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Wealthsimple Review

Wealthsimple Review – A Chat with CEO Michael Katchen

Wealthsimple is a digital investment manager sometimes referred to as a Robo-Advisor. They are a service focused on making "investing easier for millennials." A key differentiator for them is their portfolio review service that allows you to talk to real experts about your investments.
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Today we review Wealthsimple and interview company CEO Michael Katchen.

Ancestry and Investing

Michael joined 1000 Memories soon after the company was founded in 2010. It was a site that allowed people to organize and share old family photos and memories and to create family trees. in 2013 the company was sold to Ancestry.com.

When the business was sold, Michael’s coworkers came to him for advice on how to invest the money. He had been investing for years and believed that managing your own money was possible and pretty simple. He shared his method with his friends.

It wasn’t quite easy enough for them. They wanted someone else to do the work of investing for them. With a small pool of ready-made customers, Michael decided to start Wealthsimple. He built the first version of the product and listened to the feedback from those customers.

The Human Component

The whole point of Robo-advisors is to take humans largely out of the process. Most don’t offer tailored investing advice. Wealthsimple does offer that. The company is a hybrid of traditional financial advisors and Robo-advisors.

The more money you have invested with Wealthsimple, the more services you can access but anyone with an account can call and have their financial questions answered.

Take the Emotion Out of Investing

Investors are often their own worst enemies. The market falls and people panic and start selling. Buy and hold always wins when it comes to investing. Ignorance helps stoke the fear that causes investors to make poor decisions.

Wealthsimple combats that by teaching their clients the basics of good investing; start investing early, contribute to your investment accounts regularly, and make sure your investments are diversified.

When investors are successful, the company they invest with is successful too, so Wealthsimple wants to help create educated, successful investors who make decisions based on information and not based on fear.

Wealthsimple Review

As you heard, Andrew and Thomas both love the design of the site. As Michael explained, educating customers is a key component of Wealthsimple’s business. And that is evident all over the site. Right on the front page is a slider you can play with to see how much your money will grow when you start with $X and invest $X each month. You can set up an auto-deposit every month, so you don’t even have to think about investing, it just happens.

Wealthsimple-review-app

Fees

The fees are right on the front page too, so you don’t have to hunt around for them like you do with some other investment companies. There are two tiers, and you can see what features come with each. For those investing between $0-100,000, the fee is 0.5%. If you have less than $5,000 invested, the first year is free. For those with accounts greater than $100,000, it’s 0.4%.

To qualify for unlimited personal advice at Betterment, there is a $250,000 account minimum, and the fee is 0.50%.

Portfolio Type

Wealthsimple-review-portfolioThe educating continues on the Details page. It’s explained how your money would be invested across various sectors of the global economy which means your investments are diversified.

There is a graph that shows a typical portfolio. You can click on “Conservative,” “Balanced,” or “Growth” to see how that changes your portfolio. The investments are based on Modern Portfolio Theory which shows that when investments are diversified, risk is minimized and returns are maximized.

If you have social concerns when you invest your money, Wealthsimple offers socially responsible portfolio options that include investments in companies with low carbon exposure, cleantech innovators, and companies that promote affordable housing.

Portfolio Review

If you have investments with other companies, Wealthsimple offers a free Portfolio Review service. They will evaluate your other accounts for fees, tax minimization, and diversification. If you find that you are paying too much with your current company and want to transfer the money to Wealthsimple, they will cover any transfer fees that company will charge you.

Security

Your money is safe with Wealthsimple. They are backed by Power Financial Corporation, so the company is not going to suddenly disappear one day. The site is encrypted, and each account is SIPC insured for up to $500,000.

Account Types

There are four account types. Personal is the most popular account and aimed at building long-term wealth. You can contribute and withdraw as much as you want with no restrictions. The Roth IRA is a tax-advantage account to save for retirement. You invest after-tax money. Your withdraws and capital gains are tax-free. A Roth IRA is recommended for investors with many years before they retire.

A Traditional IRA invests pre-tax money. You pay taxes when you withdraw money after retirement age when most of us will be in a lower tax bracket. This account is best for those who plan to retire within ten or so years. A SEP IRA is a retirement account for those who are self-employed or employed by a small business.

Opening an Account

Wealthsimple-review-investingThere are three easy steps to open you Wealthsimple account.

Provide general information, whether you live in the US or Canada, the reason you’re investing, your income, your net worth. You can choose a socially responsible portfolio or a traditional one.

You will see the portfolio types, Conservative, Balanced, and Growth and the asset mix of each. Conservative is 65/35 stocks/bonds. Balanced is 50/50, and Growth is 80/20.

  • You choose one that fits your situation and then create your account.
  • Sign the Investment Management Agreement with your electronic signature.
  • Enter your banking information. It takes about five business days for your account to go live.

 Pros

There is a lot to like about Wealthsimple. The whole reason LMM was started was to educate people about money and investing. That Wealthsimple puts a lot of emphasis on educating their customers is a big pro. Taking the emotion out of investing can be hard. The personal advice users can access goes a long way to helping talk people down when they are about to make a decision based on emotion.

Ethical investments are another big pro. Divesting is a powerful tool, so you want to be sure your money is not going to companies with practices that you don’t agree with. We have recommended Betterment to a lot of you, but our Canadian listeners didn’t have that option. Happily, we can now recommend Wealthsimple to them. The company is based in Canada.

The Portfolio Review service is a nice perk, and if based on the results, you want to transfer your money to Wealthsimple, they will cover the fees your current provider may charge for doing so. Other Robo-advisors offer no minimum accounts, but not all of them do. Wealthsimple does, so that’s a pro. If you have more than $100,000 invested with Wealthsimple one of the perks is airport lounge access, a nice thing to have if you travel at all. They also financial planning with one of their advisors.  Tax loss harvesting is also available at this tier. The algorithm will lower your capital gains taxes by selling securities at a loss and re-buying similar ones.

If you have more than $100,000 invested with Wealthsimple one of the perks is airport lounge access, a nice thing to have if you travel at all. They also financial planning with one of their advisors.  Tax loss harvesting is also available at this tier. The algorithm will lower your capital gains taxes by selling securities at a loss and re-buying similar ones.

You don’t have to have an account to read the on-line magazine Wealthsimple publishes, so we aren’t listing it as a pro but as a neat perk for anyone. There are some great articles on the site including an interview with Anthony Bourdain where he explains that is never too late to get your finances together. Hairdresser Chris McMillan explains how he stopped living paycheck to paycheck.

Cons

Weathsimple has competitive fees, but they aren’t the lowest in the industry. Not all of the lower cost advisors offer the personal attention that Wealthsimple offers its customers though so that may be something you think worth paying extra for.

Bottom Line

Wealthsimple doesn’t have the lowest fees in the industry, but fees don’t matter if you’re too afraid to invest. For those afraid to make the leap into investing, the fact that they can get some guidance when they invest with Wealthsimple might be the final push they need. And investing with slightly higher fees is still better than not investing at all.

Wealthsimple-Review-dashboard

Show Notes

Apex Predator: A farmhouse ale.

Wealthsimple: Use this link to get up to your first $10,000 of investments managed with no fees for the first year! Offer ends April 30, 2017.

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