- Review: Wealthsimple
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Wealthsimple is an automated investing service — or robo-advisor — and the largest such service in Canada. It was launched in Canada in 2014 and just made available to U.S. clients on Jan. 31, after six months of beta testing. The company is based in Toronto, with offices in New York and London. The company 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, their financial advisors are available to you whenever they are needed. This can be an exceptional platform, particularly for new and small investors, who historically have been unable to afford access to these services.
|Account Fees||Under $5,000 – FREE; $5k-$100k – 0.50%/year; $100k+ – 0.40%/year|
|Accounts Available||Traditional IRA, Roth IRA and Individual|
|Tax-Loss Harvesting||Yes — Available for accounts larger than $100,000|
|Automatic Deposits||Yes — Weekly, Bi-weekly and Monthly|
|Mobile App||Yes — Apple iOS and Google Android|
|Customer Service||Phone and Text — M-F 8A-8P ET, Email — 24/7|
|Promotions||Exclusive to Investor Junkie – $50 bonus when funding a new Wealthsimple account; An additional $50 if you qualify for Wealthsimple Black|
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 complements 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 this and make changes to their portfolio based on their desires.
|Read the Review||Read the Review||Read the Review|
|Fees||0.25%/yr||First $10k Free; 0.25%/yr||Under $5k – Free; $5k-$100k – 0.50%/yr; $100k+ – 0.40%/yr|
|Promotion||One Month Free w/$10k+ Deposit||First $15k Managed for Free||$50 Bonus; Addl. $50 for Wealthsimple Black|
|Compare More Robo-Advisors|
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 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|
|Mid Cap||Vanguard US Mid-Cap Value||VOE|
|Small Cap||Vanguard US Small-Cap Value||VBR|
|Foreign||Vanguard FTSE Europe||VGK|
|Foreign||WisdomTree Japan Hedged Equity Fund||DXJ|
|Emerging Market||Vanguard FTSE Emerging Markets||VWO|
|US TIPS||iShares TIPS Bond||TIP|
|Muni||iShares National AMT-Free Muni Bond||MUB|
|High-Yield||VanEck Vectors Fallen Angel High Yield Bond||ANGL|
|US Total||Vanguard US Total Bond Market||BND|
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||MUB|
|Socially Responsible US Companies||iShares MSCI KLD 400 Social||DSI|
|Gender Diversity||SPDR SSGA Gender Diversity Index||SHE|
|Local Initiative Bonds||PowerShares Build America Bond Portfolio||BAB|
|Mortgage-backed Securities||iShares GNMA Bond||GNMA|
Wealthsimple Black Program
Wealthsimple offers their Black Progam for investors with higher account balances. With $100,000 or more, you will enjoy a reduced annual management fee and the following perks:
- An 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 airline lounge access at 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.
- Socially Responsible Portfolio — This is a unique investment product among robo-advisors. If you prefer to invest in a socially responsible way, Wealthsimple may be the go-to robo-advisor platform for that purpose.
- 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 annual rates of 0.40% and 0.50%.
- 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-advisors 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 falls down 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. It is virtually double the fees charged by Betterment and Wealthfront. Wealthsimple doesn’t offer a product sufficiently strong to justify charging twice the fee of the primary competition. This is especially true since they are 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 more 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.