Review of: Wealthsimple
Reviewed by: Kevin Mercadante
Last modified: November 16, 2017
Wealthsimple is a solid addition to the current slate of robo advisors available. The service offers a socially responsible investment option, as well as assistance from a live representative. However, compared to other firms their fees are on the high side.
Wealthsimple is an automated investing service — or robo advisor — and the largest such service in Canada. It was launched in 2014 and made available to U.S. clients on Jan. 31, 2017, after six months of beta testing. The company is based in Toronto, with offices in New York and London. It has more than 20,000 clients and over $750 million in assets under management.
Wealthsimple is backed by a team of world-class financial experts and some of Silicon Valley’s best technology talent. The company has raised $37 million in capital from Power Financial Corp., which is one of the world’s highest-rated financial institutions, and one that manages over $780 billion in assets around the world. The staff is made up of software engineers, designers and data scientists who have previously worked at such companies as Amazon, Google and Apple.
What Is Wealthsimple?
Wealthsimple provides world-class, long-term investment management with no account minimums. Your account is invested in a diversified portfolio of exchange-traded funds (ETFs) that focus on low-cost index funds. This enables the development of a portfolio that is invested in thousands of different companies and across many major sectors around the globe.
The service includes automatic rebalancing, dividend reinvesting and tax loss harvesting. In addition, Wealthsimple’s financial advisors are available to you whenever you need them. This can be an exceptional platform, particularly for new and small investors, who historically have been unable to afford access to these services.
|Fees||Under $5k – FREE; $5k-$100k – 0.50%/year; $100k+ – 0.40%/year|
|Tax Loss Harvesting||— For Accounts Larger Than $100,000|
|Automatic Deposits||— Weekly, Biweekly and Monthly|
|Socially Responsible Investing|
|Access||Website, iOS App, Apple Watch, Android App|
|Customer Service||Phone: M-F 9A-5:30P ET; Email|
|Promotions||Up to $100 Bonus|
Portfolio Review. — Wealthsimple offers a portfolio review service, which is a free, objective evaluation of your non-Wealthsimple financial accounts. They’ll evaluate the fees you’re paying, the tax efficiency of the account and the portfolio allocation of any third-party accounts you have.
How Does Wealthsimple Work?
Wealthsimple’s investment approach is based on Modern Portfolio Theory. That’s an investment theory developed by Nobel Prize-winning economist Harry Markowitz, who demonstrated that you can minimize risk and maximize return by diversifying your investments. Wealthsimple’s automatic rebalancing and dividend reinvesting complement that strategy.
The sign-up process includes a short risk assessment questionnaire to determine your initial risk profile, after which you are given a recommended a portfolio mix. Your portfolio is based on your financial goals, time horizon, risk tolerance, past investment experience and level of investment knowledge.
However, when these change, you may want to adjust your portfolio accordingly. You may even want different portfolios for each account, as you may have different time horizons and goals. Wealthsimple allows clients to call or email to discuss these and to make changes to their portfolio based on their desires.
|Fees||Under $5k – FREE; $5k-$100k – 0.50%/year; $100k+ – 0.40%/year||Digital – 0.25%/year; Premium – 0.40%/year||First $10k managed free; 0.25%/year for $10k+|
|Promotions||Up to $100 Bonus||Up To 1 Year Free||$15k Managed for Free|
|Review||—||Read the Review||Read the Review|
Easy Sign-up Process
Signing up for Wealthsimple is a simple three-step process:
- Complete the online application, with some basic information, as well as answering a few questions about your previous investment experience;
- E-sign one or more Investment Management Agreements;
- Bank verification — via online by entering your account information
Once completed, your account should be up and be running within five business days.
