Canada’s Most Famous Robo Advisor Wealthsimple.

Next up in the Canadian Review Series is the Robo Advisor Wealthsimple, the most well-known or famous of the Canadian Robo Advisors.

We have to give the folks at Canadian Robo Advisor Wealthsimple a standing ovation for raising awareness in Canada. They have created some wonderful breakthrough advertising that lets Canadians know that investing can be simple and effective and low-cost. As a former ad guy I say hats off to their marketing heads who had previously worked with Wieden+Kennedy. That US-based advertising agency has created some of the most memorable advertising and brands for companies such as Nike and Levi’s.

Wealthsimple admittedly has a brand focus, they want to create a very human and personal connection between investors and the company and brand.

Mission accomplished. And what’s incredible is that the advertising is all created in-house, they do not use an advertising agency.

The end goal is investor awareness and an attempt to remove the barriers so that investors can feel empowered to embrace a sensible low-fee managed portfolio option. Investing does not have to be complicated or intimidating. Building wealth can be simple. As they like to say it’s …

Wonderful branding and advertising.

Here’s my favourite ad created by Wealthsimple, it’s entitled Mad World. There’s so much noise out there. Most of us simply need a simple plan. We can tune out all of that noise and confusion. OK, I’ve used up my quota for the word ‘simple’ but it may be the most important word or message when it comes to successful investing.
As with most Robo Advisors the on-boarding process (becoming a new client) is also quite simp… er make that easy. You can open an account within 5 minutes. You might have your investment portfolio or portfolios set up in just another 10 minutes or so. The website is clean and smart and easy on the eyes. This is a Webby award winner for World’s best financial website.

As we know a cornerstone or definition of ‘Robo Advisor’ is that you can obtain the investment advice or portfolio recommendation online. Think of it as digital advice. You can also ask for help or speak with a Portfolio Manager if you need assistance. You can give them a call between 9:00 am and 8:00 pm (EST) Monday through Thursday, or between 9:00 am and 5:30 pm on Fridays. You can even go beyond portfolio talk and ask for a more detailed financial plan. 

As CEO Michael Katchen offers…

Humans when you want them, technology when you don’t.

Invest within your risk tolerance level.

The online investor profile questionnaire is simple and smart. And the approach is ‘goals based’. You will be asked questions such as what you are investing for, your time horizon, your net worth, your income, your investment experience and investment knowledge. When we get to one of the most important assessments – your risk tolerance level, Wealthsimple frames the risk tolerance with a probe or series of questions based on your comfort level weighing potential portfolio gains vs potential portfolio losses.

I do like the approach as it can be an honest and direct way to help clients understand that risk return proposition. What separates Wealthsimple from the other Robo’s is that within that investor profile you have the option to select a Social Responsible Portfolio (SRI) or a Halal Portfolio. You can align your beliefs or values with your wealth creation.

The ETF Portfolios.

There are 10 portfolios for the ‘standard’ large cap index models and 10 SRI portfolios that will each use between 8 and 10 ETFs. The most conservative portfolio is 70% bonds and 30% stocks, the most aggressive portfolio is 90% stocks and 10% bonds. The Halal portfolio, having a much more specific focus will be built using individual stocks.

Here’s a portfolio example using a Balanced Portfolio model.

We can see that they use a range of ETF providers, from iShares to BMO to Vanguard and Purpose. The Purpose Investment ETFs add an actively managed layer to the portfolios. Purpose investments Founder and CEO (and Wealthsimple Board Member) is Som Seif who is known as one of the pioneers in the Canadian ETF industry. The fees are higher in the actively managed ETFs. That said, the funds have a good track record. Within the full portfolio setting those higher fees of the active funds will not have a great effect on the overall portfolio expense ratios.

The portfolios will shade slightly outside of the lines of the ‘plain vanilla’ allocation to large cap stock funds and Canadians bonds. We see emerging markets and foreign bonds and high yield bonds and REITs (real estate) in the mix. With respect to portfolio rebalancing this is done in ‘robotic’ fashion. They will not change portfolio assets or allocation percentages based on any economic events or the ever-changing investment environment. Robo Advisor Wealthsimple will rebalance on schedule to bring your investments back inline with your risk tolerance and investment goals. At times portfolios will partially hedge for currency risks.

