These past few years have seen a huge uptick in the number of people who are interested in investing. This isn’t a surprise as a lot of people have been sitting on the fence or have had a desire to purchase stocks for the first time for various reasons.
One is the concern with inflation and needing somewhere to put your money where it will grow, not lose value.
Secondly, is the good old feeling of FOMO, or the fear of missing out watching people make money in the stock market. But lastly, and maybe most importantly, is that people see it’s a lot easier to do now than ever before - that’s where Wealthsimple comes in.
In operation since 2017, they’re very much a new face in the world of investment services which means they have a lot to prove, but just as equally an opportunity to cement themselves as not just another boring brokerage account.
Much like its American counterparts Robinhood and Betterment, Wealthsimple aims to offer investors a much more streamlined and simplified service that allows people to buy and sell stocks at the push of a button and with lower fees than traditional brokerage services.
This has become a growing trend to offer retail investors a piece of the pie and get more people involved in the stock market and Wealthsimple is trying to jockey for position as the Canadian equivalent to Robinhood (it does provide service to U.S.-based investors as well), but is it any good? Let’s dig in and find out.
How Wealthsimple Works
A traditional brokerage account is usually owned and operated by a bank or an investment firm. Some common ones are QuestTrade, TD Ameritrade, E*TRADE, Fidelity, and so on.
These services allow you, in short, to buy and sell shares of stocks, along with other securities, like options trading.
Wealthsimple works in a very similar way, but it’s intended for a younger audience of Millenials and later aged Gen Z, so it primarily functions like a mobile app and it’s streamlined to make investing as easy as possible.
While this means it is simple to navigate, it also lacks some of the more robust features that other brokerage apps and services have.
This investment platform is geared toward retail investors, which is a term that has popped up plenty of times throughout these past two years, and all it means is investors that are not associated with big firms or banks - ie. the average person. That’s why Wealthsimple, much like Betterment, SoFi, and of course, Robinhood, represent a new era for the common investor.
What Wealthsimple Does Right
There’s a lot of reasons why someone would want to streamline their investing goals. You have a busy life, you don’t want to commit too much time to observe your portfolio, or you simply don’t fully understand the world of finance yet.
These are all reasons why Wealthsimple is a popular choice amongst young investors, so it’s important to figure out what Wealthsimple does right.
Here are the popular features that make it an attractive platform for new retail investors.
No Account Minimums and Hidden Fees
One of the biggest selling features of Wealthsimple is the fact that it is commission-free, meaning you won’t be losing money on each trade that goes to the commission for a broker or the brokerage service.
Not to mention, there’s a $0 minimum to open an account which is perfect for starters compared to some brokerage services that require anywhere from $500 - $5000 to open an account.
Access to Financial Help
For first-time investors, it can be daunting to purchase shares of a company. Luckily, Wealthsimple offers plenty of phone, email, and online chat access to financial planners to help allocate funds, provide portfolio reports, complete tax assessments on securities, and plenty of useful guidance along with reliable customer support.
Fractional shares allow for people to buy into companies in small increments rather than all at once.
This is extremely helpful for investors who do not have the upfront money to buy shares of large-cap companies like Tesla, Apple, Amazon, Microsoft, etc. with shares that exceed well over $100-$1000. Instead, they can buy as much or as little as they want.
Crypto, Cash, and Invest Accounts
Cryptocurrency has taken the world of finance and investing by storm, and Wealthsimple has caught on quickly. They now offer an account that allows you access to cryptocurrency.
You can add funds as you would for the regular Wealthsimple Trade account and purchase BTC, ETH, ADA, LTC, DOGE, LINK, and many more.
This is a good way for new investors to get a safe entry into cryptocurrency through a protected service.
The second account they have aside from Trade and Crypto is their Cash account. Wealthsimple Cash is a high-interest savings account with a rate of 0.75% interest that operates much the same way as a typical bank high-interest savings account.
Finally, there is the Wealthsimple Invest account which offers TFSA (tax-free savings account), RRSP (registered retirement savings plan), and RESP (registered education savings plan) accounts for Canadian users and Traditional, Roth, SEP IRAs, and Keogh plans for American users which makes it a true one-stop-shop service for almost all investing, trading, and savings needs.
