Wealthsimple Review 2017

Brokers, Investing

When Wealthsimple — a Canadian-based robo-advisor backed by financial services firm Power Financial Corp. — launched in 2014, it provided investment fee relief to a population that sorely needed it. Canadians pay the highest average management fees for equity mutual funds of any developed country: 2.42% versus 0.82% in the U.S., according to Morningstar.

Low-cost, hands-free automated investment management helped propel Wealthsimple to its spot today as Canada’s largest robo-advisor, with more than $1 billion in assets under management. In January, the company crossed the border to compete with well-established U.S. robo-advisors such as Betterment and Wealthfront with $9 billion and $6 billion assets under management, respectively.

If Wealthsimple were just another robo-advisor, it would fall in the middle of the pack in the U.S. market. But it’s banking on a few features to set it apart, such as socially responsible investment (SRI) portfolios, free tax-loss harvesting (ideal for larger taxable accounts), clear and simple pricing (no hidden fees), and a beginner-friendly customer experience.


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Wealthsimple

Quick Facts

  • Management fee: 0.4% - 0.5%
  • Account minimum: $0
  • $50 cash bonus for users who deposit at least $1,000 in the first 30 days
Get started on Wealthsimple's secure site

Wealthsimple is best for:

  • Socially responsible investors
  • Hands-off investors
  • Beginning investors
  • Automatic rebalancing
  • Tax-loss harvesting

Wealthsimple at a glance

CategoryRatingDescription
Overall

Account management fee
  • 0% for first year on $0 - $5,000
  • 0.5% for balances $100,000 and less
  • 0.4% on balances above $100,000
Investment expense ratios
  • 0.1% weighted average for regular Wealthsimple portfolios
  • 0.23% - 0.26% weighted average on SRI portfolios
PortfolioETFs from 16 asset classes
Account minimum$0 for Wealthsimple Basic; $100,000 for Wealthsimple Black
Account fees (annual, transfer, closing)No fee to open an account; no maintenance or transfer fees. Wealthsimple reimburses all transfer fees charged by an outside institution with a $5,000 minimum transfer.
Accounts supportedTaxable personal/joint accounts, traditional IRA, Roth IRA, SEP IRA, trusts
Tax strategyFree tax-loss harvesting for Wealthsimple Black customers; free for Wealthsimple Basic customers by request
Automatic rebalancingFree
Customer supportLive phone support: M-F 8 a.m. - 8 p.m. Eastern time; email 24/7. Customer support calls can be scheduled.
PromotionNerdWallet readers who fund a new account with $1,000 get a $50 account credit

Where Wealthsimple shines

Low account minimum and no extra fees: Wealthsimple has made its value proposition appealing. The pitch begins with a $0 account minimum, which applies to the Wealthsimple Basic offering. That includes free automated deposits, automatic rebalancing and dividend reinvestment. Wealthsimple charges no fees on transfers, trading, rebalancing and tax-loss harvesting (this is a biggie we’ll address below).

Maintaining a $100,000 minimum balance qualifies customers for the Wealthsimple Black service offering the same features of the Basic account at a lower management fee (0.4% versus 0.5% for Basic) and includes a complimentary membership to VIP Priority Pass, which offers unlimited access for customers plus a travel companion to more than 1,000 airline lounges in 400 cities around the world. (Travel is one of the main savings goals cited by customers.)

Mix of low-cost ETFs: Low-cost, diversified portfolios based on Modern Portfolio Theory — spreading your money across different asset classes (Wealthsimple offers 16) to reduce risk — is the overarching investment philosophy at Wealthsimple, like at many of its competitors. A customer’s exact mix of growth, international, fixed income, cash and other asset classes is based on their answers to questions about financial goals, investing experience, financial situation and risk tolerance. Then Wealthsimple determines which of 10 diversified portfolios of exchange-traded funds is most appropriate. Six of the 10 ETFs Wealthsimple uses in its portfolios are from low-cost leader Vanguard.

There’s a bonus for customers who may be adding small amounts to their account over time: Wealthsimple buys fractional shares of ETFs, which means your entire deposit can be invested in full instead of hanging out in low-interest-bearing cash until there’s enough to purchase a full share.

Socially responsible investment (SRI) options: Not to bury the lead, but Wealthsimple’s marquee offering — which sets it apart from the rest of the robo-advisor pack — is its socially responsible investment offerings that, according to the company, were added to the portfolio lineup based on customer demand.

Wealthsimple’s portfolios draw from six SRI ETFs that focus on companies involved in enterprises such as clean technology innovation in the developing world, efforts to lower carbon exposure and supporting gender diversity in senior leadership roles. The portfolio may also contain municipal bonds that support local investment and government-issued mortgage-backed securities that promote affordable housing. The exact mix is based on a customer’s risk tolerance.

Wealthsimple says 35% of its clients have at least one of their accounts in one of the company’s three risk-weighted SRI portfolios.

A Halal investing portfolio is an even newer addition to Wealthsimple’s offerings. It contains roughly 50 individual stocks (not ETFs) screened by a third-party committee of Shariah scholars. No companies that profit from gambling, arms, tobacco or other restricted industries or derive significant income from interest on loans are permitted.

Customer service: Automation is how robo-advisors keep money management fees within the financial reach of the average investor. But sometimes the human touch is required — and most robo-advisory services limit the amount and kind of hands-on help they offer customers (e.g., email only or one meeting per year) or offer access to one-on-one advice only to premium account holders who maintain high account balances.

