Wealthsimple rating

Wealthsimple Review (2021)

Wealthsimple Overview

It’s a mad world for people new to personal finance, and doubly so for the millennial generation who grew up in an era of financial meltdowns, volatile markets and rock-bottom interest rates. Too many young people aren’t investing, or aren’t investing well, but for the Canadian personal finance market, a Toronto-based online firm called Wealthsimple may be the best option yet.

For those who’ve used traditional investment firms or any of Canada’s banks for RRSP and TFSA savings (those are Canadian versions of 401k and Roth IRA plans), a fintech firm like Wealthsimple may be worth considering. Here’s why.

Wealthsimple Pricing

Canadian mutual funds are notoriously expensive, having management expense ratios often well over 2%. Over time, this seriously degrades the value of the investment, especially when most active managers don’t actually exceed benchmark expectations. Wealthsimple’s suite of investments is focused entirely on exchange-traded funds and runs the full breadth of domestic and international equities, government and corporate bonds, dividend stocks and real estate, all of which have considerably lower MERs in the 0.2% range. Over that, Wealthsimple charges their management fee on a sliding scale: 0.5% on the first $249,999, 0.4% above $250,000, and 0.35% for accounts above $1 million.

Wealthsimple Competition

Wealthsimple’s fee structure is competitive with another online Canadian investment house, Vancouver-based Wealthbar, with 0.6% on the first $150,000, 0.4% up to $500,000, and 0.35% for accounts over $500,000. Incidentally, both manage the first $5,000 for free; Wealthsimple clients can gain further increments of fee-free management with successful referrals.

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Wealthsimple Investing

Wealthsimple’s target market is, however, the novice investor (ie: millennials). To that end, there are no account minimums (making the 0.5% fee on the lowest bracket a key selling point) and they have established an online presence with their website and app, either of which can be used to start an account. The entire experience is online – a deliberate strategy given that Wealthsimple’s target demographic focuses on people with a high degree of comfort conducting business online rather than in-person.

This starts with a questionnaire to assess the client’s risk appetite; Wealthsimple then builds a portfolio with a selection of ETFs to match. (This is where seasoned investors may take a pass, since clients can’t individually customize their portfolio through fund selection.) Once enrolled, bank account verification makes fund deposits possible and auto-contribution (which is highly encouraged) can be set up on a customized scheduled.

For the investor who wants to move existing accounts over, the fund transfer process at Wealthsimple is entirely online, avoiding paper documents and personal appointments with investment advisors. This is not to say that Wealthsimple is an entirely impersonal experience, however. Their head office employs “wealth concierges” who can provide advice over the phone or by online chat. This may be to ensure that a client’s aggressive investing preference is really suited to his/her objectives or to recommend a significant fund adjustment like moving away from hedging. However, the important recurring events like dividend reinvesting and portfolio rebalancing are automatic, using technology to conduct unbiased analysis and keeping emotions out of the calculation.

Wealthsimple’s investment objective for its clients is long-term value investing; the mantra is “set it and forget it” (hence, automatically-occurring contributions on a set schedule). Again, their target market is the young investor with a 25+ year horizon who can stomach a series of market swings. Case in point: right after the Brexit vote happened, markets tumbled. Wealthsimple quickly sent out an email to its clients with exactly the right message: remain calm, fluctuations happen, keep focused on long-term objectives and ride it out. This is golden advice for the long-term value investor.

Wealthsimple review

Wealthsimple Website

Ironically, Wealthsimple advocates a passive approach to investment management but the app and website makes portfolio monitoring all too inviting to log in frequently. The company recently unveiled a redesigned website with visual appeal; the soft colors and long-term graphics underscore the virtue of patience.

Wealthsimple review

At a glance, portfolio value and performance are easy to read. But one feature is that each fund’s management fees are listed right in the client’s Dashboard rather than buried in fund documents. Low-cost investment firms in Canada have marketed themselves on transparency regarding fees, especially with the new CRM2 regime (second-phase Client Relationship Model rules requiring full disclosure on all fees and investment performance) coming into effect this year. Canadian fintech investment firms can rightfully expect to benefit from cost competitiveness effectively in this new environment.

Wealthsimple Review Summary

Overall, most investors (and particularly new entrants to the personal finance marketplace) at ease with online transactions would find the Wealthsimple experience favourable if not outright pleasing. In keeping with the socially-conscious mores common to the millennial crowd, the initial questionnaire even asks new potential clients to rate the importance of socially responsible investing; four of the 15 ETFs Wealthsimple uses are specifically geared towards investments in low-carbon or clean-tech activities or in regions where sustainable development in respect of human rights and anti-corruption efforts are needed.

Ideology is optional, however; a client seeking to maximize gains can expect an aggressive portfolio of 80% equity ETFs and 20% fixed income with the top two funds (representing 35% of total allocations) having individual fund MERs as no higher than 0.12%. Whatever an investor’s conscience may be, this efficient and low-cost approach to ETF investing makes Wealthsimple worthy of consideration.

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