Socially Responsible Investing
A very interesting thing that Wealthsimple offers is the ability to invest in socially responsible companies, ETFs, and strategies.
These socially responsible investing plans include a focus on environmentally friendly companies and even include a Halal plan with companies that are Islamic law-friendly. This is a very unique feature that makes Wealthsimple stand out.
Advanced Account Features
For investors that have a balance over $100 000, which is known as the Wealthsimple Black service, there come some generous benefits. In particular, management fees drop from 0.5% down to 0.4%.
There is also the benefit of tax-loss harvesting to help lower taxes on capital gains from investment.
Additionally, there is Wealthsimple Generational which is available to users with an individual or household balance over $500 000.
It’s intended to provide more complex planning features for people with goals like inheritance (hence the name of the account), tax efficiency, retirement income planning, etc.
They provide these account holders with two dedicated financial planners and a host of financial tools like cash-flow analysis and portfolio analysis planners as well.
Ease of Use
Lastly is the fact that Wealthsimple is just simple. The UI of the app and site is easy to navigate, it’s clean, it works well, and they’ve been continuously improving and updating as they grow.
It’s their biggest claim to fame in terms of what they offer and it’s something they do very well. Also, there’s automatic rebalancing so your account portfolio remains on track.
What Wealthsimple Lacks
There’s plenty of reasons in the pros list to see why Wealthsimple is a great investing platform, but there are also some things that made us say “what does Wealthsimple do wrong.” It’s the unfortunate reality of reviews that you need to highlight the good, the bad, and the ugly, so here is what Wealthsimple lacks or comes up short on:
Less Than Robust Investing
While Wealthsimple offers you the straightforward aspects of buying shares, even fractional shares, and crypto now, they do fall short on robust investing options. Coincidentally that is one thing that is greatly missing is Options trading. Options, like calls or puts, are offered by plenty of investing services but sadly Wealthsimple has yet to implement them yet.
Lack of Investing Tools
In terms of tools to help investors, it’s also sadly lacking. There are no portfolio organizers, portfolio analysis tools, calculators, and little educational material. Their site offers some educational material here and there, but not to the level of competitors.
It’s not a surprise that a service named Wealthsimple would go for simplicity, but it’s at the cost of providing a well-rounded bevy of features for beginner and advanced investors alike.
Higher Than Average Management Fees
It is commission free and there is no minimum account, but Wealthsimple’s management fees for regular accounts (non-Wealthsimple Black) sit at 0.5%, which is higher than Wealthfront and Betterment (0.25% each) and TD Ameritrade (0.3%), among others. This leaves a bit of a sour taste in my mouth as their claim to be the low/no fee is slightly misleading.
Is Wealthsimple Right for You?
With everything said for and against Wealthsimple, the question remains on whether it’s right or not for you.
There’s no straightforward answer as each investor is going to be different in their needs.
People who want to set it and forget it when it comes to auto-deposits and buying shares will love Wealthsimple, while those that are more interested in daily trading and more risky securities, like options, will want to look elsewhere.
The benefit of Wealthsimple does lie in its simplicity, however, and it’s not unusual to have multiple investment services, especially when one like Wealthsimple has no commissions and no account minimum, but this is at the cost of higher than usual management fees.
Still, when it comes to investment, there’s never a one-size-fits-all approach to picking a service. What we can say is that given the fact that Wealthsimple is only a handful of years old and a smaller kid on the block, they’ve been doing plenty to address the wants and needs of customers, providing excellent customer service, and improving on their fundamental ideology of making investing easier for anyone.
To wrap things up, Wealthsimple isn’t trying to reinvent the wheel of investing, only make it run smoother. It’s pretty evident upon first glance at their site, their app, and their promotional material that it’s intended to help first-time retail investors feel comfortable knowing their money is in safe hands and it isn’t mired in confusing financial jargon.
This is why Wealthsimple shines, and even though there are some noticeable missing features or functions, it doesn’t take away from the fact that it’s reliable, it’s easy to use, it’s constantly growing, and it’s an enjoyable experience altogether which makes it a worthy competitor to Robinhood for the Canadian market, and even a worthwhile service for American investors too.