Wealthsimple vs Wealthfront (2020): Is A Human Advisor Worth The Higher Fees?

Wealthsimple vs Wealthfront Compared

Can a cheaper, fully-digital investing service beat the good old human touch? In this Wealthsimple vs Wealthfront comparison, we examine the two and put purely digital investing to the test.

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Despite all the insurance, laws, and regulations, entrusting someone with your retirement savings is not a decision one can make lightly.

Luckily, the world is now full of robo-advisor companies that can manage and grow your money for a fraction of the price a traditional financial manager would ask for.

The trading algorithms these new companies use may not have emotions or aspirations, but they get the job done.

That’s exactly why they’ve become so widely used as of late. Well… That and also because robots don’t need a paycheck.

This article will describe two such companies, one with a personal human advisor for clients, and the other with a fully digital investing platform.

Everyone has better things to do than to check their portfolio every day, which is one more reason why these things are so handy.

Aside from being a low-cost way to invest, using these robo-advisors is near-effortless because of their intuitive and simple platforms.

Making money passively, with insurance, and without thinking about deposits or shifts in the market sounds great, but how does it work?

Well, we are here to answer that question.

Let’s see how robo-advisors work, and how these two companies cater to your preferences and investing aspirations.

FeaturesWealthsimpleWealthfront
Minimum Deposit$0$500
Annual Fees0.5% annually, 0.4% for accounts with more than $100,0000.25% annually
Tax Loss HarvestingYesYes
Portfolio RebalancingYesYes
Provision of 401(k) AssistanceYesNo
Ideal ForBeginner investors, Investors who want an expert human advisor, Young investorsBeginning investors, Intermediate investors, Young investors, Smartphone users, IRA investors, and Goal-oriented investors
Promotions$10,000 in assets managed for free$5,000 in assets managed for free

Wealthsimple Overview

Wealthsimple Banner
Wealthsimple’s features include no account minimum and advice from human financial advisors.

Fast Facts and Features

  • Account Minimum: $0
  • Fees: 0.5%, 0.4% for users with $100,000+
  • Ideal for: Investors who want a human advisor
  • Automatic rebalancing: Yes
  • Tax-loss harvesting: Yes
  • Advice: Human advice is available
  • Available Promotion: $10,000 managed free for one year

Founded in 2014, Wealthsimple is a financial management firm, well-known for its robo-advisor services available in Canada, the US and the UK.

The company offers an easy-to-use automated investing platform that’s geared toward millennials, and currently has over 175,000 users with a total of over $5 billion in assets.

This Toronto-based wealth management firm is owned by the Power Company of Canada (83.2%) and provides clients with a comprehensive automated investing platform as well as human advisors.

This Canadian robo-advisor provider arrived in the US in late 2017 and has since provided an intuitive automated investing service, suitable for new investors who want to grow their portfolio without needing to invest much time and effort.

Interested in a Wealthsimple account? Get started here.

Wealthfront Overview

Wealthfront Logo
Wealthfront is known for a number of features, including its low fees.

Fast Facts and Features

  • Account Minimum: $500
  • Fees: 0.25% annually
  • Ideal for: New investors
  • Automatic rebalancing: Yes
  • Tax-loss harvesting: Yes
  • Advice: No human-assisted consultations

Since its founding in 2008, this California-based company has become one of the country’s first and most popular robo-advisor providers.

Wealthfront has created a fully-digital automated investment service that strives for a combination of accessibility and customizability, suitable for beginner investors.

The company is considered to be among the most competitive robo-advisors and currently has around $20 billion of assets under management.

Wealthsimple vs Wealthfront: Financial Planning

An investor with a plan will always do a better job than an investor without one. That’s why all robo-advisors have goal-setting systems, where your strategy is created with the help of the platform.

These two companies have very different approaches to planning, as one is detailed and fully-digital, while the other is more simple, yet human-assisted. Still however, both made our list of the best robo-advsiors – so they obviously have a history of demonstrated success. Let’s take a look at how they fare when pitted against each other.

Wealthsimple – A Hybrid Advisor System

As you can probably tell from the name, Wealthsimple tends to be non-complicated.

The first thing you need to do after creating an account and making an initial deposit is coming up with a strategy that your robo-advisor will then put into action.

Clients get unlimited sessions with human advisors who will help them choose an ideal strategy for one or more financial goals.

Wealthsimple Human Advisors
Wealthsimple offers financial guidance from the experts — which is not the ‘norm’ in the robo-advisor world.

For example, you can set buying a house, saving for college and saving for retirement as separate plans, which will be managed simultaneously. Quite handy indeed.

When you come up with a plan with your advisor, the company will invest your money in one of 10 portfolio types which are made according to the Nobel prize-winning Modern Portfolio Theory.

