Wealthsimple is a roboadvisor that, among a few other things, helps its users invest their savings through ETFs.
We have already talked about other roboadvisors on this site. For example, you can check out our Moneyfarm review.
Much like we did in that review, today we will be analyzing the services and features offered by Wealthsimple so that you can decide of you own accord whether you think this is a company you would like to entrust your savings to.
Let’s start with a little history.
Wealthsimple is a Canadian company founded in 2014 by Michael Katean. It later launched in the US in 2017.
Prior to founding Wealthsimple, Michael Katchen worked for 1000Memories, a Silicon Valley-based startup. After Ancestry.com bought 1000Memories in 2012, Katchen developed a spreadsheet with tips to help his colleagues set up investment portfolios. Interest in the spreadsheet helped inspire the idea for Wealthsimple.In 2014, he returned to Toronto to launch the company
Like most robo-advisors, Wealthsimple uses ETF’s to create ready made portfolios for its users based on their funds and risk preferences.
There are, however, a few things that make Wealthsimple different. but first, let’s have a look at how Wealthsimple works in our review.
How does Wealthsimple work?
One of the great things about Wealthsimple, is that there are literally no minimum requirements needed to start an account,(in terms of funds that is).
You can start an account with a single pound or less.
This is an attractive feature for new investors.
The registration process is simple and straightforward. Users are asked for their reasons for investing and are then later presented with a series of questions to best determine their risk profile.
This is similar to most of the other robo-advisers in the UK but it has a slightly more streamlined feel to it. The questions asked include those listed below and are standard fare for any robo-advisor:
- How long are you looking to invest for?
- What’s your monthly income after tax?
- What are your monthly outgoings?
- Do you anticipate any negative changes to your income or outgoings in the near future? • What’s the combined value of any investments and cash you have?
- How much debt have you got?
- How much emergency cash do you have? • How much investment experience do you have (if any)?
- How would you react to a number of suggested investment scenarios?
With all the information gathered, Wealthsimple will recommend a portfolio for you.
Here’s an example of what a balanced portfolio might look like:
- Fixed income 50%
- Equity 50%
Your asset mix:
- 26.5% BlackRock Corporate Bonds 26.5%
- 19.7% BlackRock UK Equity 19.7% I
- 13.5% BlackRock UK Government Bonds 13.5%
- 7.1% Amundi North America Equity
- 7.1% Vanguard US Equity
- 5.0% L&G Emerging Market Government Bonds
- 5.0% PIMCO Global High Yield Bonds
- 5.0% Vanguard Global Small-Cap Equity
- 4.4% BlackRock Continental European Equity
- 3.7% Vanguard Emerging Market Equity
- 2.1% BlackRock Japan Equity 1.1% I BPXJDRA BlackRock Pacific ex. Japan Equity
Overall the portfolio is well diversified across assets globally and certainly isn’t US focused which is a criticism that can be directed at its US peer Vanguard in relation to its Lifestrategy funds. Wealthsimple use exchange-traded funds (ETFs) and low cost mutual funds in order to keep costs low.
All investments are then regularly managed and rebalanced to ensure the asset mix remains in line with the client’s goals. So at this point I strongly suggest that you use the Wealthsimple tool to see the portfolio they recommend for you (they run a total of 9 portfolios). It takes minutes and there is no obligation on your part because to get to this point you don’t even have to give them your email address.
Wealthsimple will regularly manage each client’s portfolio by rebalancing the assets held to ensure that they stay on track to reach their financial goals. Every client is different in their investment timeframe and goals and therefore have different investments in their portfolios, this is known as asset allocation. To keep the investments in line with each client’s investment goals this asset allocation needs to be monitored regularly. Of course, this is pretty standard for any robo-advice proposition.
What is Wealthsimple’s investment strategy?
Wealthsimple’s investment strategy can be said to have a three point approach:
- Diversification – spreading investments across different asset types is a key driver of portfolio performance. Wealthsimple invest in global equities and bonds providing a wide range of choices to create the best portfolio for each client (as shown in my example earlier).
- Passive management – which principally involves investing in low cost funds or ETFs that track specific investment markets.
- Client control – portfolios are created for each individual client bearing in mind their investment goals and attitude to risk.
Wealthsimple products and services
Wealthisimple also offers three distinct forms of services:
- Investment services: This is where you would find your typical ISA accounts and general investment accounts
- Saving: Wealthsimple also offers a high-yielding savings account together with an interesting feature we will further discuss later on.
- Financial advisors: Wealthsimple for Advisors is the all-in-one wealth management platform for financial planners, investment advisors, portfolio managers and dealers. We offer front- and back-office solutions that help you optimize and scale your business.
