Wealthsimple Review

Hey guys!

Just got wind that one of the more popular Fintech companies in Canada (Wealthsimple) opened up here in the U.S., and if my spidey senses are on point as they usually are, I think it’s going to be another great company to contend with in the investing space.

Outside of Vanguard, of course ;)

If you’re just starting out with investing and/or want a little more hand holding and automation, Wealthsimple may be worth looking into for you.

I’m not much of a Canadian connoisseur, but I’ve been following along their journey ever since they launched a killer blog which I am now GLUED TO (see below), and from all the awards and press they’re getting I definitely think they’re onto something.

Here are some of their latest blog posts – I dare you not to click on them! :)

• Jon Hamm Would Like to Buy a Time Machine
• Spike Lee Tells Us Why He Never Feels Bad Asking for Money
• The World’s Most Famous Sword Swallower on Becoming the World’s Most Famous Sword Swallower

I’ve since watched more and more Canadian bloggers talk about them over time, and then start moving their own money over as well. Most recently, my good friend and Rockstar Finance helper, Cait Flanders.

She just moved $50k over from fellow Canadian company, Tangerine (they had higher fees and weren’t as transparent w/ their funds), and she was finally convinced to *automatically* start investing for the FIRST TIME ever in her life too (Cait!!!). I think she’s seen since seen the light though, after seeing the projections Wealthsimple showed her if she keeps it up ;)

Anyways, enough of an intro…

Here’s what they’re about, and why they’re worth a look in my opinion.

What Wealthsimple Does

In a nutshell, Wealthsimple is a financial company that helps you build a portfolio of low-fee funds (ETFs), without charging you an exorbitant amount to do so. Then they’ll manage it all for you, help you grow it, and offer advice along the way.

So pretty much a “robo-advisor”, just without any minimum balance requirements and set up to be as simple as possible. They won’t charge you for trades or rebalances or account transfers (in fact, they will PAY any of the fees you might incur from moving over your money elsewhere!), and their main mission is to get people of any age and net worth to feel comfortable investing.

Here’s more of the corporate speak off their website if you prefer that version :)

“We provide world-class, long-term investment management without the high fees and account minimums associated with traditional investment managers. We invest your money in a globally diversified portfolio of low-cost index funds modeled after the same Nobel Prize-winning research used by the world’s savviest investors.

Our cutting-edge technology helps you earn the best possible return on your money, while also lowering your tax bill. This means we do things like automatic rebalancing, dividend reinvesting, and tax loss harvesting—services that most people couldn’t afford until now or found too time-consuming and tedious to do on their own.

Our financial advisers are always available when you need them. They can help plan your financial milestones and answer questions you might have about potential risks or what sort of investment accounts you should have.”

And looking at some of their stats and recent awards, I think they’re accomplishing their mission:

• They have over 20,000 clients now
• Managing over $750,000,000 of their money
• Was just named 2016’s “Best Financial Website” in the Webby Awards, as well as one of the Top 100 Most Innovative Financial Companies.
• And have $50 million in backing from one of the world’s largest financial companies (Power Financial)

A Look at The Portfolios They Offer

So how and where do they invest everyone’s money?? They use a similar approach that other robo-advisors use, which is basing portfolios on “Modern Portfolio Theory” introduced by the Nobel Prize-winning economist Harry Markowitz. Who basically proved that you can minimize volatility (risk) and maximize reward (money!) by diversifying your investments.

And as a refresher, typically the younger you are the more aggressive you want to go for better shot of growing your pot (and having enough time to recoup losses from major crashes), and the older/more conservative you are the more you’ll want to skew towards investments set up to *preserve* your money more than grow it.

Though of course you also have to factor in a number of other variables like how comfortable you are with risk, what strategies you believe in, if you care about socially responsible funds or not, etc etc.

Here’s a look at the options they offer:

The Conservative Portfolio — You’ll see with this one *bonds* make up a bulk of the investments at over 70% because they’re the safest. But they also have the least returns, so those interested in growing their $$ over long periods of time probably want to shy away from this route (vs those getting closer to retirement and will soon be tapping their investments to live off).

 

The Balanced Portfolio — This one’s more even across the board, and probably the one most people start with when first dipping their toes into investing. You’ll get 50% stocks and 50%’ish bonds. Still wayyyyyy too conservative for my blood, but it is balancing more risk/reward than the previous option.

