5 Ways Wealthsimple Makes Money Without Charging Commissions

Wealthsimple Trade is known for being one of the few zero-commission trading platforms in Canada.

Not many platforms in the country can offer this, as other revenue streams such as payment for order flow (PFOF) are not allowed.

PFOF allows American companies like Robinhood to avoid trading fees for their customers while generating revenue.

When an order is placed to buy or sell a security, it is rerouted to a third party for execution.

It is then executed at the largest bid-ask spread, bought at the lowest price, and sold to the person executing the order at the highest price, with Robinhood receiving a commission.

So how does Wealthsimple generate revenue without trading fees like its Canadian competitors? It offers a wide range of services that generate recurring revenue through fees or subscriptions.

Here are six ways that Wealthsimple earns revenue without charging any commissions on trading.

1. Management Fees

Wealthsimple is dedicated to transparency in its fee structure.

For investors who use their robo-investing service, Wealthsimple Invest, fees are clearly shared.

The Basic package for those who invest under $100,000 has a 0.5% management fee.

For anything over that amount, the management fee drops to 0.4% and you move to the Black and Generation packages, The difference between these two packages is that the higher end one (Generation, $500,000+ deposit) includes additional services.

Additionally, through managing exchange-traded funds (ETFs), Wealthsimple collects 0.1% of every dollar invested in maintaining the ETF itself.

2. Wealthsimple Trade Plus Subscription

To access additional features in your stock trading account, Wealthsimple Trade offers a paid subscription called Plus.

For $10 per month, users get:

  • USD accounts without forex fees or commissions when trading US equities
  • USD cash without currency conversion fees
  • Deposits of up to $5,000 instantly into your account

With a Wealthsimple Plus subscription, clients can buy and sell securities and exchange-traded funds in USD without being charged a conversion fee for each trade.

They can also hold exchange-traded funds without being charged a currency conversion fee for the management fees.

This allows users to hold USD in a separate account, which was not previously possible under the Wealthsimple Basic model.

A key pain point of Wealthsimple Trade was the fact that there was no USD account.

By appealing to investors who want exposure to US markets through a low-cost, monthly subscription, Wealthsimple can satisfy user demand while generating additional monthly revenue.

3. Crypto Fees

Through Wealthsimple Crypto, an ‘Operations Fee’ of 1.5%-2% is charged for each transaction.

The fee is charged by applying a percentage to the bid-ask spread at which buy and sell orders are executed.

The spreads are available for investors to see on the Wealthsimple app.

For example, if you were to purchase $100 of ETH and the basis points (BPS) for the spread were 175bps, you would be charged $1.75 in fees.

Wealthsimple also has by-request transactions because the portfolios are automatically managed and rebalanced.

Special request transactions or extenuating circumstances are charged a flat fee of $75 per transaction.

Wealthsimple Trade open on laptop and phone on desk with coffee

4. Currency Conversion Fees

Although they don’t charge trading fees directly, clients who wish to trade US equities must convert Canadian dollars to United States Dollars.

For this conversion, Wealthsimple charges a 1.5% currency conversion fee.

This is only charged for Wealthsimple Basic users who have not subscribed to Wealthsimple Plus.

Clients using the Basic package for Trade will pay 1.5% on exchange fees for all US listed assets on both buy and sell orders.

The fee is lumped into the total foreign exchange cost applied to each order execution.

The rate for each trade will be available on the confirmation after the order has been fulfilled.

Did You Know?

Many other Canadian brokerages charge ~2% for currency conversions.

5. Wealthsimple Cash Visa Card

Wealthsimple offers a physical Visa card paired with it’s Wealthsimple Cash offering.

It’s linked to the client’s Wealthsimple Cash account which functions like a bank account, allowing ATM withdrawals as well as purchases anywhere Visa is accepted.

Like with any Visa card, Visa establishes the transfer level rate of interchange which can be a potential source of revenue for the financial institution, in this case Wealthsimple.

While there is no public information available to confirm Wealthsimple generates revenue through interchange, it is not an uncommon model in the industry.

Frequently Asked Questions

  • How does Wealthsimple make money without commissions?
  • How much money does Wealthsimple make?
  • Is Wealthsimple stock publicly traded?

I have been investing for half a decade, using the perspectives gained from my work experience in the private, public, and non-profit sectors to shape my investment outlook. I have a specific interest in the potential of emerging disruptive technologies and their impact on the future.