Wealthsimple offers the usual Stocks and Shares IRA and general account like its peers but more notably it also offers a low cost a Junior ISA account. Robo-adviors have been slow or reticent to offer their services via a Junior ISA because of the low annual contribution limits In their race to acquire assets under management they have tended to focus on Stocks and Shares IRAs. Also most allow new customers to transfer their existing ISA portfolios across too so they can be managed by the new robo-advisor. Wealthsimple now also offers a pension product making it one of the few robo-advisers in the UK to do so. The only other robo-advice firms to offer a pension are Nutmeg, Moneyfarm and evestor
Given Wealthsimple’s lack of a minimum investment threshold the service lends itself perfectly to those looking to invest for their children via a Junior ISA or wanting to invest smaller sums initially into a pension. Also transfers into a Junior ISA (or indeed the general investment account or Stocks and Shares ISA) are straightforward and free of charge.
Wealthsimple Save is a perfect place to invest money for emergency expenses, a down payment, or your next vacation. And it integrates seamlessly with your other Wealthsimple accounts on our website and mobile app.
Wealthsimple save promises annual yields 21 times higher than the FDIC (US) national savings account average. Plus, no introductory rates, limited-time offers or expires.
But the best thing about this service is the ability to use “Round-up”, to literally round-up your purchases and put the extra money into a savings account and/or a personalized investment portfolio.
There are already various apps out there that do this; Acorns in the U.S and MoneyBox in the U.K.
I love that this feature is seamlessly integrated in Wealthsimple. It’s the perfect way to complement their services and unify all your financial efforts in one place.
For Financial Advisors
While I have not personally verified this service, it definitely sounds like this service could be very helpful to new financial advisors.
The Wealthsimple financial advisor panel allows you to easily streamline all your investments and easily keep track of all the necessary paperwork and client documentation.
Wealthsimple, promises to make your life easier by:
- Reducing paperwork: You can streamline client onboarding, account management, back-office operations and compliance.
- Scaling your business: Allowing you to spend more time on strengthening your existing client relationships, and on building new ones.
- Charge less: Reduce your costs while growing your business. So you make more, while your client pays less.
Whatever the type of service it is you hire, wealthsimple will put you into one of its three plans according to the size of your investments.
Here’s a breakdown of each plans features and rates.
Basic Plan: From 0 to $100.00
- 0.7% fee (+ fund fees averaging 0.18%)
- Perfectly matched portfolio
- Access to investment advice
- Automatic rebalancing
- Direct debit contributions
- Dividend reinvesting
Black plan: from $100,000 – $500,000. Includes all basic plan features plus:
- 0.5 fee (+ fund fees averaging 0.18%)
- Investment planning
- VIP airline lounge access
Generation plan: $500,000 and above.Includes all black plan features plus:
- Dedicated investment adviser
- Ongoing portfolio monitoring
- Budgeting and cash flow planning
Socially Responsible Investment Options
One of Wealthsimple’s marquee offerings is socially responsible investments. Investors can choose from three risk-weighted SRI portfolios.
The portfolios draw from six exchange-traded funds that focus on companies involved in enterprises such as clean technology innovation in the developing world, efforts to lower carbon exposure and supporting gender diversity in senior leadership roles. The portfolio may also contain municipal bonds that support local investment and government-issued, mortgage-backed securities that promote affordable housing.
The SRI Portfolio focuses on investing in companies with low carbon admissions, those that support gender diversity, and those that support affordable housing. It gives investors a chance to invest in companies that are consistent with their personal values. The portfolio provides allocations based on Conservative, Balanced and Growth profiles. It uses the following six funds – four stocks funds and two fixed-income – to create those portfolios:
- iShares MSCI ACWI Low Carbon Target (CRBN) – Low Carbon, comprised of global stocks with a lower carbon exposure than the broader market.
- PowerShares Cleantech Portfolio (PZD) – Cleantech, comprised of cleantech innovators in the developed world.
- iShares MSCI KLD 400 Social Index Fund (DSI) – Socially Responsible, comprised of American companies that are socially responsible.
- SPDR Gender Diversity (SHE) – Gender Diversity, comprised of companies with more gender diversity among their leadership.
- PowerShares Build America Bond Portfolio (BAB) – Local Initiatives, comprised of bonds issued by municipalities to support local initiatives.
- iShares GNMA BD ETF (GNMA) – Affordable Housing, comprised of government issued securities that promote affordable housing.
A halal investing portfolio — one that complies with Islamic law — is another standout offering. It contains roughly 50 individual stocks (not ETFs) screened by a third-party committee of Shariah scholars. No companies that profit from gambling, alcohol, firearms, tobacco or other restricted industries or derive significant income from interest on loans are permitted.
