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Wealthsimple vs. Robinhood: A Detailed Comparison

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In order to start investing in the equity or bond markets, you first need to set up an online brokerage account. For investors who are new to this space, selecting an online broker may be a tedious process as you need to identify a platform that aligns with your financial goals.

Retail investors can now access the financial markets easily given the increase in the number of online discount brokers over the past decade. However, there are certain differences in the products and solutions they offer that you need to be aware of. There will also be a difference in trading fees and commissions that may impact your bottom line if you are a regular trader.

You need to conduct due diligence while selecting an online broker in order to get the most bang for your buck, especially if you are a do-it-yourself (DIY) trader/investors. 

DIY is an investing method where investors identity and buy stocks on their own. Here, you build and manage your portfolio. This method of investing has increased in popularity due to the advent of discount brokers in the last two decades as well as the introduction of investing tools that have made it easier to analyze and buy stocks. 

Here, we look at two of North America’s most popular low-cost DIY brokerage platforms Wealthsimple Trade and Robinhood.

An overview

Wealthsimple aims to democratize investing without the high fees and account minimums that you usually associate with a traditional investment management platform. The company was founded in 2014 and manages over $8.4 billion in assets. It operates in other markets including the U.S. and the U.K.

It allows the user to invest capital in a globally diversified portfolio of low-cost index funds and the company looks to leverage technology in order to help you generate the best possible return while optimizing your tax bill.

So, it offers services that include automatic rebalancing, dividend reinvesting as well as tax-loss harvesting. These services were offered only to HNIs (high net-worth individuals) by asset managers as people found them too time-consuming, complicated, and tedious to do on their own.

Wealthsimple’s team of expert financial advisors will also help you plan your short-term and long-term financial goals as well as answer any questions that you have related to lowering your risk profile or the type of investments that you should focus on.

While investing is one service that the platform offers, Wealthsimple has introduced other ways by which you can reach your financial goals and manage your capital in a more prudent manner. These features include high-interest savings, commission-free trading, or even auto-investing your spare change, making it easier to save for the future. Wealthsimple believes every individual should have access to tools in order to make better financial decisions.

Robinhood believes the financial system should benefit each and every person on the planet. That’s why it has created a platform that lets you invest on your own. Robinhood is a do-it-yourself investing platform that was founded in 2013 by Vladimir Tenev and Baiju Bhatt. It offers commission-free trading services and over 100,000 users signed up within the first month of its launch.

According to a report from Business of Apps, Robinhood’s monthly active users rose to 13 million in May 2020 and to 20 million in April 2021, up from just 1 million in 2016. This platform manages $20 billion worth of assets with an average account size of $3,500.

Product portfolio

Wealthsimple has a broad suite of investment products that include:

Wealthsimple Invest

This is an intelligent portfolio of low-cost funds that are designed to meet your financial goals. Here, you can diversify your investments lowering your overall risk while maximizing your returns. Wealthsimple invests your savings in the stock market via ETFs or exchange-traded funds, based on your risk appetite. It then builds a custom portfolio targeting your financial goals.

Under this product, it offers features such as auto-deposits, dividend reinvestments, and automatic rebalancing. Passive investing is one of the most reliable ways to grow your money over the long term.

You can open several accounts under Wealthsimple Invest that include:

RRSP: A common retirement account that helps you avoid taxes and pay them once you retire

TFSA: A popular and flexible savings and retirement account that helps you avoid taxes on your capital gains

Personal: A taxable account for the extra money you want to invest once you have maxed out TFSA and RRSP contributions.

RESP: This account will help you save money for your child’s education as well as lower your tax burden and benefit from a government matching program.

RRIF: For Canadians over the age of 71 who would like to convert their RRSP account

LIRA: In case you earn a pension from a former employer but are not retired

Joint: For account with multiple holders that include married couples or business partners

Business: For businessmen who can take advantage of lower corporate income tax rates

Wealthsimple has three pricing tiers. For Basic account holders with a balance of up to $100,000, the company charges a 0.5% management fee. For people who have between $100,000 and $500,000 in investments, the management fee is reduced to 0.4%.

Wealthsimple Trade

Here, you can buy and sell thousands of stocks and ETFs on major exchanges in the U.S. and Canada. Wealthsimple does not charge you a commission on these trades and there is no minimum account balance that you need to maintain. You can technically start with as little as $1.

Using the Wealthsimple Trade product you can search and track stocks easily using the watchlist feature. You will also have access to real-time prices on demand and higher instant deposits with premium features.

Wealthsimple is now looking to add other features including stock price notifications as well as news and updates for stocks that are part of your portfolio. Wealthsimple trade is ideal for DIY (do-it-yourself) investors who have the expertise to pick and choose individual stocks or ETFs.

Crypto

Wealthsimple is one of the few major Canadian brokerages that also offer trading in cryptocurrencies. This highly disruptive asset class has gained massive traction in the last year driven by widespread adoption as well as a rise in institutional investments. Wealthsimple Crypto allows you to buy and sell Bitcoin and Ethereum- two of the largest digital currencies in the world.

Wealthsimple uses state-of-the-art encryption to keep your data safe and also has 2FA (two-factor authentication) for added security.

