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Updated on Tuesday, October 27, 2020
Robo-advisor Wealthsimple provides an easy and automated way to invest in diversified portfolios of low-cost ETFs, offering options for everyone from conservative to aggressive investors, socially-responsible investors and more. While its annual management fee is fairly steep compared with its competitors, Wealthsimple supports an array of account types and offers access to human financial advisors, making it a solid option for consumers looking to invest anywhere from $1 to over $500,000.
|Best for ...|
|Management fee||0.50% for balances up to $100,000, 0.40% for balances over $100,000|
|Accounts offered||Individual and joint brokerage accounts; Traditional, Roth and SEP IRAs; custodial accounts|
|Access to human advisors||Yes|
- What is Wealthsimple and how does it work?
- Wealthsimple’s investment approach
- Wealthsimple’s fees
- Wealthsimple’s features and tools
- Wealthsimple’s user experience
- Wealthsimple safety and security
- Is Wealthsimple worth it?
What is Wealthsimple and how does it work?
Wealthsimple is a financial services company that provides digitally built and managed investment portfolios and digital investment advisor services. It handles the hard work of building a well-diversified portfolio for your particular risk tolerance level, automatically rebalances your portfolio as needed and also finds ways to minimize your tax burden.
As is the case with most robo-advisors, Wealthsimple will help you determine your risk tolerance with a risk questionnaire, and will then recommend a customized portfolio for you made up of a diversified mix of passively-managed ETFs. In addition to many of the perks that robo-advisors are known for — including automatic rebalancing, auto-deposits and dividend reinvestment — Wealthsimple offers features that are a bit rarer, like roundup tools and halal investing.
- Options for a wide range of investors: Along with its three main risk profiles (conservative, balanced and growth), Wealthsimple offers a slew of portfolio options for a wide range of investors, including socially-responsible investors and halal investors. Additionally, it features an ultra-conserative option through a portfolio consisting solely of short-term bonds. As far as robo-advisors go, this is a fairly inclusive selection of portfolios to choose from, differentiating Wealthsimple from its peers.
- Access to human advisors: In the realm of robo-advisors, access to a human financial advisor should not be overlooked, as it is somewhat of a rarity. Included in the annual management fee for its top two tiers (Black and Generation), Wealthsimple gives the option to schedule a financial planning phone session with a financial advisor. In fact, for the Generation tier, you will not only receive access to just one financial advisor, but a team of financial advisors with whom you can book a call.
- A robust referral program: Wealthsimple features a generous referral program, and the more people you enlist to use the service, the more benefits you will receive. Currently, Wealthsimple is offering free management of $10,000 in assets for 12 months for every friend who joins and funds an account using your referral link.
- Transfer fee coverage: As an incentive to get you to switch from your current brokerage to Wealthsimple, they will cover any administrative transfer fees you may incur if you invest a minimum of $5,000. Transfer fees can climb as high as $125, so this benefit provides real value.
- Higher fees compared with other robo-advisors: In comparison to its competitors, Wealthsimple charges slightly higher fees. It charges a management fee of 0.5% for balances between $0 and $100,000, while balances above $100,000 pay a reduced fee of 0.4%. Even its low-risk investment portfolio feature — Wealthsimple Save — charges an additional management fee of 0.25% (note that this is a separate fee from the annual management fee). If your priority is saving on fees, there are less expensive robo-advisors out there.
- Limited asset classes: As is the case with many robo-advisors, Wealthsimple offers a relatively limited scope of asset classes, not straying far from the standard stock and bond ETFs (although it does offer access to physical gold, a rarity in the robo-advisor landscape). If you are a seasoned investor looking for ways to invest in assets like futures or cryptocurrency, you will need to look elsewhere.
- Wealthsimple Save is a weak “savings” option: While Wealthsimple Save essentially functions as a savings account, as it invests your funds in a low-risk investment portfolio, it pales in comparison to many other types of deposit accounts that provide the same service. If your main concern is to preserve the value of your money (instead of generating returns), you would be better off stashing your cash in a CD or a high-yield savings account, where it will at least earn an APY. Many other deposit accounts similar to Wealthsimple Save are also free, yet Wealthsimple Save charges a management fee.
