Wealthsimple Review – An “Autopilot” Investment Service

About Wealthsimple

Wealthsimple is a robo-advisory and platform based out of Canada servicing clients in Canada, U.S. and U.K. The platform offers many features commonly found with more popular services including automated portfolio management, rebalancing and tax-loss harvesting using exchange-traded-funds (ETFs). It also has some unique niche features like a rewards program, socially responsible and culturally sensitive portfolios like a Halal Portfolio for Muslim investors. Is this the right robo-advisor for you? Keep reading our Wealthsimple review to find out.   

History

Wealthsimple was launched by Michael Katchen, formerly of 1000memories.com acquired by Ancestory.com, in September 2014, out of Toronto, Canada. Power Financial Corporation invested over $160 million through many subsidiaries to become a primary owner of 77% of the company. Wealthsimple has over 100,000 global users with over $3 billion in assets under management (AUM). It is the largest robo-advisory in Canada and launched access to U.S. residents in 2017.

How Wealthsimple Works

As the slogan “Investing on autopilot” says on its homepage, Wealthsimple automates the core functions of a personal financial planner with no minimum balances and lower fees. most robo-advisories, Modern Portfolio Theory principles of diversification are applied to the models by sticking with the most liquid index ETFs.  Users answer questions related to their financial details, preferences and goals as the robo-advisor creates an investment gameplan. Algorithms handle portfolio construction and management tailored to individual user’s financial profile and preferences. Portfolio management includes automated rebalancing (adding and selling to positions to maintain portfolio allocations percentages), auto-depositing, dividend reinvestment and tax-loss harvesting (offsetting capital gains with capital losses).

Account Requirements

There are no minimum investment requirements. Users must be 18-years or older.

Wealthsimple Pricing and Fees

Wealthsimple has three types of pricing plans:

The Basic Plan has a 0.5% annual fee for deposits up to $100,000. This provides personalized portfolios, financial advice, auto-rebalancing, auto-deposits and dividend re-investment.

The Black Plan has a 0.4% annual fee for deposits over $100,000, which includes all features of the Basic Plan, personal training with a human financial advisor and VIP airline lounge access to over 1000 airline lounges in 400 cities through complementary Priority Pass membership.

The Generation Plan has a 0.4% annual fee for accounts over $500,000 and include all features of the Black Plan with holistic personal financial planning. This is a goals-oriented bottoms up approach that includes generational and estate planning. Clients have access to a team of professional advisors that will provide individualized asset allocations optimized for tax-savings.

Indirect Fees

Like most robo-advisory services, Wealthsimple uses exchange-traded-funds (ETFs) as the building blocks for portfolios. While ETFs are core to diversification, they also come with management fees ranging from 0.04 to 0.12%. The Socially Responsible Investing (SRI) portfolio has a hefty 0.25% expense ratio. There is a 0.25% management fee on unused cash in the account, however, Smart Savings account provides interest rates up to 1.75% on cash.

Platform

Wealthsimple can be access via desktop or mobile device through iOS and Android. Designed to be intuitive and self-explanatory, tab-based navigation guides users to the various categories. The platform is incredibly simple and easy-to-use.

Wealthsimple Investing Tools

As with most robo-advisors, these aren’t do-it-yourself platforms. They are structured to handle literally all the legwork involved with portfolio management so that users can set it and forget it.  Aside from initial projections and risk assessment tools, there isn’t much more by way of manual investing tools. This leaves little by way of self-directed investment tools for customers who want more hands-on participation. Everything is streamlined to provide a frictionless experience. The free online Wealthsimple Magazine is provided to all customers featuring stories and ideas.

Access to Human Certified Financial Planners

Wealthsimple allows users to set-up a financial planning session with their certified financial planners (CFP) for further guidance and more sophisticated solutions. This perk is available to all plans, not just premium plans like other robo-advisory services.

