recent editorial in BNN Bloomberg which states Wealthsimple is the robo-advisor “favored by millennials.”

Is Wealthsimple what you’re looking for? Let’s dive in.

What is Wealthsimple? 📚

Millennials are flocking to Wealthsimple for its focus on SRI — socially responsible investing. Another plus is that the platform caters to beginner investors. It takes just minutes to get started. There is no (as in, zero) account minimum.

How is a relative newcomer generating so much interest? For one, Wealthsimple acquired a tax-preparation software, SimpleTax. It also spearheaded a similar expansion into the mutual fund industry, a category of securities traditionally under-represented among robo-advisor platforms.

But Wealthsimple isn’t only for millennials and new investors. The company announced a plan to spin off a portion of its services to serve the financial industry itself – a literal business2business for investment planners and finance professionals.

The investment platform is considered to be a safe since the consumer assets are held by ShareOwner Inc., a CIPF member and regulated by Investment Industry Regulatory Organization of Canada (IIROC).

It doesn’t seem to get much better than this for a young Toronto, Canada, startup with a history only dating back to 2014. With C$4.3 billion in investments under its belt, is there any down side to this seemingly rosy-bright robo-advisor?

Let’s find out.

Modern Portfolio Theory (MPT) Digital Algorithm Does Its Job 👨‍💻

First and foremost, Wealthsimple’s digital algorithm (the robo-advisor part of this hybrid service) is based on a tried-and-true portfolio-building theory.

The so called modern portfolio theory supports investors to build diverse portfolios by investing into a variety of bonds, stocks and funds, both international and national. For general purposes (the Halal-compliant portfolio options excepting) the algorithm adjusts based on your personal risk tolerance preferences.

The algorithm also includes periodic automatic account rebalancing to keep your portfolio in alignment with your risk tolerance preferences. And if you want to set up auto-drafts into your Wealthsimple investment account, that option is also available.

Socially Responsible and Halal-Compliant Investing Options 📃

We briefly covered the definition of socially responsible investing, or SRI, earlier here. Wealthsimple also offers the option for Halal-compliant investing. We will take a closer look at both options now.

Halal-Compliant Investing ⭐

As the Wealthsimple website explains, a Halal-compliant investment portfolio will adhere to the Islamic investment principles as follows:

• ☑️ Only includes investments that do not profit from debt (examples include bonds and GIC certificates).
• ☑️ Only includes investments that do not profit from alcohol, weapons, pork, tobacco, gambling and similar prohibited options.

The chosen investments are vetted by an independent team of Shariah scholars.

To make Halal-compliant investing easy for the observant, Wealthsimple offers a Halal investment portfolio made up of 50 compliant yet diverse stocks and even provides the entire list for your review here.

This – we have to say it – is impressive.

However, it is worth mentioning that choosing the Halal-compliant portfolio option also means choosing a higher level of risk tolerance than some investors may be comfortable with. This is because the Halal-compliant portfolio includes only pure stocks.

Will this work for every investor who wants to use a robo-advisor and maintain a Halal-compliant portfolio? Likely the answer here is “no.”

But for investors who don’t want to or don’t feel confident to screen their own securities for Halal compliance, Wealthsimple doesn’t have a lot of competitors in offering this service.

Socially Responsible Investing (SRI) 🤝

As the Wealthsimple website outlines, there are three main tenets a security must adhere to in order to be considered an SRI:

• ☑️ Environmental impact.
• ☑️ Social impact.
• ☑️ Governance impact.

SRI investment funds are sometimes called ESG funds for this reason: Environmental, Social, Governance.

With a reported $22+ trillion in investment funds supporting SRI funds worldwide (plus garnering an estimated 30 percent of the national investment pie in the robo-advisor’s home country of Canada) this is clearly a sector that is a major draw for a majority of investors.

To this end, Wealthsimple makes it easy to invest in a socially responsible manner without having to do much (if any) research on your own. The Wealthsimple menu of options focuses on EFTs (exchange traded funds).

Here, you will find that the fee structure for choosing SRI investments is going to be higher. But Wealthsimple states that this is because SRI EFT fund managers charge more than non-SRI fund managers.

Wealthsimple further explains that this is because SRI funds managers need to be smart to screen out non-SRI investments. This is a strange argument but these are Wealthsimple’s own words of explanation, not ours.

