Wealthsimple Trade is an online discount broker enabling Canadian investors to buy and sell US and Canadian equities (stocks and other exchange-traded products) as well as cryptocurrencies for zero to minimal fees depending on the product, along with no account minimums for using their platform.
Wealthsimple has gained a lot of traction with young investors as its core product offering of no-commission trades quickly differentiated itself from others in the Canadian financial services landscape.
Pros of Wealthsimple Trade
Anyone that has traded for a number of years recognizes how much slippage and execution costs can eat into the profitability of trades.
Wealthsimple has done a great job in creating a differentiated product amongst the trading alternatives provided by the big banks and other brokers.
Wealthsimple Trade offers a commission-free platform to retail investors that want to trade stocks and ETFs.
The Wealthsimple product team has done a good job creating a near-seamless fluid user experience across various platforms whether you’re trading on your desktop or using the mobile app.
This is extremely convenient for new users as they don’t have to spend a lot of time learning how to use the platform and can get hit the ground running and get started trading right away.
Despite offering commission-free trading, my fills have been timely and fast for limit orders for liquid securities.
These might be different for investors trading micro-cap or other illiquid products or using market orders to execute their orders.
In my experience, I have faced no difficulty while using limit orders, but have faced some slippage when I have used market orders on Wealthsimple Trade and would suggest using limit orders to minimize giving away a few ticks while entering or liquidating positions.
Wealthsimple Trade has a new feature where you can deposit up to $1,500 for instant credit that becomes available to trade immediately.
It doesn’t take 3 to 5 business days to process account deposits.
They do have a cap on the number of transactions in a specified time period.
This is a feature that I use frequently to fund my account and add positions to my portfolio.
The trading world has embraced cryptocurrencies with a lot of pomp as these bits in the sky are now a burgeoning asset class in itself with a couple of trillion dollars in market cap.
Wealthsimple Trade allows retail investors 24×7 access to these markets at modest charges using the Wealthsimple Trade platform.
At present, they have more than 10 coins listed and offer investors custodial protection to protect their crypto investments from theft.
Did You Know?
Wealthsimple is a member of the Canadian Investor Protection Fund (CIPF) and each account type has an implicit guarantee of up to $1 million (CAD) in the event that the investment dealer (Wealthsimple) goes under, thereby providing peace of mind to investors joining the platform.
Cons of Wealthsimple Trade
Wealthsimple Trade is good at what it’s built for and provides a no-frills trading environment with zero commissions.
At this point in time, Wealthsimple Trade offers long-only trading capabilities without the use of any leverage.
This is a great starting point for most people taking up investing for the first time, but more sophisticated investors might find it lacking.
Margin accounts provide additional buying power and are a tool to enhance returns by employing borrowed capital.
There has been an uptick in investor appetite to employ futures and options to participate in equity markets.
Retail investors have a surging proclivity to use options to express views on particular cult stocks such as Tesla, Gamestop, AMC etc.
Wealthsimple Trade has no platform support for trading options or futures which may be a dealbreaker for experienced investors looking for these capabilities.
Wealthsimple Trade at present only supports long-only investing.
With a change in monetary policy regime and macroeconomic environment, investors only using Wealthsimple Trade may struggle to cope in volatile markets without the ability to short sell (i.e., sell a particular equity name without owning the underlying stock).
Inverse ETFs might be a good way to mitigate risk on a long-only platform, but it opens up paying higher fees and potential tracking errors.
Wealthsimple Trade allows users to trade only US and Canadian stocks/ETFs but doesn’t support fixed income, currencies, and commodities at the moment.
Investors managing large sums of money may struggle to effectively deploy capital without using bonds and currencies to express their views.
However, there is an increasing convergence of retail and institutional knowledge base and retail users are now capable of taking advantage of price dislocations in asset classes beyond equities as other platforms have begun providing access at low-fee cost structures.
Wealthsimple Trade vs Alternatives
- Ability to purchase fractional shares.
- Low commissions, especially for high-frequency traders.
- The platform is not as user-friendly as other options.
- The pricing structure is complex, and understanding commissions may be difficult at first.
- No account minimums required.
- Easy-to-use mobile and web platforms.
- Plus subscription required to have a USD account to avoid FX fees.
- Lack of advanced features such as options trading.
- No fees to purchase ETFs.
- Easy to navigate mobile and desktop platform.