The good thing about these 10 portfolio options, is that they are all proven combinations of assets that frequently provide projected returns to users. The downside is that they can’t be customized.

Wealthsimple Invest Dashboard
Wealthsimple offers a number of investment options for retirement.

Your portfolio of choice can be changed into one of the other 9 at a moment’s notice, and it will be automatically rebalanced on a regular basis.

So, there’s no need to be concerned about managing your portfolio or to worry whether you’ve chosen the best one. Every imperfect planning decision can be corrected quickly and easily.

To keep your account growing without a hassle, you can set up automatic monthly deposits that will be transferred from your bank to the platform regularly, bringing you closer to getting that house or car you like.

Wealthsimple Investment data
With Wealthsimple, you can establish monthly deposits to ensure periodic contributions.

One more tool worth mentioning is the prediction chart on Wealthsimple’s website, which is very nice as it can give new investors rough estimates of how much they can save in a limited timeframe.

Wealthfront – Fully-Digital And Customizable

Unlike Wealthsimple, Wealthfront’s planning system is fully-digital and provides a bit more customizability.

The planning process that can start you on your investment journey is appropriately called “Path”, and this is how it works.

First, you need to set one or more goals like buying a house, saving up for college, retirement, etc.

Then you’ll input some parameters like your age, monthly income, risk tolerance, and all that, after which Path will give you a projection and a recommended portfolio asset allocation scheme.

You can tweak the parameters a bit until the platform makes a projection that looks good. After that, Wealthfront will invest your money and create a portfolio of your choosing, bringing you a step closer to reaching your goals.

Wealthfront Path Planning Tool
With Wealthfront, you’ll be able to customize your investment strategy to account for criteria such as age, financial goals, income, and more.

If the portfolio isn’t growing as expected, the platform will send you an alert and recommend a course of action. Maybe you’ll need to change the asset allocation in your portfolio or pool some cash from one financial goal fund into another.

This kind of system is made to keep responsibility off your back and let you enjoy life without checking your portfolio’s progress five times a day, which is exactly what we all would like to have.

A fully digital planning system would be better if it displayed all your financial info in one place, which is why Wealthfront’s platform has account aggregation.

This means that you can link all your financial accounts, like your bank account, to Wealthfront. This will give you a holistic view of your finances, which is a handy perk that all investment platforms should have.

Wealthfront Financial Data Example
Wealthfront enables its users to link all of their financial accounts to Wealthfront.

All in all, Wealthfront has managed to make an easy-to-use platform with a bundle of handy features customizable portfolios. However, this is just a brief overview of the platform.

If you like how the company looks thus far, check out our full Wealthfront review to see if it ticks all the boxes for you.

Draw. Both of these platforms are very user-friendly and offer proven investment methods to clients. The main difference is that Wealthsimple has human advisors, which can help a lot in easing new investors into the robo-advisor game. Wealthfront has an advantage as well, as their fully-digital platform offers more detailed planning and customizability. Therefore, it’s very hard to compare these two services. Where one falls short, the other shines, and vice-versa.

Wealthsimple vs Wealthfront: Fees Compared

Robo-advisors have democratized the wealth management industry by lowering the cost of having a financial advisor.

Since robots don’t need paychecks, many companies are trying to outmaneuver each other by lowering their prices, and the competition is fierce.

Some charge low management fees while others have special discounts and interesting money-saving features. Let’s take a look at how much these two would cost you, and if it pays off.

Wealthsimple

Wealthsimple isn’t difficult to get used to, but it’s not cheap either.

The minimum initial deposit is a lovely $0 but the base management fee is 0.5%, which is higher than what the top robo-advisors today charge, and two times higher than Wealthfront’s offer.

Luckily, there is a bucketload of special promotions that can lower this cost by giving you free management on a certain amount of money.

For example, inviting a friend will get you $10,000 managed for free. Signing up, setting automatic deposits, downloading the app, setting up two-step authentication, etc. are all ways to get anywhere from $100 to $10,000 managed for free.

Keep in mind, though, that these bonuses aren’t permanent. They only last for 12 months, which is not especially mind-blowing considering that these long-term investments are something that should go on for many years.

However, there is a way to escape the high 0.5% management fee. If you have $100,000 or more in your account, you’re eligible for a Wealthsimple Black Account, which has a 0.4% fee, as well as some other perks.

Wealthsimple Fees
When it comes to Wealthsimple’s fees, the more you invest – the more you save.

Black account users also get tax-loss harvesting, which means that the company will sell uderperforming assets at a loss and buy other assets. This is useful, as taxes would make a dent in your balance otherwise.

Also, Wealthsimple isn’t perfectly egalitarian, as UK clients have even higher fees than US and Canada-based users. The basic management fee for UK-based users is 0.7$, whereas Black Account holders get 0.5%.