Wealthsimple Compared

Let’s Talk About Wealthsimple Fee Structure 🎛

Speaking of fees, let’s take a closer look at what Wealthsimple charges for its services.

The robo-advisor platform states that it is free to join. But the full story is a little more complex, because if you want to actually do anything once you join, then you will incur fees.

Basic Robo-Advisor Fees 📝

There are standard fees for using the robo-advisor platform as it is designed to be used with the digital algorithm. That fee structure is as follows:

• ☑️ For accounts up to $99,999: 0.50 percent.
• ☑️ For accounts above $100,000: 0.40 percent (called “Wealthsimple Black”)
• ☑️ For accounts at $500,000 or greater: 0.40 percent plus two dedicated financial advisors plus VIP airline lounge privileges for the client and one guest (called “Generation”)

Extra Socially Responsible Investing (SRI) Fees 💵

But remember earlier we mentioned that the Socially Responsible Investment portfolio EFT options cost more? As Wealthsimple explains, the robo-advisor platform itself doesn’t charge more to participate in the SRI portfolio options.

Rather, it is the EFT funds themselves that charge more. These fees are taken out on the front end (before you choose to invest in them through the Wealthsimple robo-advisor) so what you see once inside the Wealthsimple platform is an adjusted EFT price with the fees already deducted.

This is a much simpler way to invest in SRI EFTs, but it does mean you may not be aware of exactly what fees you are paying when you choose to add these funds to your portfolio.

So you will need to do this research on your own to find out what the exact outside management fees are for each EFT fund you select and then decide if those fees are acceptable to you.

Account Withdrawal Fees 💳

Wealthsimple does not charge you anything to withdraw money from your investment account. There are no fees for trades or for their tax-loss harvesting service – a huge perk that many newbie-friendly robo-advisor platforms do not offer.

You also won’t incur any fees for accounts with a zero balance or for account transfers in or out. This includes transferring your account to another robo-advisor platform.

Account withdrawals can take up to five business days from the date of your request. Wealthsimple states that the reason it takes so long is due to regulatory and banking delays.

Confusingly, they also state they are working to speed things up in the future.

Fees overall are considered to be higher for this hybrid robo-advisor platform because of the option for human financial guidance from a team of advisors that includes certified financial planners (CFPs).

Overall, the management fees are the single biggest impediment to Wealthsimple’s aggressive growth strategy. Even many brick-and-mortar financial advisor services (i.e. Fidelity, TD Ameritrade) don’t charge what Wealthsimple charges for its services.

Here is how the big brick-and-mortar names stack up against Wealthsimple fee-wise:

• ☑️ Wealthsimple: 0.50 to 0.40 percent depending on minimum account balance.
• ☑️ Fidelity (Go): 0.35 percent.
• ☑️ TD Ameritrade (Essential Portfolios): 0.30 percent.

Wealthsimple’s closest digital robo-advisor platform competitors also charge less:

• ☑️ Betterment: 0.25 percent.
• ☑️ Wealthfront: 0.25 percent.

Will this fee structure be a deal-breaker for you as a prospective Wealthsimple user?

Wealthsimple advertises that it handles investing for 1+ million users to date. So clearly the fees are less obstructive than they might seem at first glance. It will really be up to you to decide if the hands-off and/or personalized investing value provided is worth the higher fees charged.

Wealthsimple Offers Tax Loss Harvesting at No Extra Charge

Reason being, once your investment portfolio begins to accrue value, tax loss harvesting is a fully legal way to reduce your tax burden from your more profitable investments that may have appreciated during the prior calendar year.

In case you are not already familiar with tax loss harvesting (many investors are not), it works like this: before the tax year ends, securities posting a loss are sold and replaced with similar securities. These losses then post along with the gains to offset taxes assessed against those gains. Neat, right?

Many of the leading robo-advisor platforms that cater to younger investors with less means do not offer tax-loss harvesting. Wealthsimple is not one of them.

Wealthsimple offers tax-loss harvesting to every account holder at no additional fee.

The one potential catch is that you need to request this review to be done. However, you can also request that it be done for accounts you maintain outside of the Wealthsimple platform which is a nice extra.

