The Bottom Line: Wealthsimple is a leading robo-advisor with over $4.5 billion in assets under management. Investors who value choices, transparency, and who enjoy extras from VIP lounge access to investing Master Classes should sign up.
Robo-advisors have taken the world by storm since their inception after the financial crisis of 2008. Investors who sought to beat the Street were overtaken by a new breed of investor, focused on a passive, stable investment strategy.
Wealthsimple (WS) is a Canadian-based financial services firm that rode the great wave of growth in robo-advisors to a top ten spot.
WS is a truly modern company with no retail space, a focus on social responsibility, and a mission to upend traditional money management.
Targeted at millennials, the firm has expanded rapidly, with inroads into Europe made through Great Britain. The firm continues to hint at an IPO a few years down the road, with a May 2019 CNBC article reporting this and an additional $75 million in funding from Allianz.
While only five years old, the company has already raised several rounds of funding, acquired a brokerage, expanded services into socially responsible investing and Halal investing, created a high-interest savings account, and aimed itself at solving personal finance problems.
This is a fast mover in the fast-moving robo-advisor space.
Account Minimum: $0
Fees: $0 to $100k – 0.50%/year; $100k+ – 0.40%/year
Promotion: $10k managed for free for 1 year
What is Wealthsimple?
Wealthsimple, or WS for short, is a Canadian-based financial services firm that burst on the scene after the robo-advisor revolution.
Known as a top-ten robo-advisor, the company focuses on providing largely automated financial services to customers in Canada, the United States, and Great Britain.
Like many robo-advisors, WS has experienced tremendous growth since its inception in 2014. Average assets under management (AUM) stands well above $4.5 billion and total customer count is over 150,000.
Customers are attracted to the relatively straight-forward automated portfolio management system, a staple of robo-advisors. In addition, this robo-advisor offers a slew of related services to set itself apart from the competition.
On a self-described “mission to replace banks”, WS continues to expand its core offerings while pitching itself as young, hip thought-leader in the investing revolution.
When WS has conquered the world, blame Michael Katchen. At 26, this finance and management prodigy and winner of the 2016 EY Entrepreneur Of The Year award launched Wealthsimple.
The genesis for this financial juggernaut began when Katchen worked at 1000Memories, a Silicon Valley-based startup eventually purchased by Ancestry.com.
During his time there he had collected investment portfolio tips for friends on a spreadsheet. That little spreadsheet was the spark that led to the roaring fire that is WS.
The firm was launched in Toronto and focused on the Canadian and U.S. markets its initial years. The company grew rapidly, attracting funding and clients at a fast clip.
This growth demanded additional corporate leaders. Katchen was joined by a cadre of millennial-aged c-suite executives who ostensibly share his passion and vision for overturning the financial establishment.
WS has bought or partnered with big players in the financial services space since its inception.
In 2015, the company purchased a leading Canadian discount brokerage, a long-term plan to offer discount trading services (recently launched in Canada as an app called Wealthsimple Trade).
In 2016, the company partnered with Mint, a popular personal finance app.
No Account Fees.
$0 annual fees, transfer fees, and closing fees.
Annual Yield Savings Account.
Earn 2% (as of July 2019) on extra cash held.
Automated Portfolio Management.
Technology invests and balances the portfolio based on a pre-set risk score.
Three Service Levels.
Different pricing plans and benefits depending on the total funds deposited.
Free Financial Advice.
Free portfolio review and human-assisted financial advice for all pricing tiers.
Variety of Account Types.
Standard, Joint, Roth IRA, Traditional IRA, Rollover IRA, SEP IRA.
Unique Portfolio Types.
Enroll a portfolio in standard investing, socially responsible investing or halal investing.
Roundup automatically gathers your spare change to invest, while Overflow takes your extra bank account cash and reinvests it.
Free Stock Trading (for Canadians).
Commission-free stock trading app for iOS and Android.
Get extra funds managed free when you complete steps like downloading the app or turning on auto-deposits.
How Does Wealthsimple Work?
While popularly known as a robo-advisor, WS should be recognized more broadly as a financial services firm that offers automated portfolio management.
Many robo-advisors focus solely on the robo portion of robo-advisor; WS demands recognition as both the robo-advisor and the digital bank that advisor sits in.
The Promise of Passive Investing
The core offering of WS is its automated portfolio management system. Like most robo-advisors, WS offers ultra-low-cost investing controlled by a computer algorithm.