- No cash management component: Many of Wealthsimple’s robo-advisor peers offer cash management services, which essentially serve as a checking and savings account that customers can easily link to their brokerage account. This allows users to enjoy the convenience of doing their banking and investing all in one place. Wealthsimple does not offer this convenience.
Wealthsimple’s investment approach
Wealthsimple builds its portfolios using six to seven ETFs across the following asset classes:
- U.S. stocks
- International stocks
- Emerging market stocks
- Treasury bonds
- Municipal bonds
- Corporate bonds
- Physical gold
Which of those assets and the amount of those assets that appear in your portfolio will depend on your risk tolerance. Wealthsimple helps you select a risk level from conservative, balanced and growth, and then recommends a portfolio with an appropriate asset allocation for that risk tolerance level.
Similar to other robo-advisors, Wealthsimple features automated rebalancing, and it will rebalance your portfolio in response to price changes, deposits, withdrawals, changes to your risk score or changes to the ETFs that are used.
Additionally, Wealthsimple’s algorithm automatically tracks and reinvests any dividends that you may receive from your investments.
Wealthsimple allows investors to request tax-loss harvesting, which is a common strategy that is used to minimize your tax burden by selling investments that have lost value, while replacing it with a very similar investment.
Wealthsimple recommends tax-loss harvesting for investors with an annual income of more than $100,000, those who are not planning to make a large withdrawal in the next 12 months and those who are invested in a taxable account.
- Annual management fee: 0.5% for balances of $0 to $100,000, 0.4% for balances over $100,000
- Investment expense ratios: Ranges from 0.03% to 0.68%
Wealthsimple’s pricing structure benefits those with bigger balances, unlocking more features and lower fees. Here’s a breakdown of what is featured in the three tiers available on Wealthsimple, with access to each tier based on how much you invest:
- 0.5% fee for Wealthsimple Invest
- 0.25% fee on for Wealthsimple Save
- Recommended, personalized portfolio
- Dividend reinvestment
- Reduced 0.4% fee for Wealthsimple Invest
- All of the Basic plan features
- A financial planning session with a human financial advisor
- Access to tax-efficient features, such as tax-loss harvesting and tax-efficient funds
*Note that if your net deposits balance across all of your Wealthsimple accounts dips below $100,000, you will lose your Black status.
- 0.4% fee for Wealthsimple Invest
- All of the Black plan features
- Access to a team of financial advisors
- Personalized financial report
- Individualized portfolios and asset allocation
*Note that if your net deposits balance across all of your Wealthsimple accounts dips below $500,000, you will lose your Generation status. However, there is an exception for retirees who are withdrawing as part of their retirement strategy.
In addition to its annual management fee, you should plan to pay for the expense ratios that are part of your portfolio. Expense ratios are the fees charged by ETF providers for running a particular ETF, and they range from 0.03% to 0.68% for Wealthsimple.
Note that Wealthsimple Save’s portfolio also comes with a separate annual management fee of 0.25%, as it is considered a separate product from Wealthsimple Invest.
Wealthsimple’s features and tools
Wealthsimple Save is the robo-advisor’s solution for investors who prefer to be more conservative with their money, and want to invest for shorter-term goals. Contrary to its name, it is not a savings account but a low-risk investment portfolio of ETFs, specifically bond and treasury ETFs.
The account charges a lower management fee of 0.25%, and it is designed to provide what it says are “modest” yields while preserving the value of your savings. This feature offers unlimited free transfers and withdrawals.
Similar to its competitor Acorns , Wealthsimple offers a Roundup feature that allows you to invest your spare change. With Roundup, when you make a purchase with your linked debit or credit card, Wealthsimple will round it up to the nearest dollar and invest the difference into your Wealthsimple account (once you meet its $5 threshold). This is a valuable tool that you can use to get into the habit of routinely investing, albeit in small amounts.
If you value socially-responsible investing (SRI), Wealthsimple offers a robust selection of SRI portfolios at each of its risk tolerance levels (conservative, balanced and growth). Its SRI portfolios allow investors to invest their funds only in companies that meet certain environmental, social and corporate governance criteria.
Companies that are excluded from Wealthsimple’s SRI portfolios include fossil fuels, tobacco, weapons and more. Specifically, Wealthsimple eliminates the top 25% carbon-emitters in each industry, and requires every company represented in its SRI funds to have 25% (or at least three) women on its board of directors.
