By now, you’ve probably heard of Wealthsimple, the robo-advisor that popular among many Canadians who are new to investing. But do you know about Wealthsimple Trade, the new addition to the Wealthsimple family that lets you trade stocks commission-free? And yes, Wealthsimple Trade really can be free. Here’s my review of Wealthsimple Trade and why I think it’s a great discount broker for new and experienced investors.
What is Wealthsimple Trade?
Wealthsimple Trade is a Canadian self-directed online brokerage that lets you buy and sell stocks and exchange-traded funds on major Canadian and U.S. exchanges.
It’s temping to call Wealthsimple Trade a discount online broker, but that isn’t quite right—it’s more of a free online broker. Wealthsimple Trade is Canada’s first and only commission-free online broker. You can buy and sell stocks and ETFs without paying any commission or placing a minimum order size on Wealthsimple Trade. And yes, you read that right. (Although there is one notable exception to “commission-free”, being currency conversion fees, discussed below).
It’s important to distinguished Wealthsimple Trade from Wealthsimple Invest. Wealthsimple Invest is Wealthsimple’s robo-advisor service, which automatically invests the money you deposit into a balanced fund. In contrast, Wealthsimple Trade is a self-directed investing platform that lets you choose individual stocks and ETFs to buy and sell.
Wealthsimple Trade is comparable to online brokers like Interactive Brokers, Questrade, Qtrade, Scotia iTrade and BMO InvestorLine, but it lacks many of the features of these more established brokers. Wealthsimple Trade also focuses primarily on its mobile app platform rather than its desktop platform.
Wealthsimple Trade lets you trade certain stocks and exchange traded funds (ETFs) listed on the NYSE, NASDAQ, TSX, TSX-V, and NEO that settle on the Canadian Depository for Securities (CDS) and that meet certain minimum price and volume thresholds.
In simple English, this means Wealthsimple Trade lets you trade most stocks and ETFs listed on Canadian and US stock exchanges. Some stocks and ETFs aren’t available on Wealthsimple Trade, including many penny stocks and even some well-known stocks like Disney (Disney doesn’t settle on CDS). It can be really hard to figure out what is and isn’t available on Wealthsimple Trade; you won’t know for sure until you try to search for the security.
Wealthsimple Trade does not let you trade options, bonds, mutual funds, and GICs.
Most other online brokers don’t have the same trading restrictions as Wealthsimple Trade. If you plan to trade widely and using a variety of asset types, you might want to consider a different broker.
Trading in Foreign Currencies
Wealthsimple Trade makes money by charging you a currency exchange fee.
All accounts are based in Canadian dollars. There are no US dollar accounts. When you buy and sell US-dollar securities, you pay Wealthsimple Trade a 1.5% currency conversion fee to convert from/to Canadian dollars (total 3% for buy + sell).
The 1.5% commission might not sound like a lot, but it quickly adds up if you trade a lot of US dollar securities. Before you open a Wealthsimple Trade account, carefully consider what stocks you might want to buy and whether they are listed on Canadian or US stock exchanges. If you plan to trade a lot of US-listed securities, then you might want to consider using another broker that charges lower currency commissions, like Interactive Brokers.
If you only plan to invest small sums of money in US dollar stocks, then you might actually be better off with Wealthsimple Trade compared to other online brokers. This is because a 1.5% currency exchange fee + commission-free trades might be less than the commission you pay another broker (and that’s without considering how much it cost to get US dollars with the other broker).
The highlights of Wealthsimple Trade are the following:
- Clean and Easy Interface: Weathsimple has a clean and modern interface that is easy to use. Wealthsimple Trade started as only an app, but it’s now has a desktop version. You can create your account quickly and easily through the app and within a few minutes you’ll know how to place a trade.
- Cryptocurrencies: Wealthsimple Trade now has a cryptocurrency section that lets you trade Bitcoin and Ethereum.
- Fees: Wealthsimple Trade is commission-free, meaning that you pay $0 to buy and sell stocks and ETFs. But don’t mistake commission-free for free. As noted above, Wealthsimple Trade charges a 1.5% currency conversion fee when converting Canadian dollars to US dollars and vice versa. A full fee tariff is available here.
- Account Minimums: Wealthsimple Trade does not have any account minimums, so you can open an account with $0.
- Types of Accounts: You can open a TFSA, RRSP or personal (non-tax sheltered) account with Wealthsimple Trade. There are no account maintenance fees. All accounts are in Canadian dollars.
What is Wealthsimple Trade Lacking?
Wealthsimple Trade is a great platform for commission free trading, but it isn’t perfect. A few of the features that Wealthsimple Trade is lacking are the following:
- Delayed Deposits/Withdrawals: You fund your account by linking it to your bank. Transfers from your bank to Wealthsimple Trade take approximately three to five days. (A new feature allows you to instantly access deposits of $250 or less.) The delay in processing deposits can be frustrating if you want to trade on short notice and without planning days in advance.
- No Auto-deposit: Each deposit must be manually initiated. There is no auto-deposit function.
- Only Canadian Dollars: All Wealthsimple Accounts are in Canadian dollars only. There are no US dollar accounts.
- No Dividend Reinvestments: Dividends are automatically added to your cash balance (if a dividend is paid in US dollars, Wealthsimple Trade converts it to Canadian dollars). There is no option to automatically reinvest dividends or enroll in a dividend reinvestment plan (DRIP).
- No Research and Analytics: Wealthsimple Trade offers virtually no analytics or data services to help you research stocks and ETFs. All of your research must take place elsewhere.
- No Margin: You can only trade using the cash that is in your account. Wealthsimple Trade does not offer margin.
- No Phone Support: Wealthsimple is fully self-service. It doesn’t have a call centre to help walk you through a trade.
Is Wealthsimple Trade Right For You?
Wealthsimple Trade is a great do-it-yourself online broker for beginner investors. Setting up an account is easy, and its clean interface means that there is virtually no learning curve before you can start trading (other than figuring out what you want to trade). Best of all, no commissions and no account minimums means that you can get started with $0.
Fans of dollar cost averaging will like Wealthsimple Trade because they can buy small quantities of stocks or ETFs over a period of time without worrying about commission fees eating up each trade.
Wealthsimple Trade, on its own, is unlikely to satisfy advanced investors. The limited functionalities of Wealthsimple Trade, such as a restrictive list of tradable securities, no US dollar account, and no phone support, make other discount brokers with a more comprehensive range of services look a lot more attractive. Wealthsimple Trade can, however, be a useful secondary broker. For example, you can use your primary investment account at another broker to trade US dollar securities, options, bonds etc., while using Wealthsimple Trade as a secondary broker to trade Canadian dollar stocks and ETFs commission-free.
Wealthsimple Trade is a great new addition to the Canadian brokerage market. Maybe, given enough time, Wealthsimple Trade will start a commission-free trend and change the Canadian investing industry.
But before we get too ahead of ourselves, let’s keep in mind what Wealthsimple Trade is. At it’s core, you get what you pay for (or don’t pay for, in this case). Free trading on Wealthsimple Trade is basic, no frills trading. If you want the benefits traditionally associated with brokers, like research reports and US dollar accounts, you should consider looking elsewhere.