Wealthsimple is a robo-advisor fiduciary that launched in 2014 and has grown to $4.3 billion assets under management. With three tiers of service in addition to portfolio options for socially responsible and Halal investments, there’s something for everyone regardless of how much or how little you have to get started.
How It Works
As a robo-advisor, Wealthsimple uses ETFs with low fees that are automatically rebalanced to maintain your target goals. You’ll receive recommendations based on your risk levels so that you’re comfortable with your strategy.
In addition to answering questions online and connecting your external financial accounts, new Wealthsimple accounts also include a call with a financial expert. All of this information comes together so you can create a broad investment strategy, not just one based on a single investment account.
Wealthfront immediately stands out as a robo-advisor with a diverse offering of account types. Here’s a brief overview of what’s available:
Personal and Joint
These are taxable accounts that you can create either as an individual or jointly. Enjoy penalty-free withdrawals at any point.
Save for retirement while taking a tax deduction on all of your contributions. Then you’ll pay income tax on withdrawals once you reach retirement age. Early withdrawals are taxed and charged a 10% penalty. Annual contribution limits apply.
Another tax-advantaged retirement account, Roth IRA contributions postpone your tax deduction until you actually make withdrawals. To qualify, you must meet income eligibility requirements and adhere to annual contribution limits.
Self-employed investors can opt for a SEP IRA, which offers higher contribution limits based on a percentage of your annual income up to a certain amount.
Get ahead of your estate planning by opening a trust for a beneficiary.
For short-term savings, you can open a Wealthsimple Save account, which places your money into low-risk investments with an above-average yield of 1.8% APY. There’s no account minimum or low balance fees and unlike many savings accounts, you can make an unlimited number of transactions each month.
You can choose from three plans depending on your initial deposit amount. The higher your balance, the more you save in management fees. Here’s how Wealthsimple’s tiers of service break down:
Basic: This no-frills robo-advisor service is designed for accounts between $0 and $100,000 and comes with a 0.5% annual fee. You get a personalized portfolio and access to advice from financial experts.
Other standard features include:
- Automatic reinvestment of dividends
Black: This tier is designed for accounts with net deposits between $100,000 and $499,999. You can still qualify even with funds spread out across different Wealthsimple accounts. Black members enjoy a lower 0.4% annual fee.
On top of all the features included in the Basic plan, you’ll also get access to:
- Tax-loss harvesting and tax-efficient funds
- Financial planning session with a portfolio manager
- Access to VIP airline lounge with Priority Pass membership (1,000 airline miles across 400 cities)
Generation: Once your net deposits reach $500,000 or more, you qualify for the Generation account. The minimum applies to household balances, so if together you and your spouse have at least $500,000 invested through Wealthsimple, then you both qualify.
This plan gets you all of the aforementioned benefits of the Basic and Black plans, plus dedicated access to a team of advisors. Also, take advantage of these additional perks:
- Asset location
- In-depth financial planning, including analysis of net worth and cash flow, financial projections, and any potential actions you should take
- Customized portfolios with individualized asset allocation
Wealthsimple offers several unique features lacking in many robo-advisors, especially if you have specific requirements for the types of companies in which you invest.
With this option, your portfolio picks help to advance socially responsible initiatives (SRI). In addition to being weighed for performance, SRI ETFs are also judged based on their environmental and social impact. Categories include:
- Low carbon
- Gender diversity
- Local initiatives
- Socially responsible
- Affordable housing
More than 25% of current Wealthsimple investors take advantage of an SRI portfolio. The management price is the same as your other investments, but you may find slightly higher expense ratios to compensate for the vetting that takes place.
Wealthsimple offers a Halal investment portfolio option that complies with Islamic law while still taking performance into account. All companies included in the portfolio are first screened and approved by an external committee of Shariah scholars. In short, these companies don’t profit from restricted industries such as gambling, tobacco, or arms and also don’t earn significant income from loan interest.
To ensure diversification, the Halal portfolio is composed of 50 stocks primarily in the US and Asia Pacific, with a small percentage located in Europe.
With Wealthsimple’s mobile app, you can increase your ongoing contributions by connecting an external bank account. Every time you make a purchase with the account’s associated debit or credit card, the platform automatically rounds up to the next dollar and invests the change into your Wealthsimple account. It’s an easy way to maximize the power of compound interest over time.
Wealthsimple keeps extraneous fees to a minimum. You won’t ever be charged when you withdraw or transfer funds from your investment accounts (other than early withdrawal penalties on IRAs). You also won’t be charged a fee if your account drops to a zero balance.
When you join Wealthsimple or transfer external accounts in order to streamline your finances, they’ll pay your transfer fees if you bring in $5,000 or more. Many brokerages charge between $50 and $75 when you move out funds, so this is a nice savings from Wealthsimple if you meet the minimum threshold.
Before you sign up for Wealthsimple, you can also take advantage of a free portfolio review. This automated analysis looks at your financials holistically, then helps set your goals. You’ll get a review of your current expense ratios to see where you can save, and also get advice on how to decrease your taxes by choosing the right types of accounts for your investments.
Fractional shares are another advantage of using Wealthsimple. This feature makes sure your full balance is invested and contributing to your long-term growth. If you were to invest with a robo-advisor that doesn’t offer fractional shares, you’d have money sitting idly in your account until you had enough funds to add to your portfolio.
One of the downsides to choosing Wealthsimple is that the management fee is higher than some other robo-advisors, who offer as low as 0.25% regardless of your balance. You do, however, get a call with a financial planner to help guide your investment strategy.
If your deposits are high enough, you can also take advantage of the extra perks that come with the Black and Generation plans. It’s definitely worth running the numbers to see if the benefits outweigh the additional cost in your specific scenario.
Another disadvantage that comes with Wealthsimple is that tax-loss harvesting is only available to accounts with higher balances. Not all robo-advisors even offer this feature, but if it’s important to you, you’ll need to either shop around or make sure you meet that minimum $100,000 balance to qualify for the Black account.
Who It’s Best For
If you’re a beginner investor who needs some guidance on how to maximize your investment strategy, using a robo-advisor like Wealthsimple is a great option. Everything is automated based on your personal preferences and goals. You’re prompted to provide information so it’s still tailored to fit your needs without you having to become an expert.
Even if you have a solid understanding of investment strategies, Wealthsimple is also made for those who want a hands-off experience while still knowing your investments are being rebalanced to stay on track. Wealthsimple also shines in that you get access to a financial planner for questions. It’s a strong balance between the sophistication of an automated robo-advisor and the personal touch of a true advisor.
Finally, if you have specific investment criteria, such as socially responsible or Halal companies, then Wealthsimple is one of the few robo-advisors where you’ll find what you’re looking for. Each portfolio is vetted by third-party experts to ensure your investment strategy aligns with values that are important to you. Your fund management expenses may be a bit higher in these categories, but your annual management fee remains the same.
The Bottom Line
Wealthsimple offers ease of use and a variety of options and benefits for investors of all kinds. As long as those extra features make up for the slightly-higher management fees, it can be an ideal way to utilize your money to grow using smart, automated portfolios. Ideal for investors interested in socially responsible or Halal portfolios, Wealthsimple also provides hands-on service for those who don’t need specific value-based portfolio offerings as well.