All in all, the Canadian company has relatively high prices, especially when compared to the likes of Wealthfront and Betterment, which are the top-dogs of the US robo-advisor world.

Check out our Betterment vs Wealthfront comparison to see how this battle of giants is shaping the industry.

Wealthsimple Smart Savings - Wealthsimple offers a high-yield savings account, with 2.4% annual interest.

Smart Savings Program

If investing seems a bit risky in today’s turbulent market, you can always stash your cash in Wealthsimple’s high-yield savings account.

Depositing your money here will yield a 2.4% yearly interest rate, which is good, but is lower the inflation rate is about 2.5% per year.

Keep in mind that the Federal Reserve has lowered interest rates recently, which is why most banks are following suit, offering rates lower than 2%.

However, despite this trend of lowering rates, Wealthfront too has upped its offer to stay competitive, as we will see in a moment.

Wealthfront

All new users start with a competitive annual management fee of 0.25%, which is two times lower than Wealthsimple’s offer. However, Wealthfront has a $500 minimum initial deposit, which is not the lowest, but not that expensive either.

Wealthfront also offers tax-loss harvesting for users with $500 or more on their accounts, as well as even more cost-reducing perks.

One interesting strategy that Wealthfront uses to make you money is Direct Indexing. In essence, instead of buying ETFs and mutual bonds, the company will make an index just for you.

This means they will buy individual stocks and put them in your index to avoid taxes and other costs associated with buying products like ETFs. This technique will boost your yearly returns, so kudos to Wealthfront.

Unfortunately, good things don’t come cheap, and direct indexing is only for users with $100,000 or more in assets.

Wealthfront’s low management fee is what makes this service good for new investors, but there are also some great perks for high-balance clients, which we will talk about in a minute.

Wealthfront Cash Account

As is the case with Wealthsimple, you can also put your cash in Wealthfront’s high-yield savings account. The cash account currently has a 1.27% interest rate which has recently been lowered from 2.57%, disappointing many customers.

Wealthfront Cash Account
Wealthfront’s high-yield savings account features an annual interest rate of 2.57%.

These interest rates tend to jump up and down all the time, especially in today’s hectic market,. If you’re looking for a good place to stash your cash, make sure to check the interest rates beforehand, as they can change very quickly, as we have seen with Wealthsimple.

Winner: Wealthfront. The platform’s management fee is half of what you have to pay Wealthsimple. Sure, Wealthsimple has promotions that can lower your cost, but they are temporary and limited. Both robo-advisors offer discounts for users with large balances, but Wealthfront comes out on top there as well due to its superior cost-reduction services.

Other Features

Wealthsimple

Wealthsimple Roundup FeatureRobo-advisors tend to come up with creative solutions to help their clients’ on their investment journey. One such solution is the Round-Up feature.

Here’s the idea. Whenever you make a purchase using a linked credit/debit card, Wealthsimple will round up the amount to the next dollar and automatically deposit it onto your account.

For instance, if you buy an orange juice for $4.40, the company will take $0.60 from your card and put it to work on your Wealthsimple account.

This is a great way to save money without even noticing it, and other robo-advisors like Acorns are starting to use this method successfully along with many other innovative features.

Wealthsimple has a very interesting feature called Dividend Reinvestment Program, which goes by the picturesque acronym DRIP.

Some companies offer shares that pay dividends on a monthly basis, and buying such shares can give you a certain monthly income.

DRIP allows you to set up your account to automatically funnel monthly dividend income into buying more of these stocks. Due to its simple nature, this is definitely a feature that dividend investors shouldn’t overlook.

As you can expect from a Canadian company, Wealthsimple is very environment-friendly, which is perhaps why they provide socially responsible investing.

This program allows users to buy stocks in “green” companies. These companies are listed on the platform, and you can take your pick to make a list of those you would like to invest in.

For clients who adhere to Islamic principles, there’s a feature called Halal Investing. This means you can invest in companies that don’t profit from loans or any other activity forbidden by Sharia Law.

A feature like this is rare in the industry, and without it, you would have to conduct a lot of research to see if a company is making profits in ways that are not approved by Islamic teachings.

All in all, Wealthsimple has a wealth of simple, yet innovative features that you will likely not find in this combination anywhere else.

However, to keep this article straightforward and fast-paced, we haven’t reviewed the company’s full offer here. Check out the full Wealthsimple review to see if this robo-advisor has something else you might like.

Wealthfront

As soon as you open an account, you get access to Wealthfront’s signature set of features called PassivePlus. As your portfolio grows, something new and interesting will spring out of this box of surprises.

As we already mentioned, tax-loss harvesting starts at $500, but the real value of this robo-advisor becomes more apparent if you have a large portfolio.

