Wealthsimple Trade: Pros and Cons

Wealthsimple Trade is an online brokerage that allows you to trade stocks and ETFs without any brokerage commissions. As is the case with other online brokers, this platform dedicated to independent investors does not offer financial advice or recommendations on how to manage your portfolio.

But beware! Wealthsimple offers several different financial platforms. Wealthsimple Trade should not be confused with Wealthsimple Investments. The latter is a low-cost robo-advisor that allows you to build a personalized portfolio of ETFs. 

Wealthsimple does offer a variety of services under one roof. Think of it as a one-stop shop, so to speak. From their website, the “Our Products” tab features the Wealthsimple Investments robo-advisor, Wealthsimple Cash, a savings account and a prepaid credit card rolled into one product, and Wealthsimple Tax, which allows you to file your tax returns. But for now, let’s focus on the stock trading platform.

How does Wealthsimple Trade differ from the competition?

Wealthsimple Trade‘s popularity has skyrocketed this year in the wake of the stock market saga. Young investors who were very active on Reddit and social networks artificially boosted the value of certain stocks.

As mentioned earlier, there are no transaction fees charged for buying or selling individual stocks or ETFs. This is the first competitive advantage for Wealthsimple Trade. However, it is important that clients stick to their investment profile and maintain their long-term investment philosophy despite the fact that it is free.

The objective of Wealthsimple Trade is clear and aimed at the bull’s-eye: we want to democratize access to financial tools. And my goodness, it seems to be successful. Revolutionary when it arrived in the country because some online brokers were charging $24.99 per transaction at the time, this online brokerage platform is now making it its duty to educate its clientele.

And this is where the second competitive advantage lies: there is plenty of theory to learn the ins and outs of stock market investing. Educational resources such as the Master Classes and the magazine, Personal Finance 101, are worth the detour. Hats off to you!

This platform is designed primarily for mobiles. The application is available on IOS and Android. Generations Y and Z seem to find it appealing: influencers promote the virtues of financial literacy and the website is fun and colourful. Who says investing has to be too serious a chore, anyway?

Now here are a few things about Wealthsimple Trade that are worth bringing to your attention.

Fractional shares

It is now possible to trade a fractional share of a certain company for only $1. Wealthsimple Trade offers this feature for shares of 14 publicly traded companies, including four Canadian companies like Shopify (SHOP-T), RBC (RY-T) TD (TD-T) and Canadian National Railway (CNR-T), and 10 U.S. companies including Amazon (AMZN-Q), Alphabet (GOOGL-Q), Apple (AAPL-Q), Microsoft (MSFT-Q) and Facebook (FB-Q). 

This is an excellent way to diversify your portfolio and limit the asset allocation you wish to give to each of these giants, whose stocks are often beyond the reach of the average portfolio!

Instant deposit up to $250

Instant Deposit is aptly named, allowing you to deposit up to $250 into your account with just a few clicks. The Premium plan, offered at $3 per month, allows you to deposit up to $1,000 and obviously offers other enhancements to improve the basic experience. 

A platform in development designed for mobility

In this case, the ability to invest at a low cost requires some compromises. Several important features offered by the competition are not available at this time. There is not much information available to analyze individual stocks and no analysis tool to evaluate the portfolio as a whole.

Some popular U.S. stocks are not available for trading

MoneySense and analytics firm Surviscor note that some important U.S. stocks, including Walt Disney Company (DIS-N), are not available for trading.

The quotes offered are not in real-time

Stock quotes are offered on a 15-minute delay, a situation that may lead you to place a buy order based on an incorrect price. To benefit from real-time quotes, the investor must choose the Premium option, offered as mentioned above, at a cost of $3 per month.

Wealthsimple: what is the verdict?

The first question to ask is whether Wealthsimple’s free offer allows it to provide a trading experience comparable to other online brokers. And depending on the type of investor, the answer is likely to be mixed.

For example, a lower unit execution price using delayed data may make you wish you had saved the cost of a $5 to $10 commission with another broker offering real-time data. 

Remember the high volatility of GameStop (GME-N) or AMC (AMC-N) in the midst of the stock market craze. A trade based on a delayed price could have meant hundreds of dollars in lost revenue. Do the math: the price of a single stock traded during that time frame could have varied by more than $100, an amount 10 times the commission charged by most brokers.

Wealthsimple Trade has it all. The promise of future features is a sign that the best may be yet to come. For the moment, however, the independent investor must accept to make some compromises in exchange for the use of a platform that stands out from the crowd and that is free in its basic version.

What we like about Wealthsimple Trade

• Lower currency conversion fees than the competition.
• The quality of the educational resources provided.
• Commission-free trading when integrated into a well-defined investment strategy.
• The ability to trade fractional shares.
• The youthfulness it brings to the industry.
• The quality of the mobile apps.

What we like less about Wealthsimple Trade

• Some types of accounts are not offered: for the moment, non-registered accounts, TFSAs and RRSPs are offered.
• The quotes provided are not in real-time. 
• The absence of portfolio management functionalities.