The halal investing portfolio risk profile is in line with Wealthsimple’s growth portfolio offerings, because it is invested 100% in equities and designed to track the broad market’s performance. Customers with a lower risk tolerance are advised to hold a certain percentage of their portfolio in cash since investment in interest-bearing assets (such as bonds) is not allowed under Islamic law.
Because the portfolio excludes bonds, the Growth allocation is the only option. The Conservative and Balanced options don’t apply. However, they do caution that the portfolio is higher risk, since it’s an all-equity allocation. For this reason, they recommend keeping more of your assets in cash as a diversification strategy.
Since Wealthsimple opened its doors for business in the U.S. in 2017, it was already the largest robo-advisor in Canada and it has been steadily adding services, which now include:
VIP Priority Pass membership: This complimentary perk for Wealthsimple Black clients gives a customer plus a travel companion unlimited access to more than 1,000 airline lounges in 400 cities around the world.
- Smart Savings account: For the money you’re not investing for the long term, the 1.75% interest rate (subject to change) is more than most traditional banks offer. And the unlimited free transfers and no minimum make it a convenient place to stash money you need in the near-ish term or as a parking spot for an emergency fund — just far enough away from everyday spending cash so you’re not tempted to spend it. However: Note that the company charges a 0.25% management fee on this cash, deducted from your balance at the end of each month.
- Free portfolio review. You don’t even have to be a Wealthsimple customer to cash in on this perk. The company offers a free portfolio review, which you can get by uploading the latest statement from any of your current investment accounts. A Wealthsimple analyst will check your investment allocation, account fees and tax efficiency based on your goals and time horizon and call to discuss the findings (and whether the company can improve on what you already have), with no account sign-up required.
Wealthsimple has a low cost fee strategy, charging just 0.7% per annum. The standard annual fee is reduced to 0.5% for clients who invest more than £100,000. This is known as their black package and comes with the additional perks mentioned earlier; investment planning and VIP airport lounge access. Wealthsimple also has a ‘generation’ package for people who invest over £500,000. The charges are the same as the ‘black’ package but you also get a dedicated investment adviser, cashflow planning and ongoing portfolio monitoring.
The different packages is a nice touch and show that Wealthsimple is the only robo-adviser to recognise that wealthier clients want exclusivity and additional benefits.
On top of the above management fees, there is an additional fee of around 0.2% applied to your investments which is charged by the underlying funds. This underlying fee is on a par with the likes of Nutmeg and Moneyfarm as shown in the next section.
Fees are calculated on a daily basis using the closing balance on your portfolio for each day. The charges will be accrued and applied to the client’s account on a monthly basis.
One of the key atractions of robo-advisors is the low fees charged for managing a client’s investments, but these fees do vary across the various advisors.
- Wealthsimple charge an annual fee of 0.7%. This annual fee is reduced to 0.5% for investments over £100,000. In addition to this there is an ETF charge averaging at 0.2% per year.
- Scalable Capital charge an annual fee of 0.75% on the total amount invested, with no reduced fee for larger investments. In addition there is an ETF charge averaging at 0.25% per year.
- Nutmeg charge an annual fee of 0.75% on its fully managed service but this drops to 0.35% for any assets over £100,000. In addition there is an ETF charge averaging at 0.19% per year.
- Moneyfarm charges a maximum annual fee of 0.7% reducing to 0.4% for investments over £500,000. In addition there is an ETF charge averaging at 0.3% per year.
So you can see that Wealthsimple has pitched its charges below its competitors although there are cheaper alternatives than Wealthsimple for investors with sums over £100,000, namely Nutmeg’s fixed asset portfolio but they are not directly comparable as they are not actively managed.
It’s also important to stress that there are no exit fees so if you decide to transfer your money away from Wealthsimple in the future you won’t be penalised.
Having said all this, let’s recap and take a look at what are the main advantages of Wealthsimple:
- Low account minimum and no extra fees: The $0 account minimum for the Wealthsimple Basic offering is a low hurdle to get started. That service includes free automated deposits, automatic rebalancing and dividend reinvestment. Wealthsimple charges no fees on transfers (in or out), trading and tax-loss harvesting. Maintaining a $100,000 minimum balance qualifies customers for the Wealthsimple Black service, which offers the same features as the Basic account at a lower management fee (0.4% versus 0.5%), plus a few extras, discussed below.
- Investment in fractional shares: Like other robo-advisors, at Wealthsimple each customer’s portfolio of ETFs — the exact mix of growth, international, fixed income, cash and other asset classes — is based on answers to questions about financial goals, investing experience, financial situation and risk tolerance. But the company has a bonus feature for customers who may be adding small amounts to their account over time: Wealthsimple buys fractional shares of ETFs, which means your entire deposit can be invested in full instead of hanging out in low-interest-bearing cash until there’s enough to purchase a full share.