In addition to the standard email, chat and phone support at Wealthsimple, its Basic clients get a 15-minute phone call for a walk-through on the basics of financial planning and to ask any questions, including how much to save, which type of account (IRA vs. non-retirement) to choose, and how their investments are taxed. Wealthsimple Black customers receive a more formal financial plan — a document that provides an overall snapshot of their financial situation and addresses top concerns, such as if they’ll have enough to retire, which accounts should they withdraw from for income, or how to close any gaps in their plan.

Any customer regardless of account balance can request a phone appointment with a member of the customer support team, even outside of business hours. And when needed, Wealthsimple will call on one of the company’s certified financial planners or chartered investment managers to provide further guidance.

Free tax-loss harvesting: At most robo-advisors, tax-loss harvesting is typically either a paid add-on service (WiseBanyan charges 0.25% up to a maximum of $20 a month) or available for free only to clients with high account balances, such as $50,000 or more at Schwab Intelligent Portfolios, for example. The strategy is used to lower an investor’s taxes on investment gains or other income by offsetting it with any investment losses.

Previously just Wealthsimple Black clients (with a minimum account balance of $100,000) had access to tax-loss harvesting, but recently the company opened it up to all U.S. customers with a taxable account. Clients can request that a portfolio analyst review their accounts (including those outside of Wealthsimple) for tax-loss opportunities, though the strategy typically is most valuable to those with larger investment balances and high salaries.

Focus on beginners: The high-touch, human-powered support starts even before someone becomes a customer. Upload the latest statement from any of your current investment accounts and a Wealthsimple analyst will check your investment allocation, account fees and tax efficiency based on your goals and time horizon and call to discuss their findings — for free; no account signup required.

Feel more comfortable seeing the human faces behind your robo-advisor? Continuing a practice the company started in Canada, Wealthsimple will host an in-person “Lunch and Learn” session at your company to teach the fundamentals of investing for the future, answer financial planning questions and launch into the company spiel only if asked. (Lunch is on them, too. And we’re talking actual catered fare, not your standard boxed-lunch-with-a-side-of-chips. Since Wealthsimple’s U.S. launch, nearly 30 companies across the country have taken up the company on the offer.)

Where Wealthsimple falls short

Account management fees: Account fees are where both customer and provider fortunes are made and broken. Wealthsimple’s 0.5% management fee on account balances between $5,000 and $100,000 and 0.4% on accounts with $100,000-plus is higher than that charged by all the companies on NerdWallet’s best robo-advisors list.

In comparison, Wealthfront and Betterment charge a 0.25% management fee. Even big-name brokers such as Fidelity Go (0.35% management fee) and Vanguard (0.3%) undercut Wealthsimple by a large margin.

Although Wealthsimple manages the first $5,000 for free, it’s a limited-time offer: The freebie lasts just one year (although clients who refer customers can add to the amount and extend the time frame). In comparison, Wealthfront (with just a $500 account minimum) has a free management perk with more staying power: It charges 0% in management fees on the first $10,000 invested in perpetuity and has many of the same account features (minus SRI funds) as Wealthsimple.

SRI fund management fees: Mutual fund and ETF expense ratios are taken directly out of an investor’s returns, and management fees on socially responsible investments (funds and ETFs) are notorious for being higher than average ETF fees. This isn’t a Wealthsimple-specific issue — you’ll pay these fees anywhere. Even though Wealthsimple shops around for the lowest-cost SRI options it’s good to know that the weighted average on SRI portfolios is 0.23% for a conservative portfolio, 0.24% on a balanced one and 0.26% on a growth portfolio versus the average weighted expense ratio of 0.1% for Wealthsimple’s non-SRI portfolios.

Lack of personal finance tools: Wealthsimple takes the “simple” part of its name quite literally: The website, app and entire approach contain just enough information to explain the important concepts of saving and investing and keep customers apprised of what’s happening in their accounts. It’s ideal for savers who want to set it up and forget about it.

Those seeking a more robust experience — calculators, planning tools, educational material and financial command central — will find Wealthsimple’s purposely streamlined website and app sparse compared with other providers. For example, Betterment customers can link outside accounts, including 401(k)s, to the company’s RetireGuide tool, which provides comprehensive retirement planning guidance. Fidelity Go offers its robo-advisor customers full access to Fidelity’s well-regarded lineup of planning tools, apps and educational resources.

Is Wealthsimple right for you?

Wealthsimple is a good starter robo-advisor for those at the beginning of their investing journey, and especially anyone for whom values-based investing is a priority. The plusses — $0 minimum balance requirement, no hidden account fees and access to human help — are particularly attractive if you have a smaller portfolio or are new to investing. Wealthsimple’s 12 months of free management (a savings of 0.4% to 0.5%) on accounts with $5,000 or less sweetens the pot further.

Those further along the investing spectrum will appreciate two things. This robo-advisor offers free tax-loss harvesting for any customer who requests it (a big benefit for taxable accounts). And Wealthsimple supports not only individual and joint non-retirement accounts, but also Roth, traditional and SEP IRAs, and trusts, although it does not support 529 college savings plans.

The biggest check mark in the “cons” column is that Wealthsimple’s account management fees are high compared with its U.S.-based competitors. Cost-conscious investors who eventually can cover a higher minimum account balance (anywhere from $5,000 to $50,000) should note that they can get at other companies a higher level of customization (at Vanguard Personal Advisor Services, portfolios are built on a client-by-client basis), access to sophisticated financial planning tools (Fidelity Go) or even free account management (Charles Schwab Intelligent Advisory).

 

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