- Minimum account balance of $1,000 is required to trade.
- Subscription required to stream real time quotes.
Wealthsimple Trade Fees
Wealthsimple Trade disrupted the Canadian trading scene by slashing commissions to zero and forcing other brokers in a race to zero fees.
With no account minimums and maintenance charges, Wealthsimple has a very compelling proposition for investors starting out in their investing journey.
There are fees for currency conversion (1.50%) when you buy/sell US Dollar-denominated securities.
With the introduction of Wealthsimple Plus, a membership costing about $10 per month, it allows users to store USD by paying a single foreign exchange charge until converted back into CAD thereby bringing down costs to trading in US equities.
Further, there are no trading commissions/brokerage fees to trade cryptocurrencies listed on their platform but there is an operations fee charged (usually 1.50-2%).
The introduction of Wealthsimple Plus sets the firm up to capitalize on its user base without charging commissions or selling trade orders to high-frequency trading algos commonly referred to as payment for order flow (PFOF).
Also, the platform feeds into its robo-investing channel and helps them build out their asset management business on the backend.
Wealthsimple Trade Plus Subscription
Wealthsimple has added more premium features to its core offering and this subscription service costs $10 per month, but provides unlimited USD trades without additional fees once converted from CAD, unlimited price alerts and a bump in the instant deposit limit from $1,500 to $5,000.
There are benefits to subscribing if you’re an active US equities trader that uses Wealthsimple as the primary platform for trade execution, but will be more of a nice-to-have for investors that trade sporadically and are more active on the CAD side.
How to Buy Stocks with Wealthsimple Trade
Create an Account
Wealthsimple has streamlined the account opening process.
You need to furnish basic identification questions and provide required documents.
Once that is complete, you will have your account approved to begin trading.
New account openings can be done via the website or the mobile app and will be identical in terms of the time taken to approve new accounts. Wealthsimple Trade supports the following account types:
- Tax-free Savings Accounts (TFSA)
- Registered Retired Savings Plan (RRSP)
- Non-registered personal accounts
Deposit Funds into Your Account
Funding your Wealthsimple Trade account is extremely straightforward as soon as you’ve linked your Canadian bank account with the platform.
Wealthsimple will credit your deposit up to $1,500 instantly and this limit renews every three business days.
Depending on the size of your remittance, it can take up to 3-5 business days.
Select the Stocks You Want to Buy
Once your funds are deposited, this is where the fun begins as you can now begin building your portfolio and allocate capital to your desired stock(s).
You can search up the security in the search bar and load your stock of interest.
At this point, the platform should display the relevant details about the stock such as price, daily high/low, the volume traded etc.
You can enter the buy order along with the quantity and price you’d like to execute at.
In the case of market orders, you just need to enter in the quantity and you’ll find your trade executed immediately at that point.
Wealthsimple Trade is a great platform for Canadian investors looking to enter investing for the first time or who don’t have aspirations to indulge in complex strategies involving futures and options.
As a platform, it has fast execution capabilities given that they offer commission-free trading.
They have also made investing in USD-denominated securities affordable when you sign up for the Wealthsimple Plus subscription as you avoid paying currency conversion charges every trade.
I’d highly recommend investors to give Wealthsimple Trade a spin if they want to get their feet wet in investing and create a buy and hold portfolio for the long term.
Active discretionary traders will find value in platforms that provide derivatives capability along with margin facilities.
Frequently Asked Questions
- Can you make money with Wealthsimple Trade?
Absolutely! Any security that witnesses price appreciation will cause an increase in the value of your account and once sold, will enable you to lock in gains. Like anything else, the platform simply facilitates your trades and your decision-making is what produces gains/losses.
- Is Wealthsimple Trade good for beginners?
Wealthsimple Trade is probably the best platform to begin investing in as commission-free trades allow beginners to get their feet wet with small accounts before developing enough confidence to trade larger amounts. Having said that, a certain degree of discipline should be exercised to prevent overtrading and avoid excessive churn as commission-free trades might not be a hindrance to placing trades as it would be at regular brokerages.
- Is Wealthsimple Trade really free?
Wealthsimple Trade is free and unlike other discount brokers around the world doesn’t receive any payments for order flow. They make money from people signing up and subscribing to their Wealthsimple Trade service, which depending on your trading activity can pay for itself each month, and other ancillary services such as Robo-investing, RRSP accounts, asset management and more.