The algorithm is structured under the tenets of Modern Portfolio Theory (MPT), which in a nutshell is a framework for designing a portfolio that controls risk through diversification.
That portfolio is composed of different groups of asset classes, like stocks or bonds, all based on a pre-determined risk score. This optimal portfolio allocation is maintained and re-balanced automatically.
The passive part comes in as the customer simply needs to set up their preferred portfolio, based on a risk score questionnaire. After that, the system takes care of the rest, including auto-depositing funds and dividend reinvesting.
An important element of the automatic rebalancing is that a robo-advisor can take advantage of price fluctuations to save money.
Called tax-loss harvesting, the system sells an ETF that dips and then buys a comparable ETF at the same price.
This creates a tax loss that the system can harvest, resulting in a beneficial tax event come tax season.
Many robo-advisors divide portfolios into at least three risk groups: conservative, balanced, and growth.
The total amount of risk determines the composition of the assets in the portfolio.
WS is somewhat unique in that it offers two additional offerings when it comes to portfolio management: tailored portfolios and transparency.
This means that there are nine different core portfolio structures to choose from, and the customer gets to see the exact composition of each portfolio before allocation begins.
Below are the three standard portfolio options as of 2H 2019, which include 10 different asset classes.
In 2016, WS began offering portfolios focused on socially responsible investing. These portfolios also divide into the classic conservative, balanced, and growth options.
These portfolios select from six different asset classes.
Recognizing an untapped market, WS began offering a Halal portfolio in 2017. This portfolio, which also divides into the three standard portfolio options, was built by a committee of Islamic scholars to comply with Islamic law.
These portfolios are composed only of stocks from roughly 50 companies and is recognized as riskier due to the selective nature of the portfolio.
WS offers three tiers of service depending on the total assets under management. This may be a nod to its millennial target market and the love of gamified levels and tiers, or simply a way to entice customers to move from other robo-advisors.
Whatever the reason, the tiers and their differentiated service offerings add an important element to its offerings.
Deposit: $0 - $100k
Fee: 0.50% per year per assets managed
Deposit: $100k +
Fee: 0.40% per year per assets managed
- All basic benefits
- Financial planning session
- VIP airline lounge access (1000 lounges in over 400 cities)
Deposit: $500k +
Fee: 0.40% per year per assets managed
- All black benefits
- Dedicated team of advisors
- Asset location
- In-depth financial planning
- Individualized portfolios
More Than Machine: A Bank and Brokerage
Founder and CEO Michael Katchen proclaimed in a recent CNBC article that WS will “ultimately replace banks”. WS may be well on its way.
Since 2016, the company has focused on growing its product offerings. In 2016, WS launched a platform for financial advisors to manage their client accounts.
In addition, Wealthsimple for Work allows employers to offer robo-advising services to employees.
WS took a big step in 2018 when it launched Wealthsimple Save, a high-interest savings account.
Less than a year later the company began leveraging its brokerage acquisition to offer zero-commission stocks and ETFs to Canadians.
The company also heavily invested in the personal finance revolution.
Beyond its partnership with Mint, WS offers two personal finance services: one that harvests change from transactions and one that invests spare cash sitting in a bank account.
Pros & Cons
How to Get Started
Creating an account with WS takes about 10 minutes, more if you are uncertain of your financial goals or preferred portfolio composition.
Fill out personal information and employment information.
Select investment goals and timeline.
Fill out total income, savings, assets, and debts.
Complete investing questionnaire.
Confirm or select a preferred portfolio type.
Open or transfer accounts.
The simple way to grow your money like the world's most sophisticated investors. Zero-maintenance portfolios, expert advisors and low fees.
Should You Invest With Wealthsimple
Wealthsimple stands as a leading robo-advisor for customers in Canada, the U.S., and Great Britain. Built on a solid foundation, the company has grown at a rapid pace, attracting committed customers and employees alike.
Strong branding, transparency, a focus on growth all make this a robo-advisor to watch — and for more than the just automated portfolio management.
If anything, the weakness of WS is that it may bite off more than it can chew, trying to be a little bit of everything while succeeding at nothing. This has yet to be seen.
WS is an ambitious and truly impressive financial services company that deserves serious consideration.
There is something for everyone: strong portfolio management, a variety of portfolio styles, access to live advisors, a savings account, and a wealth of extras.
Courtney Bower writes about investing, behavior economics, real estate, and psychology. He served as a US Peace Corps volunteer in Ukraine. He is originally from the Midwest.