- Ease of use: Practically everything about Wealthsimple’s service aims to achieve this. A clear, straightforward pricing; beginner-friendly customer experience; a slick, no-nonsense website which is stripped down to provide just what the customer needs. Also, the Help Center, has everything you need to know about fees, portfolio holdings, performance and account management is laid out clearly and transparently.
- Access to financial planners: Most robo-advisor services limit the amount and kind of hands-on help they offer customers (e.g., email only or one meeting per year) or offer access to one-on-one advice only to premium account holders who maintain high account balances. Wealthsimple allows all customers, regardless of account balance, the chance to set up a phone call with one of the company’s certified financial planners. This kind of access may be another reason why Wealthsimple’s management fee runs higher than some of the competition.
- Tax-loss harvesting: Tax-loss harvesting is a strategy used to lower an investor’s taxes on investment gains or other income by offsetting it with any investment losses. Often it is either a paid add-on service or only available to high-net-worth clients. Any Wealthsimple customer with a taxable account can have a portfolio analyst review their accounts (including those outside of Wealthsimple) for tax-loss opportunities, though the strategy typically is most valuable to those with larger investment balances and high salaries.
- Lack of finance tools: Those seeking a more fleshed-out financial advisory experience; calculators, planning tools, educational material and a money command central… may find Wealthsimple’s purposely streamlined website and app sparse compared with other providers: The entire approach is designed to merely cover the important concepts of saving and investing and keep customers apprised of what’s happening in their accounts. It’s ideal for savers who want to set it up and forget about it … but maybe less so if you like to play with what-if retirement planning scenarios.
- Fees: Account fees are where both customer and provider fortunes are made and broken. Wealthsimple’s 0.5% management fee on account balances of less than $100,000 and 0.4% on accounts over $100,000 is higher than that charged by the other companies. The charges are competitive, but they are certainly on the higher end of the spectrum
On the Trustpilot review website, Wealthsimple has earned a “Trustscore” rating of 8.9 out of 10 which is excellent.
Here’s what Wealthsimple’s clients have to say about the company:
I signed up a couple of months ago. So far I am very satisfied. New money transfers from my bank account have been seamless. I’ve had a couple of snags with my existing accounts, but the customer service team had been very responsive and helpful, which for me almost overcome the issues. It’s a new business and so I expect a few hiccups. I am very satisfied with my experience and performance so far (although I recognize that it’s not a sufficiently long period to really assess performance).
Wealthsimple is great if you are doing regular monthly contributions. (weekly for me). If you do this at a regular brokerage. the $9.99 fees per transaction will eat your portfolio. the awesome part is it automatically rebalances every time you put money. and it buys fractional shares.
I’ve had no issues with them and I like the simplicity of a robo advisor. I’m 10 months in and up 9.5% money weighted between my RRSP and TFSA invested in their aggressive growth picks. I haven’t had any need to contact them, besides the initial phone interview to conform my risk tolerance, so I can’t really comment on that. But I do like their app, web interface, and the ability to link with Mint. Sure, I could go straight ETFs with a low cost broker, but I think the 0.5% fee they charge is worth it until I amass a larger portfolio.
We’ve been with WS for about a year (Joint, TFSA, RRSP) and are mostly satisfied. The automation is great, and the monthly fees are fair for the convenience and services they offer. Biggest complaint? When two WS customers have a joint account, only one of the account holders can actually see it in their portfolio. WS expects you to share your ID/password with the co-owner, which is ridiculous
You could invest into the funds individually yourself (they are transparent about exactly what they invest in anyways), but you would not reap the rewards of having tax loss harvesting, dividend reinvestment, portfolio reinvestment, and a few more gizmos, and really the best parts is peace of mind.
The basic portfolio model of Wealthsimple is solid and not unlike that offered by other robo investing 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 it’s a newcomer to the U.S. market.
The platform does, 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 to all U.S. clients, making it a complete investment service.
According to Wealthsimple, the average age of their clients is 33 and 50% of clients are between the ages of 25-45 years old. 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.
For most small investors seeking an all digital robo-advisor, Wealthsimple may have limited appeal. The fee structure is on the high end of the robo-advisor range, particularly with the Basic Portfolio, where the fee is twice as high as other popular competitors. Given that robo-advisors as a group seek to match the performance of the general market through passive investing, it’s hard to justify paying an extra quarter-point for what is essentially the same service.
But, if you want a robo-advisor with financial advisor access, have a larger portfolio, are seeking socially responsible of Halal investments, Wealthsimple is great. The fees are fair, for the products and services that you receive. For many investors, having a human advisor to consult with is very important.
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