Wealthsimple’s portfolios are comprised of varying positions in low-cost index-based ETFs. There are three portfolios, including conservative, balanced and growth. The conservative portfolio is a 65/35 stock/bond split, while the growth portfolio is 80/20 favoring stocks, and the balanced portfolio is a 50/50 split. In comparison to Betterment’s portfolio, the ETFs used are almost exactly the same.
|US||Vanguard US Total Stock Market||VTI|
|US||Vanguard US Total Market Index ETF||VUS|
|Foreign||iShares Core MSCI IEFA ETF||IEFA|
|Emerging Market||iShares Core MSCI Emerging Markets ETF||IEMG|
|Dividends||Purpose Core Dividend Fund|
|Canadian||iShares Core S&P/TSX Capped Composite Index ETF||XIC|
|Real Estate||Purpose Duration Hedged Real Estate Fund||PHR|
|US High Yield||iShares US High Yield Bond Index ETF||XHY|
|Canadian Government||BMO Mid Federal Bond Index ETF||ZFM|
Wealthsimple provides this option for investors who are interested in feeling good about their investments. The socially responsible portfolio prioritizes low carbon emissions, advances clean-tech innovation and promotes sustainable growth in emerging markets.
|Lower Carbon Exposure||iShares MSCI ACWI Low Carbon Target||CRBN|
|Clean-Tech||PowerShares Cleantech Portfolio||PZD|
|Socially Responsible Global Companies||Vident International Equity Fund||VIDI|
|Canadian Companies||iShares Jantzi Social Index ETF||XEN|
|Canadian Fixed Income Bonds||BMO Mid Federal Bond Index ETF||ZFM|
Wealthsimple Black Program
Wealthsimple offers the Black Program for investors with higher account balances. With $100,000 or more, you will enjoy the following perks:
- A reduced annual management fee of 0.40%.
- A financial planning session with one of Wealthsimple’s expert advisors to help you meet your financial goals.
- VIP access to more than 1,000 airport lounges in more than 400 cities; this will include a Priority Pass membership for you and one traveling companion.
- Additional tax-efficiency features, like tax loss harvesting and tax-efficient funds.
This kind of investment service level is typically available to investors with much larger portfolios and at much higher annual fees at traditional investment brokers and advisors.
Pros and Cons
- Socially Responsible Portfolio — This is a somewhat unique option among robo advisors. Though recently Betterment and Wealthfront now offer SRI portfolios as well.
- Live Support — This is a welcome benefit in an industry sector that often provides little or no direct assistance, let alone financial advice.
- Portfolio Review — A complete portfolio review of outside investment services is unique in the robo advisor space. It can help you determine if your money is currently being efficiently invested.
- No Minimum — Weathsimple isn't the only investment service offering no minimum account balance. But it's a noteworthy benefit and perfect for new and small investors who may have little or no capital to start investing.
- VIP Airline Lounge Access — If you’re a frequent traveler and you like to make use of airline lounges, this could be a nice perk.
- Available in Canada and the U.S. — Most robo advisors stop at-the-border, but Wealthsimple is actually based in Canada.
- High Fees — The basic fee of 0.50% is at the higher end of the robo advisor fee spectrum, but you can do a lot better. For example, Betterment and Wealthfront each charge 0.25% for basic service, and Betterment now offers premium services at 0.40%/year.
- No Goal Setting — This is a feature offered by Wealthfront, Betterment and Personal Capital, and one that would enhance Wealthsimple’s platform.
The basic portfolio model of Wealthsimple is solid and not unlike that offered by other robo investment platforms in its mix of index ETFs invested in both foreign and domestic stocks and bonds. But like some other robo advisors, the service can benefit by adding investments in commodities and real estate investment trusts in order to provide even broader diversification.
Wealthsimple excels in that it has no minimum required account balance and that it provides ongoing live customer support. The socially responsible option is also an attractive choice for investors who want their investing activities to match their personal beliefs.
Where Wealthsimple comes up short is in its pricing. The annual management fee of 0.50% on balances under $100,000 is at the higher end of the robo advisor fee range. That’s virtually double the fees charged by Betterment and Wealthfront. Wealthsimple doesn’t offer a product sufficiently strong enough to justify charging twice the fee of the primary competition. This is especially true since they’re a newcomer to the U.S. market.
They do, however, become more competitive on account balances over $100,000, with a 0.40% management fee. This matches Betterment’s Plus program and is lower than the fee on Betterment’s Premium plan. In addition, Wealthsimple provides tax loss harvesting on balances over $100,000, making it a complete investment service.
We recommend investigating Wealthsimple if you have at least $100,000 to invest. Smaller investors will be better served by checking out other robo advisors that have lower fees.