Wealthsimple Portfolios

Wealthsimple implements Modern Portfolio Theory and diversifies investment based on risk/outcomes profiles using up to ten types of ETFs covering up to ten asset classes. There’re three types of portfolios comprised of the core, SRI and Halal.

SRI Portfolios

There are three Socially Responsible Investing (SRI) portfolios that use a combination of 6 ETFs involved in businesses with initiatives addressing urban blight, affording housing, clean environment, carbon emissions and gender conscious issues.

The Halal Portfolio selects up to 50 stocks that meet and abide by Islamic principles, meaning no companies in the alcohol, tobacco or weapons industry. Cash is held in place of bonds since interest bearing instruments are not Shariah-compliant.

Performance

Individual portfolio performance depends on many factors both controlled and uncontrolled. Controlled factors include when you get started, timing and amount of deposits, portfolio allocations, while uncontrollable factors include geo-political events, global and financial market volatility. The smart saver function helps to improve performance with higher than normal yields over checking accounts.

Rebalancing

Wealthsimple will automatically rebalance allocations when they exceed the portfolio settings. This can happen when market volatility causes extensive price moves throughout certain asset classes and industries. The algorithms will implement tax-loss harvesting as well as tax-efficient investing to minimize tax liabilities.

Comparisons

Wealthsimple combines unique functions from the most popular robo-advisors in one place. Tax-loss harvesting, automatic portfolio rebalancing and dividend reinvestment are three of the most common features that are seamlessly included in all plans. The round-up feature (popularized by the Acorns app) enables users to have spare change rounded up to the nearest dollar on purchases to be automatically transferred to their Wealthsimple account for investment. Betterment combines machine and human expertise by making professional CFPs available for premium users. Wealthsimple took it one step further by providing access to live CFPs for all its customers.

Wealthsimple Key Differentiators

While adopting the most notable features of top robo-advisories, Wealthsimple goes the extra mile to differentiate itself with lifestyle perks like free VIP Priority Pass memberships for Black Plan members. The combination of algorithmic machine and human advisors accessible to all members provides a nice value. In addition to tax-harvesting, Wealthsimple also structures portfolios for tax-efficient investing. Users can also attain rewards in the form of fee discounts from achieving specific efficiency tasks. Canadian residents can also trade stocks with zero-commissions.

Trustworthiness

For Canadians, Wealthsimple is the largest robo-advisory service and highly trusted. U.S. residents may still feel weary about investing too much with a firm that just launched its service in 2017. While Wealthsimple is a registered member of FINRA (licensed as an investment advisor by the SEC) as well as FDIC and SIPC insured, it may take some more time for U.S. residents to feel more trusting of the service. The company currently has over $3 billion in assets under management, which is respectable, but lower than Wealthfront’s $11 billion and Betterment’s $16 billion.

Who is Wealthsimple Best Suited For?

Wealthsimple is best suited for tech-savvy, long-term investors seeking a frictionless and automated investing solution with access to human advice from license CFPs when they need it. The service ideally caters to millennials and young investors who want access, transparency at a good value. The platform is a lot simpler than traditional brokerages but millennials still may gravitate to simpler apps like Acorns.

Fee-wise, Wealthsimple is still at the higher end, with management fees ranging from 0.4%-0.5%. These fees are lower than Personal Capital, but nearly double Betterment and Wealthfront. That said, performance is still the most important metric and we’re in the process of running a live robo-advisor case study to see which firm delivers the best returns.

Pros

• Ideally suited for Millennials and young investors
• Round-up spare change investing
• Access to live human certified financial planners for all customers
• Travelers will enjoy the VIP Priority Pass with the Black Plan
• Diversified portfolio choices meeting financial, social or religious preferences
• Tax-efficient investment strategy in addition to automated tax-harvesting
• No minimum account balances

Cons

• Not many investor tools for users that want to learn about investing
• No tail hedge products to profit in bear markets
• Higher management fees than comparable advisors