Wealthsimple Overview
The realm of robo-advisors is rapidly gaining popularity as a fantastic substitute for conventional investing methods that we are accustomed to.
While it’s appealing to take a do-it-yourself approach to investments and eliminate the management fees associated with traditional investment strategies, this is where robo-advisors offer a balanced solution.
Though receiving guidance from an experienced investor can be beneficial, the option to avoid management fees is undeniably enticing.
Emerging platforms like Wealthsimple are presenting alternatives to standard investing and financial planning practices.
In fact, in Canada, Michael Katchen’s Wealthsimple has emerged as the leading ‘robo-advisor’ in an expanding sector.
During an interview with Forbes Magazine, Michael shared his journey of creating 1000Memories, a startup in Silicon Valley, where he also developed a spreadsheet to help his colleagues establish their investment portfolios.
The inception of the Wealthsimple platform in 2014 was inspired by the project, which highlights its capability to operate entirely via smartphones.
Michael notes that, historically, substantial initial investments have been necessary to engage with reputable financial advisors.
This traditional model has often marginalized younger investors from participating in the investment landscape.
Wealthsimple seeks to address this issue by eliminating minimum investment thresholds and granting access to quality advisory services.
Launched in Toronto, Wealthsimple has experienced significant growth over the last six years, including the acquisition of Canadian ShareOwner Investment Inc and expansion into various product offerings.
At the time of the initial writing, Wealthsimple primarily featured their Invest service.
Wealthsimple currently provides the following services:
Wealthsimple Invest
Wealthsimple InvestThis was Wealthsimple’s inaugural product, serving as their online investment platform.
Wealthsimple Trade
Canada’s first mobile stock trading application that operates without commission fees.
As of December 2020, a desktop version with basic features was launched, promising enhanced functionality in the future!
Wealthsimple Crypto
An addition to the previous offerings, this new service enables Canadians to trade Bitcoin and Ethereum using the Wealthsimple Trade app.
Wealthsimple Cash
This is a combined savings and chequing account with no fees and no minimum balance requirement. Initially offering a 1.7% interest rate on savings, it has since decreased to 0.9%. Features like a Visa debit card, direct deposit for salaries, bill payments, and e-transfers are expected to be introduced soon, although currently, only the Visa debit card is highlighted on their website.
Wealthsimple Tax
In 2019, Wealthsimple acquired SimpleTax, which operates on a ‘Pay What You Want’ model for income tax preparation software. They confidently promise users the maximum possible refund, or they will refund the amount you paid.
What do we find?
According to Wealthsimple’s website, they manage $5 billion in assets and serve more than 1,000,000 clients across their various offerings.
As reported in a Bloomberg article from 2019, Wealthsimple Invest has approximately 175,000 clients in Canada, the United States, and the United Kingdom.
This article will concentrate specifically on Wealthsimple Invest.
Wealthsimple’s Offerings
From the start, I realized the importance of saving money to eventually invest it at some stage in my life.
Eager to learn more about investing and make better use of the funds in my savings account, I explored Wealthsimple.
What stood out to me the most was their feature for automatic investing.
(For those who prefer a platform that allows complete control over trades, Canadians might consider Interactive Brokers or Questrade as solid alternatives.)
By linking to an existing bank account or connecting directly, the platform illustrates potential growth over many years.
For me, investing is a long-term commitment, and as someone who doesn’t want to frequently monitor my investment portfolio, Wealthsimple matched my goals perfectly, helping me easily step into the investing arena.
As a beginner, the anxiety of researching individual stocks and the possibility of making poor choices that could lead to financial losses is quite daunting.
Thus, the investment approach of Exchange-Traded Funds (ETFs) serves as a compelling reason to choose Wealthsimple.
Wealthsimple diversifies its investments by allocating resources across multiple asset types, such as:
- Government bonds
- High yield bonds
- Short-term bonds
- Real estate
- Dividend stocks
- US stocks
- Canadian stocks
- Foreign stocks
- Emerging markets
ETFs experience price fluctuations throughout the day due to buying and selling activities.
Unlike mutual funds, ETFs are traded on an exchange like regular stocks.
Therefore, if you’re looking to save for retirement, establish a Tax-Free Savings account, set up a personal taxable account, or invest in RRIF or LIRA, your funds will be diversified across a broad range of assets.
While this diversification might not yield quick profits, it also helps prevent significant financial losses.
For newcomers to investing, this is advantageous as it encourages a focus on long-term growth rather than short-term gains.
Ultimately, investing is about maintaining a long-term perspective.
When you open an account, part of the process includes taking a quiz designed to identify the most suitable investment strategy for you.
After setting up my account, I went through a series of questions aimed at tailoring the ideal investment portfolio to my specific needs.
The questions covered the following topics:
– Desired growth levels
– Financial investment objectives
– Personal spending behaviors
The purpose of the evaluation is to guide you and your finances toward an investment approach that aligns with your individual characteristics.
Once I completed the online survey, I received several portfolio options for consideration:
- Conservative
- Balanced
- Growth
Where Does Wealthsimple Allocate My Funds?
You may be asking yourself:
“Am I able to select a particular portfolio type and control the diversification process?”
The brief answer is no, you cannot.
This limitation is part of the nature of automated investing.
When you entrust your money to Wealthsimple, you allow them to manage it for you based on your objectives, without the ability to make adjustments within that specific portfolio type.
That said, you do have the option to change from one portfolio type to another—such as moving from a growth portfolio to a balanced or conservative one—whenever you choose.
If you’re interested in investing in individual stocks while maintaining complete control, consider using Wealthsimple Trade or Questrade as preferable choices.
Wealthsimple focuses on enhancing diversification by spreading investments across various asset classes and diversifying within those classes as well.
This applies whether you choose to set up an RRSP, TFSA, or LIRA for your retirement savings, or a RRIF, RESP, or other types of savings accounts.
Additionally, Wealthsimple can assist you in managing the finances and investments associated with your business.
The chart below illustrates some of the different ETFs available.
The first column shows the range of assets that Wealthsimple is willing to invest in.
