Investing Basics

Which Investment Platform is Right for Me? Wealthsimple or Questrade?

by Jon Kapac Senior Corporate Development Analyst - Richardson International

Summary: Wealthsimple or QuesTrade?

For many people – especially beginners – the world of investments can seem like a daunting place. Financial jargon is notoriously difficult to understand, and the myriad of choices available in products, strategies, and brokerages can be overwhelming. For most, however, investing doesn’t have to be so complicated. Use this informative guide to determine if Wealthsimple or Questrade is the right investment platform for you!

For the sake of this article, we’re going to focus on some of the various investment platforms available to DIY investors who are looking to manage their own investments rather than use an investment advisor. Which platform is right for you is a function of a variety of factors including: your knowledge of investments; your comfort with technology; the size of your portfolio; and the amount of time you are willing to put into managing your portfolio. 

Investment Platform No. 1: Wealthsimple

Wealthsimple is an online robo-advisor service founded in Canada in 2014. Robo-advisors use technology to determine which mix of stocks and bonds is right for you based on your age, investment experience, and risk tolerance (more on robo-advisors here). Wealthsimple builds and invests your money in an investment portfolio of index-tracking exchange-traded funds (ETF) based on these results.

An exchange-traded fund works much the same as a traditional mutual fund, where client assets are pooled together in a single fund and individual investors own pieces of the fund rather than owning stocks outright. The only difference is that ETFs trade on the stock exchange – just like a stock. Buying an ETF allows you to buy a diversified portfolio of investments through just a single holding. As an added bonus, the fees for index-tracking ETFs are very low compared to conventional mutual funds, with index-tracking ETFs typically costing 0.10-0.20% compared to conventional mutual fund fees of 2.00%. They are able to operate with much lower fees because they seek only to replicate the performance of a benchmark like the S&P 500 or TSX 60 and do not employ teams of investment professionals trying to beat the market. In simple terms, owning a single index-tracking ETF allows you to own the entire stock market in one holding. For more on ETFs and Mutual funds, click here.

Wealthsimple’s technology forward approach to customer service makes account opening a breeze, and the additional services offered can help set users on the right financial path. Roundup, for example, rounds users’ purchases up to the nearest dollar and invests the spare change. Users can also opt-in to optional investment strategies like Halal or socially responsible investing. Furthermore, Wealthsimple’s team of advisors are available to help users every step of the way. 

For the service described above, users will pay a fee of 0.50% per year for amounts less than $100,000. Clients with greater than $100,000 in assets pay a fee of only 0.40% and gain some perks, such as an annual financial planning session.

Wealthsimple may be right for you if

Wealthsimple may be a good choice for you if you are a first time investor looking to learn about the stock market in a way that is easy to understand and not overwhelming. Features like auto deposit, round-up, and savings accounts help users with additional banking and financial needs. Wealthsimple also has a variety of educational resources to help users learn more about investing, allowing them to take advantage of features like Wealthsimple Trade as they gain more knowledge and confidence in managing their investments. Dedicated articles and videos coach users through stock market crashes, teach users things like the difference between a TFSA and RRSP, and provide advice on how to manage personal finances.

Wealthsimple Trade

Wealthsimple Trade is a newer product launched by Wealthsimple that offers commission-free trading on equities and ETFs listed in the US and Canada. Users can open personal accounts, RRSPs, and TFSAs all right from their phone. Most brokerages in Canada charge between $5-$10 per trade, whereas Wealthsimple Trade charges $0 in commissions. The company makes money when users buy US-listed stocks with Canadian Dollars by charging a 1.5% markup on the currency conversion. This markup is competitive or slightly below the rate charged by other brokerages, which usually charge from 1.5-2.0% according to Wealthsimple Trade. Where Wealthsimple Trade comes up short is that users cannot currently hold US Dollars or sell US stocks for US Dollars. Instead, they must incur the 1.5% markup each time they buy and sell a US-listed stock.

Wealthsimple Trade might be right for you if

Wealthsimple Trade may be a good choice for you if you have a good degree of knowledge and experience in investments and want to choose individual stocks to invest in. Since Wealthsimple Trade only offers an app and not a desktop version, it is a good choice for an on-the-go type user looking to get the services of a brokerage from the palm of their hand. Its zero commission model also makes it a great choice for investors with smaller accounts who might otherwise see commissions meaningfully reduce returns. Picking individual stocks can be a way to make investments in companies, causes, or industries you believe in, however buying individual stocks can be more risky than investing in index-tracking ETFs. Because of this, you should develop a broader investing strategy and always do research on the company or industry in which you are investing; doing research and having a plan before you invest can prevent you from making the emotional mistakes that many people are prone to. Individual stocks can pay off handsomely, but can also crash and burn at a moment’s notice (more on the psychological pitfalls of trying to beat the market here). Because of this, it is important to have a diversified portfolio of high-quality companies.

Investment Platform No. 2: Questrade

Questrade is another popular Canadian discount brokerage that lets users buy and sell stocks and ETFs. It offers more features and tools than Wealthsimple Trade, but does charge higher fees with trades costing $4.95-$9.95 depending on the number of shares traded. Users should also beware of inactivity fees and other administrative and transaction fees that may be charged. In exchange for increased costs, users can expect more features like access to news, financials, research, and other investing and trading tools. Investors who use Questrade can also buy and sell options contracts and get access to margin, which allows you to buy and sell stocks with borrowed cash.

Questrade might be right for you if

Questrade is a good choice for investors who have expert level investment knowledge and have needs not met by Wealthsimple Trade. Investors with larger portfolios can benefit from access to the tools offered by Questrade, and the fees and commissions are low enough that they should not meaningfully decrease investment performance. Questrade could also be a good choice if you’re looking to hold US Dollars or buy and sell US stocks because you will not be forced to convert between Canadian Dollars and US Dollars on every transaction.

Conclusion: Wealthsimple or QuesTrade?

Taking charge of your investments can be an empowering move, but is one that should not be taken lightly. Choosing the right investment platform, or combination of platforms, that is right for you is an important first step in ensuring a successful financial future. Inexperienced investors looking to make their own investment decisions for the first time would be smart to place the bulk of their assets in a diversified portfolio of index-tracking ETFs and to initially limit individual stocks to a smaller “play” portfolio. Keeping initial mistakes small in dollar terms can help a new investor learn while avoiding costly losses.

Jon Kapac
About Jon Kapac

Jon Kapac is a Senior Corporate Development Analyst on the mergers and acquisitions team of Canada’s largest agribusiness, Richardson International. He has previous experience in public equities and investments at a Montreal-based hedge fund and a Winnipeg-based investment counsel. Connect with Jon on LinkedIn to discuss this article, investments, or the market.

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