Wealthsimple Tax

Using Wealthsimple Tax, you can now file your returns for 2020. The company is confident about its dynamic software that covers situations ranging from work-from-home to federal benefits such as the CERB.

In case your report is audited by the Canada Revenue Agency, Wealthsimple will guide you through the next steps.

Wealthsimple Cash

Another product out of the Wealthsimple stable is the Cash application. This product makes it easier for Canadians to send or receive cash instantly. There are no monthly fees and no costs associated if you want to send or receive money. Basically, any deposit or withdrawals are completely free.

You can use the Wealthsimple Cash Card to make everyday purchases and integrate it with Google Pay and Apple Pay.

What are the fees when you use Wealthsimple Trade?

Wealthsimple claims it is able to offer commission-free trades as it has successfully built a low-cost online brokerage platform. Wealthsimple Trade only charges a 1.5% currency conversion fee when you purchase U.S.-listed securities. There are no other commission fees, transfer charges, or hidden fees.

The currency conversion fee is included in the total FX (foreign exchange rate) that is applied for every trade order. For example, if you decide to buy US$100 worth of a US-denominated asset and the exchange rate for converting the CAD to USD is 1.3, the 1.5% conversion fee will mean the total FX rate jumps to 1.3195. So, the total trade will cost you $131.95 which means you have paid $1.05 in currency conversion fees.

Alternatively, if you decide to sell US$100 worth of assets with the same conversion rate and conversion fee, the total foreign exchange rate will be 1.2805 and you will receive $128.05 from this asset sale. You have again paid $1.95 in total currency conversion fees. Wealthsimple receives the exchange rate from its partner banks and it fluctuates throughout the day.

Another way Wealthsimple charges users is by levying a premium subscription fee to Wealthsimple Trade. Here, you pay $3/month as well as the applicable taxes and gain access to real-time market data via snap quotes. You will also get a $1,000 instant deposit limit if you upgrade to the subscription plan.

How to invest with Robinhood?

Robinhood allows users to select individual stocks, ETFs, and bonds. While a majority of these investments are U.S.-based, it is now expanding to include foreign assets as well. The Robinhood platform can be compared to Wealthsimple trade as it does not have any portfolio recommendations similar to most robo-advisors including Wealthsimple Invest.

It provides users with a few capabilities to begin their research and investment journey. A few popular investments have a “buy”, “hold” and “sell” meter which is based on user reviews. So, the investor needs to research extensively before buying or selling a particular stock.

Robinhood also provides users with the opportunity to buy penny stocks or even day-trade. You can set up automatic transfers at frequent intervals and this transfer will be available for you to purchase various asset classes that include equities, ETFs, cryptos, and gold.

You can also transfer up to $1,000 each day if you have a basic level account. Robinhood allows you to set buying and selling limits which means you can set the price at which you want to buy or sell a particular asset. Once you set the money aside for the purchase, Robinhood will execute the trade at the appropriate price levels automatically.

Similar to Wealthsimple, Robinhood also does not charge any fees to execute trades or to manage your account. It however offers a premium account known as Robinhood Gold which allows you to trade on a margin and take a leveraged position. You can also instantly deposit up to $50,000 if you are a Robinhood Gold member and have at least $2,000 in your account as well as pay $10 each month for the upgrade.

The Robinhood platform is more interactive compared to Wealthsimple. You can search for a particular stock or an ETF and it will show you several details including the last five-year performance, recent press coverage, and the current trading price that is covered on a real-time basis.

The Robinhood mobile application will give you notifications for trade executions, price movements as well as earnings releases for the stocks part of your portfolio. The user can also set up watchlists to track their portfolio.

When a particular stock that you hold pays you a dividend, it will be available in your cash balance. You have the option to reinvest the amount to buy additional shares or to withdraw the same.

The pros and cons of Wealthsimple

One of the most important aspects to consider while using Wealthsimple is that the platform is commission-free with no minimum investment required. There are also no fee charges in case your account remains inactive. It has an easy-to-use interface making it perfect for any new investor.

On the flipside, Wealthsimple does not support USD accounts. As it is a popular platform for robo-investing, it does not provide you extensive data that will help you pick individual stocks. It is limited to a few assets (no bonds, precious metals, or mutual funds) and account types.

The pros and cons of using Robinhood

Robinhood also has no minimum balance criteria and has an interface that is streamlined. There are no inactivity or withdrawal fees here. But, Robinhood also provides you exposure to only a few asset classes that are focused mostly on the U.S. markets.

The verdict

When you choose an online broker, you need to look at several aspects that have been mentioned here. Both Robinhood and Wealthsimple offer commission-free trades and no withdrawal fees. Wealthsimple is the go-to platform for Canadians who want to invest passively. You can set up automatic investments and invest according to your risk profile and investment horizon. Wealthsimple has expanded its suite of products to include cryptocurrencies including bitcoin and Ethereum.

Robinhood on the other hand is ideal for active investors. You can purchase low-cost ETFs that will diversify your portfolio and lower your risk. Alternatively, you can also take on higher risk and trade penny stocks, benefit from margin trading, look at options as an investment strategy or even invest in precious metals like gold.

Which platform you would want to use basically depends on what type of investor you are.


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