Wealthsimple is a robo-advisor that is trying to simplify investing. All you need to do is answer a short questionnaire to get a personalized portfolio. There’s no minimum investment required and there aren’t many fees. The service is particularly targeted at millennials, with the average accountholder under 30 years old. Unlike many robo-advisors, this one provides access to human advisors. It also offers useful features like daily automatic rebalancing, tax-loss harvesting and the option of investing in socially responsible companies. Let’s see if it’s the right choice for you.
People who are new to investing and want to build retirement savings
Not many account types for U.S. residents
Pricing: How Much Does Wealthsimple Cost?
Wealthsimple advertises the goal of making investing simple for young people. Part of that goal is minimizing fees and keeping fees simple. There is no cost to create an account and the mobile app is free. There is no minimum to start investing and your first $5,000 is managed for free for one year. Otherwise the management fee is 0.50% of assets under management for accounts with $100,000 or less. Accounts with more than $100,000 pay a fee of 0.40%. Wealthsimple creates accounts with exchange-traded funds (ETFs) so don’t forget that ETFs all have their own operational fees. These fees are generally less than 0.25%.
That’s it. There aren't any trading, account transfer or rebalancing fees. In fact, if you want to transfer an account from another bank to Wealthsimple, it will pay any transfer fees charged by the other bank. SmartAsset readers also get a bonus $50 when they open and fund a new account with at least $100. They can get an additional $50 if they invest more than $100,000.
Option Name Management Fee Minimum Balance Features Wealthsimple Basic 0.50% $0 First $5,000 managed for free; access to human financial advisor through text, calls or email; automatic rebalancing; tax-loss harvesting; dividend reinvesting, auto-depositing Wealthsimple Black 0.40% $100,000 Basic features plus financial planning sessions with human advisors; VIP airline lounge access
Wealthsimple’s Investing Strategy
There's a short questionnaire before opening an account. This helps the company to understand your current financial situation, your investing goals and your risk tolerance. A personalized portfolio is made based on your answers.
Wealthsimple portfolios are created using modern portfolio theory. This is standard among robo-advisors. Modern portfolio theory is based on the idea that you can maximize stock market gains and minimize risk by investing in a balanced and diversified portfolio. Before this theory was created, investors tried to pick individual “winning” stocks that would gain them the most money.
Portfolios are made using nine potential asset classes. These asset classes are: U.S. stocks, U.S. mid-cap, U.S. small-cap, foreign stocks, emerging markets, municipal bonds, inflation-protected bonds, government bonds and high-yield bonds. All portfolios are made with ETFs. No individual stocks are used.
When Wealthsimple creates your personalized portfolio, it will tell you which ETFs it’s using and the proportion of your portfolio that each ETF will make up. There are a few sentences of information about each ETF to help you understand exactly what you are investing in.
The company recently introduced the option to create socially responsible portfolios. These consist of ETFs that promote socially responsible companies. If you choose this option, your portfolio will have less ETFs overall than one of its standard portfolios, but will hopefully offer you peace of mind.
In the United States, individual accounts, traditional IRAs, Roth IRAs and SEP-IRAs are offered. In Canada, where Wealthsimple is based, additional account types are available to Canadian residents.
The key to this robo-advisor’s investing strategy is maintaining a well-balanced and diversified portfolio. Answer a few questions about your finances and your investing goals to get a personalized portfolio. The robo-advisor will ensure your portfolio stays balanced over time by automatically rebalancing it every day. Automatic daily rebalancing is an example of how robo-advisors make investing easier and cheaper. With a human advisor, you normally have to meet in person to go over rebalancing. This takes time and may cost extra so you might end up rebalancing your portfolio as little as once per year.
In addition to auto-rebalancing, Wealthsimple offers auto-depositing and dividend reinvestment. Auto-depositing allows you to automate contributions from your bank account into your portfolio. This helps you stay on track for your investing goals by ensuring you don’t miss payments. The robo-advisor also automatically reinvests any dividends you earn through a dividend reinvestment program. With a dividend reinvestment program, companies pay you dividends in the form of stocks instead of cash. This is an appealing option for companies because they don’t have to use their cash to pay you. It’s also beneficial to you, the investor, because you can get more stocks for less money.
Tax-loss harvesting is also offered. Tax-loss harvesting is a common and useful portfolio management practice. When certain ETFs in your portfolio lose value, they'll be sold at a loss. The losses are used to offset the taxes you pay on your gains. At the same time, Wealthsimple purchases similar assets to the ones it sold in order to keep your portfolio balanced. The company uses software to help sell and buy ETFs at the right time to maximize your tax benefits. Remember though that tax-loss harvesting and only applies to taxable accounts. Retirement accounts don’t benefit from tax-loss harvesting.
Do you have a portfolio that you are trying to manage yourself? There are free portfolio reviews to help you out. Upload one of your financial statements to its website and its portfolio managers will provide feedback on how you could improve your investment strategy. Portfolio reviews are free and anyone is eligible. You do not need an account with Wealthsimple.
Another great feature is access to human advisors. Many robo-advisors offer completely online services and do not give you access to human advisors. This robo-advisor has a team of human financial advisors who you can call, text or email with questions. Accountholders with Wealthsimple Black (more than $100,000 invested) can also schedule a financial planning session with a financial expert.
