Since 2014, Wealthsimple has offered Canadians excellent service as the largest robo-advisor in the Great White North.
Now, Wealthsimple comes to the U.S. (along with a sweet $50 signup bonus for PTMoney readers) with the same no-nonsense mission of bringing “smarter financial services to everybody, regardless of age or net worth.”
Read on to learn more about what Wealthsimple can offer you, and what makes it different from other robo-advisors:
What Wealthsimple Does
Like other robo-advisors, Wealthsimple relies on technology to help you invest your money, rather than having a money manager with slicked back hair and red suspenders picking your investments for you.
Wealthsimple bases its investment and management strategy on the Nobel-Prize-winning work on Modern Portfolio Theory by Harry Markowitz. At its heart, Modern Portfolio Theory (and Wealthsimple’s strategy) aims to minimize volatility and maximize rewards by finding a combination of stocks that won’t have wild swings in value but will provide decent returns.
What Makes Wealthsimple Different?
There are a number of robo-advisors out there. Wealthsimple has made sure to stand out by providing options and services that others do not, such as:
- Automatic reinvestment of dividend income
- Automatic rebalancing
- Auto-deposits that you can set to your preferred schedule
- Experts available via text, email, phone, or video chat
- Easy to understand and fully-interactive breakdowns of your account information
- A beautiful and intuitive user interface, including mobile apps for Apple and Android
- Payment of any transfer fees your bank charges to transfer your account to Wealthsimple
- Automatic Tax loss harvesting for accounts over $100,000
According to Wealthsimple’s website, their approach is all about managing what is within the investor’s control:
“Expected returns are impossible to predict and out of your (and our) control. We prefer to focus on things we can control: fees, diversification, and emotions. The stock market will take care of returns over the long term. The key is to stay disciplined and stick to your strategy in order to build wealth.”
This means that Wealthsimple investors will be putting their money in low-cost, diversified, long-term investments—specifically Exchange Traded Funds (or ETFs). The program helps you to create a diversified portfolio that is set to the risk level you are comfortable with.
Wealthsimple Retirement Options and Other Account Options
Investors with Wealthsimple may open one of three different types of accounts:
- Traditional IRA. These tax-deferred retirement accounts are an excellent way to save for your golden years. As of 2017, there is a $5,500 limit ($6,500 for folks over 50) on contributions to any IRAs.
- Roth IRA. This kind of account is funded with post-tax dollars, but withdrawals are tax-free, provided you wait to make a withdrawal until you’re at least 59½. The maximum annual contribution for Roth IRAs is $5,500 ($6,500 if you’re over 50), just like their traditional counterparts.
- Personal account. This is the most common type of account with Wealthsimple, and it offers no tax advantage like those offered with traditional or Roth IRAs. However, there is no contribution limit, and you may withdraw your money at any time—but you do need to be aware of how capital gains taxes might affect you when you sell securities in these accounts.
There are three pricing structures for Wealthsimple account balances:
- For account balances up to $5,000, there is no fee whatsoever, making this an excellent starter account for newbie investors.
- Accounts with balances between $5,001 and $99,999, there is a flat 0.5% annual fee.
- Accounts with balances over $100,000 have a flat 0.4% annual fee.
The majority of Wealthsimple investors will pay 0.5%, and it’s important to note that these fees don’t include the management fees charged by the fund managers of the investments you hold These fund management fees, known as the management expense ratio (MER) are expected to be about 0.2% annually.
While Wealthsimple’s fees are somewhat higher than that of other robo-advisors, it is definitely cheaper than a traditional advisor, and the program has several offerings that you cannot find with other robo-advisors.
Like most robo-advisors, Wealthsimple offers investors a variety of low-cost ETFs. When you sign up with Wealthsimple, you’ll be provided with an investment advisor who will help you match the right funds to your long-term goals and risk tolerance. You’ll be able to connect with your advisor via phone, email, text message, or video chat.
In addition to the traditional ETF options, Wealthsimple is one of the few robo-advisors that offer Socially Responsible Investing (SRI) options.
Socially Responsible Investing
Growing your wealth is not just a financial decision, but also an ethical one. Prior to the advent of SRI, it was up to the individual investor to determine what companies reflected his environmental, social, or moral values, which was daunting, to say the least.
You don’t have to worry about the social impact of your investing when you choose one of Wealthsimple’s SRI portfolios, which offer the following ETFs:
|iShares MSCI ACWI Low Carbon Target ETF||CRBN||Global stocks with a lower carbon exposure than the broader market|
|PowerShares Cleantech Portfolio||PZD||Cleantech innovators in the developed world|
|iShares MSCI KLD 400 Social ETF||DSI||Exposure to socially responsible U.S. companies|
|SPDR** **SSGA Gender Diversity Index ETF||SHE||Companies that achieve greater levels of senior leadership gender diversity|
|PowerShares Build America Bond Portfolio||BAB||Bonds issued by municipalities to support local initiatives|
|iShares GNMA Bond ETF||GNMA||Mortgage-backed securities issued by government agencies to promote affordable housing|
The SRI portfolios do have slightly higher MERs than those of the regular Wealthsimple portfolios. The SRI portfolio MERs have a weighted average of 0.25% to 0.40%, compared to the regular portfolio MERs of 0.2% to 0.3%.
Is Wealthsimple Safe?
Though it might feel a little overwhelming to think about entrusting your finances with a robo-advisor, Wealthsimple makes sure to protect its investors and offer them peace of mind about their investments. Specifically, your money is SIPC (Securities Investor Protection Corporation) insured for up to $500,000 through Wealthsimple’s brokerage advisor Apex Clearing Corporation.
Wealthsimple also uses bank-level security to encrypt and protect your data, including all of your account information, your passwords, and your personal information. The program also uses state-of-the-art back-up and firewall technology to make sure your information is always available, no matter what happens.
The team at Wealthsimple also adheres to behind-the-scenes security strategies that are the industry standard in order to protect your data, secure their website, and process all transactions.
Anyone new to robo-advising might be concerned about customer service, but that is not an issue with Wealthsimple.
Emails sent to customer support receive prompt and thorough responses, and the team of experts at Wealthsimple can help you with any financial questions you may have. That includes advice on other investment accounts.
The Portfolio Review service is a free, objective evaluation of your non-Wealthsimple financial accounts.
The Bottom Line
Wealthsimple offers a comprehensive and savvy long-term investment strategy that is very well suited to every level of investing—from new investors or those with small initial investments to higher-value investors seeking goal-based financial planning.
Though the flat fee of 0.5% is a little higher than the fees you will find at other robo-advisors, Wealthsimple offers a great deal of value, not to mention a Nobel-prize winning investment strategy, for that price.