It is worth noting that Wealthsimple does acknowledge that the fees charged by the firms that manage its SRI ETFs are a bit higher than those charged by regular ETFs.
Wealthsimple’s Halal Investing portfolio allows investors to easily invest in companies that comply with Islamic law. This portfolio features a diversified mix of 50 stocks, eliminating any companies that profit from gambling, arms, tobacco, pork and other restricted activities, as well as companies that make significant income off of interest on loans (since profiting off of debt is prohibited).
Wealthsimple says that all of the investments in its halal portfolio are first screened by a committee of Shariah scholars. It’s important to note that since this portfolio is comprised entirely of stocks, it’s higher-risk, and Wealthsimple advises investors who opt for the halal portfolio to also keep assets in cash.
Wealthsimple’s user experience
Wealthsimple has an Android and iOS app, and it stands out for its sleek and minimalist design, giving you an uncluttered view of your portfolios and their performance. While aesthetically pleasing, its user interface is missing some of the bells and whistles that other robo-advisors have been known to provide, such as graphs displaying performance potential.
Wealthsimple’s Relationship Management team essentially serves as customer support, and is reachable by phone at 1-855-782-3559 between 9:00 a.m. and 6:00 p.m. EST Monday through Thursday, or between 9:00 a.m. and 5:30 p.m. EST on Fridays, as well as through a form on its website.
Wealthsimple safety and security
- SIPC protection
- Two-factor authentication
When you invest with Wealthsimple, your funds are held by Apex Clearing Corporation, which is a SIPC member. Therefore, your funds receive SIPC protection up to $500,000 (including $250,000 in cash) in the case that Wealthsimple fails. Apex also provides an additional $150 million in SIPC protection across all of its clients.
Additionally, Wealthsimple says it uses 256-bit/TLS certificate encryption to protect your data.
Is Wealthsimple worth it?
One common pain point of robo-advisors is that if you do not neatly fit into one of its three risk tolerance portfolios, there aren’t many other options for you. In addition to offering the standard conservative, balanced and aggressive portfolios, though, Wealthsimple offers options for socially-responsible investors, investors who want to keep the bulk of their portfolio in ultra-conservative assets (solely in short-term bonds) and even halal investors. As far as robo-advisors go, that’s a fairly robust selection to choose from, making Wealthsimple a more inclusive option for a wider range of investors.
Additionally, Wealthsimple’s Roundup feature makes it instantly competitive with Acorns, while its access to human financial advisors rivals those of traditional, big brokerage firms. However, if you are an investor interested in investing outside of ETFs, you are likely better off looking elsewhere.
Alternatives to Wealthsimple
|Account minimum||Annual fee||Accounts offered|
|Wealthsimple||$0||0.50% on balances up to $100,000, 0.40% on balances over $100,000||Individual and joint brokerage account; Traditional, Roth and SEP IRAs; custodial accounts|
|Wealthfront||$500||0.25%||Individual, joint and trust brokerage accounts; Roth, SEP and Traditional IRAs; 529 college savings|
|Robinhood||$0||$0||Individual brokerage accounts|
Wealthsimple vs. Wealthfront
In addition to their strikingly similar names, Wealthsimple and Wealthfront share many similarities, including portfolios built from low-cost ETFs and automatic rebalancing. In terms of fees, it’s a trade-off — while Wealthfront does require a minimum of $500, it charges a lower annual fee of 0.25%.
Deciding between the two will come down to features you prioritize. Wealthfront offers a more aggressive approach to tax minimization, including stock-level tax loss harvesting and risk parity. Wealthsimple, on the other hand, features a bigger array of portfolios to choose from, especially for socially-responsible investors and halal investors.
Wealthsimple vs. Robinhood
At its core, Robinhood and Wealthsimple are two very different products. While Wealthsimple serves primarily as a robo-advisor, recommending and automatically investing and managing your funds in a diversified portfolio of low-cost ETFs, Robinhood chiefly operates as an online trading platform, allowing investors to buy and sell at their own discretion, and to build portfolios from scratch.
Whether to go with one or the other really comes down to what you are looking for in an investment product. If you want more hand-holding and an automated investing experience, opt for Wealthsimple. However, if you want to control the creation and management of your portfolio, Robinhood might be a better fit.
All information included in this profile is accurate as of 10/27/2020. For more information, please consult Wealthsimple’s website.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.