The Growth Portfolio — Then we have the one I’d personally put my money into if I weren’t all in VTSAX with Vanguard (which is even MORE aggressive as it’s 100% stocks ;)). With this portfolio of only 20% bonds and 80% stocks, your money is set up to grow much faster while at the same time lose money faster during all the downturns – which is a matter of *when* they’ll happen, not *if*. So again it’s EXTREMELY important to know what your comfort levels are and what you’re willing to risk or not.

Though keep in mind being “risky” with ETFs (which are GROUPS of funds – not just a single stock) already waters down the risk pretty heavily. So while you are still investing in stocks overall, it’s like investing in 100 different stocks vs just 1 main one like, say, Apple or Facebook. Which rise and fall much more sharply on any given day.

Lastly, we have the Socially Responsible Funds — these are the funds set up that prioritize the impact companies make on the world around us. For example, you won’t find cigarette or alcohol companies in here, nor maker of hairspray bottles :) Though I’m not totally versed in these, so good to check out what exactly these hold to make sure they align with your own overall goals. Pretty cool to see though how investing companies are catering to all types of preferences out there!

Okay, So Does Wealthsimple Cost?

Smart question – good job asking :) For the first year they will charge NO fees managing your money, as long as your portfolio is under $5,000. After that, they do start charging, but much less than you will see at other places (at least for *actively managed* funds – not doing it yourself).

Here are the two options they offer:

So it’ll cost more if you have less invested, and will cost less if you have more invested – pretty typical. If you’re already investing, check this with your own funds/firm and see how it compares?

As a reference, before I started managing my own investments I was paying anywhere from 1% to 3% in fees losing THOUSANDS over the years. And I’m a financial blogger!! (Albeit a pretty dumb one up until recently…). So wherever you put your money, just PROMISE ME you’re paying attention to all the fees you’re paying – they’re important.

Who Wealthsimple is For, and Who They’re Not For

Okay, so all that being said, here’s my personal opinion on who I think they’re for and who they’re not for. Since obviously not all Fintech is good for all situations (or people).

Who Wealthsimple IS for:

• Anyone new to investing and just wanting to get started
• Anyone who doesn’t want to spend the time researching on their own
• Anyone who doesn’t want to spend time managing any of their funds
• Anyone who’s spending exorbitant fees having other people/companies managing their portfolio

Who Wealthsimple is NOT for:

• Anyone who wants to manage their own money
• Anyone who wants the bare minimum fees due to managing their own money
• Anyone who prefers picking individual stocks or other investing strategies like dividend investing (Wealthsimple only gives options for ETFs)
• Anyone who isn’t comfortable managing their money online or via apps

Basically, you need to know yourself and your goals way before giving Wealthsimple, or any company for that matter, your business. My goal on this site is to show you a variety of avenues to help you pick the one that best fits :)

Other FAQs

• Is money insured with them? Yup. Wealthsimple accounts have SIPC coverage up to $500,000. It doesn’t mean your money is safe from losing money, but it is protected if anything should happen to Wealthsimple. (I.e. they can’t use your money)
• Is their technology safe? Yup. Similar to other apps/financial companies, they use state-of-the-art security measures when handling financial information.
• What type of accounts can you open with Wealthsimple? Personal brokerage, Roth IRAs, Traditional IRAs, and SEP IRAs.
• Do they have an app? Yes, for both Apple and Android – here are some screenshots:

(The shots feature Canadian retirement accounts above (RRSPs are like our 401(k)s I believe?) but the app works and looks the same in the U.S. version)

In Summary

Wealthsimple is the new kid in town, and they want to help you invest your money simply, no matter how little (or much) you have. And so far they look promising – but of course ultimately it only matters what YOU think :) My job is to just share the stuff I think is worth consideration…

You can learn more about Wealthsimple, and sign up, here: Wealthsimple.com

(Budgets Are Sexy readers receive a special $50 bonus when you open and fund a new Wealthsimple account, and another $50 bonus if you end up transferring enough to qualify for Wealthsimple Black. Just make sure to click & use that link above if you want it as it’ll track that you came from here)

If you’re one of our sexy Canadian readers, use this link instead :)

(Same bonuses apply)

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PS: Did I tell you they had a good sense of humor too? :) The above is part of one of their older campaigns, haha… You might have caught their Super Bowl commercial “Mad World” too.

PPS: This post was in partnership with Wealthsimple, and just like with any other companies we love and promote on the site, the links above to them are affiliate links. Meaning we get compensated if you end up using them to sign up. You’ll also get a nice bonus as well, but regardless we only share stuff we think can help you or your wallet.  Your trust and readership is much more important than a few extra bones, which you hopefully know by now :)

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