** I've updated this article to be a bit more succinct and lightly detail how Wealthsimple Trade makes money. **
Being the savvy FIREwalker that I am means having my ear to the wall of any new fee structure the banks and credit cards throw at me. It's quite annoying that Canadian financial institutions make regular and consistent fee increases and commitments needed by us, their customers. Such is life. Canadians for years though have shunned big banks because of their ever increasing fees. Today's article is no different to that storyline.
RBC happens to be a big bank and will make the perfect scapegoat for my comparison today. I still use their discount brokerage (RBC DI) and I’ve been using Wealthsimple Trade (WST) for over a year now to save my money. Below I’ll detail how much. I’ll also bring Questrade (QT) into the mix too.
A quick note - I'm not the type of guy to defend big banks like RBC but I also don't really have a problem with them either. I've been a happy RBC customer for nearly 8 years and I'd continue to be if it simply cost less money.
$10/trade is Expensive!
That is $10 to buy, another $10 to sell. No discounts unless you're trading excessively and therefore timing the market - which we FIREwalkers do not. We’re just buying asset allocation funds over here, don’t mind us!
If you’re thinking of QT, they nickel and dime you on the “free” ETFs with ECN fees - plus $5-10 when you sell any ETFs, which you will eventually do. If you have a savvier portfolio of decronstructed VEQT ETFs, balancing is the same fee as selling, of course. If you want to splash some individual stocks in your portfolio, that’s another $5-10 to buy and again when you sell.
Making regular contributions either every week or every other week makes RBC DI an expensive choice for a straight forward goal. Most Canadians are paid bi-weekly or 26 times a year. That's $260 of commissions for the privilege to type in "VEQT" when WST will charge you nothing.
In my case, my household has income coming in every week which means my regular contributions will cost $520/year! If I wait for bi-weekly or monthly contributions, I'm simply sitting on the sidelines for weeks at a time, missing out on the perpetual upward gain that is long-term investing in the stock market. That is opportunity cost, another big no-no for us FIREwalkers.
RBC DI is an easy discount brokerage to use but I don't think their basic product is in any way superior to WST. Ditto for QT. Both are a little more complex to set up, requiring paperwork and perhaps in RBC’s case an in-branch visit. However, I signed up for RBC DI a long time ago (when it was $30/trade lol) and glancing at the process now online seems fairly straight forward. QT likes to waste your time by making you fill out and digitally sign PDFs or print them (lol?) and mail them in (what year is it?). No idea if RBC DI will lead you down that route too when you set up online.
** I have included a referral link to Wealthsimple in my review. Please note I am not being paid or sponsored for this post, I just really like WST for the FIRE community and I think you will too. Plus if you sign up and use the product you get $10. I get $25 because they like me more apparently - I'd love any support for the blog and my mission, thanks! **
WST can be described in three words: simple, frugal and basic.
Why it's Simple
It’s basically the minimalism of trading apps, including setting up an account which is done entirely digitally and seamlessly. No PDFs or signatures. Just the usual what’s your name, SIN, and whatnot.
WST doesn't care much about showing off multiple data or features on one page and I quite like this. It's quite intuitive actually since they've put almost everything in a methodical spot.
So WST opts to guide you tap by tap when placing trades or doing pretty much anything on the app. One screen at a time. It's not so much baby stepping you as it is just simplifying the experience. Too many competitors try to cram so much onto one screen - it makes the text small and boxes to tap on difficult. Plus it's all just hard to process. I'm a huge proponent of less is more and WST has built a superb simple experience. Huge win.
Why it's Frugal
The main reason WST has garnered warranted attention is by launching its app with $0 commissions. There is no nickel and diming to be seen anywhere! No minimums, funding your account from your bank has no charge, no minimum trades, etc. Unless you're buying USD holdings in CAD or transferring your accounts out of WST I can't find a single fee anywhere.
RBC DI and QT have administrative fees, usually in the ballpark of $25/quarterly. I won’t make too much of a fuss over this since trading once or funding the account within that quarter is usually enough to negate the fees. If you’re on the FIRE path, you’re not going to incur those fees ever. If you’re just dipping your toe in the DIY investing waters, WST is a safer bet.
You might be wondering, how does WST make their money then? They’ve actually been quite transparent about this (link here if you care) but I’ll give you the short version. US-listed stocks can only be bought in CAD on WST. They charge a fee for conversions, like every other bank.
WST is slowly but surely connecting all of their products together. A year ago everything was separate from one another but now you’re starting to see product integration with things like Wealthsimple Cash and Wealthsimple Crypto (if you’re crazy enough to buy bitcoin).
It’s Basic but it’s also Safe
WST is new but it belongs to a well-established family of financial products which reassures me that it's here for the long haul and was built properly considering the success of its robo advisor.
It’s also owned by Power Financial, a big-ass financial firm which owns Great-West Life Co, Investors Group and more. Here’s an easy chart showing their companies. So it’s reassuring that a big company is backing WST, much like how using Public Mobile is really just using Telus. There’s no quality difference.
However, new often means that the product is still incomplete. For example, you can move your RRSP and TFSA over the WST but not your LIRA (a product I unfortunately have). I think there are other features still in the wings for WST to get around to implementing but for our purposes here we are mostly just buying and holding index ETFs so there's fancy we truly need.
WST still doesn't support USD accounts (yet). If you’re in the market for using Norbert’s Gambit and holding USD in your RRSP/LIRA accounts, WST won’t work. Use WST for the TFSA and QT or another big bank for those accounts.
As your life and portfolios continue on with age things will get more complex. The future I see has WST adjusting and introducing those products - or I’ll simply be switching out and have a competitor pay for my transfer-out fees (which every single institution provides).
The upfront cost annual cost savings of $520/year is more than worth the potential hassle in the future.
WST also doesn’t support RESPs (yet). I’d be surprised if they don’t include this feature in the coming years. I use QT instead for my children's RESP.
While RBC DI hasn't done anything wrong by me, I must admit I'm ready to simplify my banking experience and switch my products over to something that costs less for comparable value. In order to keep my banking free at RBC I need to use multiple products and pay to trade on their DI platform. I'm thinking in time Wealthsimple is going to create their own ecosystem of financial products but with more mainstream "lite" options where cost is king and value is comparable. I've yet to call their customer service line with any issue so I can't confirm or deny a decent customer service phone call... yet.
I'm guessing a lot of you guys might be in the same boat, holding onto that "Big-6" discount brokerage account for convenience rather than value. Do yourself a favour and set up low-cost alternatives such as Wealthsimple Trade and give it a shot. Since it's undoubtedly the most cost-effective platform out there the only thing you have to lose is your time and you may be gaining that time and money right back if you decide to switch over. Here's my referral link if you're interested in hopping onboard.
Picture: Wealthsimple Trade promo pic