Wealthsimple’s Robo-Advisor Platform Really is Simple to Use and Navigate 🖥

If you are going to use the word “simple” right in your brand name, you had darned well better provide a simple interface.

Wealthsimple scores big points across a slew of independent reviews for doing just that. The interface is simple, stripped down, easy to read and understand and put to use.

High Value Freebies for Wealthsimple Users At All Level

If the fee structure feels like a potential barrier, it might be worth it to check out some of the high value freebies Wealthsimple offers that other robo-advisor platforms in its class may not:

• ☑️ Tax-loss harvesting.
• ☑️ Highly-rated apps for watch, phone, tablet, laptop and desktop (iOS and Android).
• ☑️ Free portfolio review by a financial advisor.
• ☑️ Account roundups.
• ☑️ “Smart” (high yield) savings account.
• ☑️ Investing master class and online self-learning tools.
• ☑️ Option to purchase fractional shares.

And of course, we already delved into the value of tax loss harvesting in detail earlier.

Useful Apps 📱

Wealthsimple overtly targets millennial investors and as such, it earns high marks for its iOS and Android apps.

Free Personalized Portfolio Review 🔍

The robo-advisor platform also extends a welcoming hand with its free portfolio review option – this review is performed by a live human, not the robo-advisor digital algorithm. It can also include a review of assets held outside of Wealthsimple at your request.

And in fact, you don’t even have to be using Wealthsimple to get your free portfolio review.

Account Roundups 💸

As the term implies, a “roundup” takes a look at your purchases and “rounds up” to the nearest dollar, investing the difference in your Wealthsimple portfolio.

So for example, if you make a purchase of $9.54 using a debit or credit card linked to your Wealthsimple portfolio, that extra $0.46 will be automatically “rounded up” and withdrawn from your bank account, then deposited into your Wealthsimple account.

This happens weekly and is a useful tool for new investors to slowly and (relatively) painlessly increase their savings and investing over time.

“Smart” Savings Account 💶

Wealthsimple’s “smart” savings account is also a newer feature. This high-yield savings account has historically posted yields of around 1.66 percent which is a nice feature if you plan to leave your more liquid funds with Wealthsimple as well.

Investing Master Class 🎥

This free 10-video series (45 minutes total viewing time) claims to be able to turn you into an “investing genius.”

While we suspect there may be a bit of literary license at work here, it is still a nice addition to Wealthsimple’s prior lack of hands-on learning tools.

To that point, if you are new and feel like you could really benefit from a lot of hand-holding and personalized guidance, Wealthsimple is likely not going to be the best choice from this perspective.

The website does offer a relatively easy to access online portal for self-guided learning, but you still need to know which articles you need to read to get your questions answered.

Fractional Shares are Available 🗃

Fractional shares tend to be another hot button topic in the world of robo-advisor platforms.

If this is your first time hearing about fractional shares, the concept is simple enough: instead of buying a full share of stock, you can buy just a part of a share of that stock.

Where does this come in handy?

Investors like fractional shares because sometimes a full share of a popular or high-value stock is simply out of reach for investors with less ready cash to invest. For a new investor in particular, it can be understandably exciting to invest into some big name stocks without having to pay big stock share prices.

But fractional shares can also require some special handling, especially when it comes time to sell. Fractional shares most commonly show up when a stock splits unevenly and not all investors favor adding these odds and ends to their portfolios.

All that to say, offering fractional shares is also in keeping with Wealthsimple’s choice to target new, younger and millennial investors.

Conclusion 🚩

If there is one thing that recent (and historical) news headlines support, it is that Wealthsimple is here to stay and grow. In other words, this platform is not going anywhere and for many investors, this is a significant benefit that matters.

With Wealthsimple’s choice to reach out into the B2B marketplace and target mutual fund and financial and investment career professionals, it could easily be seen as a smart investment choice in its own right.

But there are still the higher fees to contend with and these may represent an obstacle if you are just starting to build your portfolio. Even at higher income levels, 0.40 percent is a hefty ask so be sure you see the big picture value before diving in.

The onboarding process is simple and quick and the array of investment options are in keeping with the robo-advisor platform industry as a whole. And you do get some special perks many, even most, other robo-advisor services do not offer, including the all-important tax loss harvesting.

Is Wealthsimple the right robo-advisor for you? Now you have the information you need to make the right choice for your investing needs.