One new feature is a Wealthsimple SRI portfolio. This option allows you to invest only in ETFs that promote social responsibility. For example, some SRI ETFs focus on companies that promote gender equality and clean energy.
Who Wealthsimple Is For
This robo-advisor is targeted at young investors and particularly millennials. Its goal is to simplify investing by reducing fees and avoiding complicated fee structures. There is no minimum investment and there is no management fee for your first $5,000. These things are all helpful for young investors who don’t have a lot of money and want to start off on the right foot. However, these things are also great for anyone who is new to investing and values simplicity.
Services are all online and automated, which is great for those who don’t want to deal with people. Automated services also mean that you aren’t burdened with making every decision for your portfolio. You can essentially set it and forget it. If you are new to investing, learning materials are offered in an area of the company's website called Investing 101.
Investors in the U.S. can use Wealthsimple, but there are more account options for Canadian residents. This robo-advisor can also be a good choice if you want to invest in socially responsible companies. Through the Wealthsimple SRI option, you can create a portfolio of ETFs that promote social equality.
How Wealthsimple Services Works
You can open an account for free through the Wealthsimple website. The website offers useful information about the company, its investing options and general investing information. There's also a free mobile app.
When you go to open an account, the company will give you a short questionnaire that helps it understand your financial situation, your financial goals and your risk tolerance. Then it will create a personalized portfolio based on your answers. You will be able to read about the asset allocation of your portfolio and about the ETFs used to create your portfolio. A risk setting will be chosen for your portfolio from the options of conservative, balanced or growth-oriented. You can change this setting based on your preferences.
Once you’ve looked over your recommended portfolio, you can create an account, connect a bank account and start investing.
What’s the Catch?
Wealthsimple offers some access to human advisors but it is not the best choice if you need another human to discuss your investment decisions with. Its services are mostly automated and online. This is true of nearly all robo-advisors but some do offer more access to human advisors (often for higher fees).
More advanced or more adventurous investors might choose to save money by eliminating the middle man and managing their own portfolio. Wealthsimple uses a number of Vanguard ETFs. You could save on fees by investing directly with Vanguard. Doing things yourself would also allow you to customize your portfolio more than you could with Wealthsimple. Unlike many other advisors, Wealthsimple offers free portfolio reviews. Upload a financial statement and its portfolio managers will provide feedback to help you improve your investment strategy. Portfolio reviews are free to anyone, regardless of if you have an account.
The trade-off with managing your own portfolio is that Wealthsimple’s services will save you a lot of time and work. For example, just the task of rebalancing a portfolio can take significant time to do on your own. More advanced features like tax-loss harvesting are also very difficult if you’re inexperienced with investing.
Serious investors may want to consider other advisors that offer more advanced features. Some robo-advisors, like Wealthfront, offer a more advanced form of tax-loss harvesting called direct indexing. This service can help you save more money on taxes. High-net-worth investors can find other robo-advisors that tailor to people with assets. For example, Personal Capital is tailored to people investing over $1 million. Wealthsimple is best designed to build long-term savings through ETF investments. If you are looking to trade individual stocks, look at other advisors.
Competition: How Wealthsimple Stacks Up?
Wealthsimple charges much lower fees than traditional financial advisors but there are other robo-advisors that charge lower fees. Wealthfront, one of the largest robo-advisors, has a flat-rate management fee of 0.25% for all investors. Wealthfront also gives its accountholders access to more advanced management services. Tax-loss harvesting is available to all Wealthfront accountholders. People with more than $100,000 get direct indexing, a service that could further lower your tax bill. Investors with over $500,000 get access to Wealthfront’s version of smart beta. Smart beta considers many factors to decide the best way to weight the stocks in your portfolio.
One difference between Wealthsimple and Wealthfront is that Wealthfront does not have any human advisors. If accessibility to human advisors is important to you, then you may want to consider Betterment. Betterment has a plan that lets you talk on the phone with a certified financial planner. The Betterment Premium plan requires a minimum investment of $100,000 and charges a fee of 0.40%. It includes unlimited phone consultations with a Betterment financial planner.
This plan has a higher minimum than Wealthsimple but Betterment also offers a lower-level plan with a 0.25% fee and no minimum balance (just like Wealthsimple). This plan doesn’t give you access to human advisors though.
|Robo-Advisor||Management Fee||Minimum Balance||Best For|
|0.40% - 0.50%||$0|| |
|0.25% - 0.40%||$0|| |
Bottom Line: Should You Use Wealthsimple?
Wealthsimple offers a simple investing plan that combines the benefits of human and robo-advisors. Most of your portfolio management is done automatically but you can also consult with human advisors when you need to. There aren’t many fees and you won’t pay any management fees on your first $5,000 of investments. This is great for people who don’t have a lot of money to invest. Other robo-advisors do have lower management fees so you should consider others if you really want to minimize fees. You should especially consider others if access to human advisors isn’t important to you. Robo-advisors without human advisors generally have lower fees. Wealthsimple’s website is easy (and fun) to read with a lot of useful information. You could benefit if you are new to investing and want to learn. Serious and higher-net-worth investors (those with over $100,000 to invest) may want to consider a robo-advisor with more advanced management features. You should also consider other options if your main objective is trading individual stocks. If you want to invest through Wealthsiple, keep in mind that SmartAsset readers get $50 if they open an account and fund it with more than $100. They get $100 if they invest more than $100,000