At $100,000 clients get services like direct indexing and risk parity. All of these services will noticeably lower your costs, so you’ll probably see a pleasant increase in profits once you reach the 100k mark.

Wealthfront PassivePlus
Wealthfront’s PassivePlus comes with a number of benefits, including tax-loss harvesting.

You also get access to socially responsible investing at this point. The platform will allow you to choose stocks from a list of “green” companies, which will then be bought for you.

However, using this feature isn’t as effortless as Wealthfront’s platform tends to be in general. To add them to your portfolio, you have to manually pick out the companies you like and even do research on your own.

Things get even better at the $500,000 point because Smart Beta comes into play. This is an advanced investment service, which means your money will be invested with more care and analysis, yielding better results than before.

These features are a welcome addition to Wealthfront’s already well-received offer, but there are even more driven robo-advisors loose in the world.

One such company is Betterment, which is the robo-advisor pioneer and one of the most popular modern wealth managers today.

The battle for the no. 1 spot is nothing if not interesting, so check out the Betterment vs Wealthfront comparison to see if one these financial advisor giants suits your preferences.

Winner: Wealthfront. Wealthsimple’s set of interesting and rare features like round-ups, and Halal investing is definitely valuable, laudable, and profitable for investors up to a certain point. Also, the dividend reinvesting program is fantastic for users who want a dividend-generating portfolio. On the other hand, Wealthfront’s discounts can increase long-term profits, which is the main reason why people sign up for a robo-advisor service. So, Wealthfront is likely a better choice for most long-term investing needs due to its cost-reducing features.

Customer Service

Wealthsimple’s human advisors are there to help you out with most things, but aside from them, you can reach the customer service by phone and email.

Phone lines for the US clientele are open from 9 a.m. to 8 p.m. ET from Monday through Thursday and from 9 a.m. to 5:30 p.m on Friday. The Canadian call centers open an hour earlier, and the UK lines are open from 9 a.m. to 7 p.m.

There is no live chat option on Wealthsimple’s website and platform, so email is the only alternative to a phone call.

We send Wealthsimple’s customer support a simple email asking them if we can create a Wealthsimple Canada account as a US citizen. The reply came full 2 days later and answered our question without fault, which is the usual waiting time for robo-advisors.

Wealthsimple Customer Support Email
Our inquiry to Wealthsimple took two days to receive a response.

Wealthfront is also only available via phone and email. The phone agents can be reached from Monday through Friday from 7 a.m. to 5 p.m. PT and the usual waiting time is 2 minutes, which is pretty quick.

The phone representatives are licensed professionals who can answer most questions and the same can be said for email support.

We sent them a simple email asking about the PassivePlus program. The response came just 3 hours later and had a helpful answer along with some useful links relevant to our question.

Wealthfront Email Support Reply
Our email to Wealthfront prompted a response within an impressive three hours.

Winner: Wealthsimple. The platform has a human advisor you can get in touch with, which is a great boon. Aside from that, these companies offer very similar customer support. Wealthfront’s representatives seem to be quicker. However, Wealthsimple’s human advisor adds a level of value that Wealthfront’s customer service doesn’t have.

Security

Wealthsimple is protected by Securities Investor Protection Corporation (SIPC) through Apex Clearing, which covers US-based investors with up to $500,000 in case the company goes bankrupt or mismanages your money in some major way.

The role of financial protector is played by ShareOwner in Canada and SEI Investments in the UK. Canadians have it better off, as they get up to CAD 1,000,000 coverage from CIPF, while UK clients only receive up to £85,000 from the FSCS.

Much like Wealthfront and most other robo-advisors, Wealthsimple has 256-bit SSL encryption and two-step authentication via a text message.

Wealthfront has the same level of protection as its competitor with up to $500,000 coverage provided by the SIPC. Many wonder: is Wealthfront really FDIC insured? The answer is yes: Wealthfront offers FDIC protection up to $1,000,000 for cash accounts.

Keep in mind that this protection doesn’t stand if you lose your money due to changes in the market. For all robo-advisors, this protection is only provided in case the company you’re investing with goes bust or loses your money somehow.

Draw. Both companies offer similar level of protection to users. This is not uncommon since all robo-advisors are regulated by the same group of institutions.

Bottom Line – Which Investment Service Is Better for You?

Investors who feel more comfortable with a human advisor will probably value Wealthsimple’s hybrid advisor system. To top that off, the company has a very easy-to-use platform and a set of interesting features like round-ups and the Halal account.

Wealthfront doesn’t offer the services of human advisors but its competitive prices and cost-lowering features are great for users’ long-term returns. What’s more, the customizability of Wealthfront’s platform might be more suitable to some investors than Wealthsimple’s 10 fixed portfolios.

Choosing between these two robo-advisors will probably come down to choosing between a human advisor and lower costs for the most part.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).