Tax efficiency, tax loss harvesting.

For investors with a Wealthsimple Black plan, taxable (non-registered) accounts will be set up for greater tax efficiency and investors can also enable the tax loss harvesting feature.

There is a very experienced team behind the portfolio planning and design; and that includes Dave Nugent as Chief Investment Officer, Ben Reeves from Bridgewater Associates, and Nina Sanajian from CPP (Canada Pension Plan) is a senior researcher. There is also an advisory group.

Wealthsimple accounts are offered in 3 formats.

Wealthsimple subsequently added Wealthsimple Generation. This plan is for clients with $500,000 plus in assets. This plan type offers access to financial planners, plus other perks.

Portfolio MERs.

The underlying MER’s for the portfolios range from .10% for the growth portfolios to .21% for the Conservative and Balanced Portfolios. The management expense is higher for the Socially Responsible Portfolio SRI models. The trading expenses for the ETFs are included or covered by your .50% or .40% fees. Wealthsimple fees are applied annually and paid monthly and taken from the account cash balance. Of course, the ETF fees are ‘paid for’ by or from the assets of the individual funds.

If you use the Robo fee comparison tool on autoinvest.ca you’ll discover that Wealthsimple is very competitive and at times #2 or #3 in the lower account balance range and is very competitive in the mid and higher account balance range due to that Wealthsimple Black offering. Please use autoinvest.ca as a starting point for fee evaluation. When we consider a group of lower fee options, a difference of a few hundredths in percentage points may not drive the ship with respect to your selection of a Canadian Robo Advisor.

Account types.

In addition to this list, employers can also set up their Employee Group Plan with Wealthsimple. You’ll notice there are corporate (small business) investment options in the mix.

Other unique savings features.

Saving on a regular schedule is a staple of basic and sensible long-term wealth building. All Canadian Robo Advisors allow you to set up an Automatic Investment Plan, but Wealthsimple does offer an additional twist. They recently introduced Roundup.

You can sign up for the app and link your spending account such as your debit or credit card or other mobile payment service. When you make a purchase, let’s use $17.42 as an example, Roundup with bring your total purchase up to $18.00 and will put 58 cents into your investment account and get that invested for you on a weekly basis. You also have the option to direct those Roundup monies to your savings account. Once again, those pennies can certainly add up over time. This is a great complement or top up to that sensible Automatic Investment Plan.

In 2020 Robo Advisor Wealthsimple also introduced Wealthsimple cash. This unique offering is a spending/saving account with a non-promotional 2.4% interest rate. That product replaced the Wealthsimple Smart Savings Account.

There are no monthly account fees, no low-balance fees, no foreign transaction fees worldwide and ATM fee reimbursements, among other features. Clients will access these features through a mobile app and super-cool Tungsten metal card.

Is your money safe?

Investment portfolios are insured up to $1,000,000 per account type (eg. RSP, TFSA) by the Canadian Investor Protection Fund (CIPF). Keep in mind this is insurance against default, this does not cover market or investment losses.

Wealthsimple is backed by Power Financial, a very considerable Canadian conglomerate that includes Great West Life, London Life, Canada Life, Investors Group, Mackenzie Investments among other divisions.

The Scorecard.

What is the right Canadian Robo Advisor for you? Obviously, that is a very personal decision. With no minimums or transaction costs Wealthsimple is known as a wonderful investment option for those who are starting out or who have more modest balances. And you can get that first $10,000 managed for free when you use this link.

That said with Wealthsimple Black they are very competitive for those in the mid range and for investors with higher account balances. Investors of all stripes might consider Canada’s most famous Robo Advisor.

There is the option of Socially Responsible Investing and the Halal Portfolio. There is the Savings account option that has that Roundup booster. Wealthsimple is innovative and they are obviously on the lookout for added features, products and services. Portfolio reports are clean and simple and allow you to keep track of your goals and progress. And once again, there’s help and advice when you need it.

With Wealthsimple you have sensible index-based portfolios available at a low-cost, all wrapped in an engaging and easy-to-use platform. When it comes to building wealth, simple works.

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Thanks for reading.

Dale