Investing

WealthSimple RESP experience

  • Last Updated:
  • Dec 10th, 2019 6:45 am
[OP]
Jr. Member
Jun 23, 2012
118 posts
14 upvotes
Calgary

WealthSimple RESP experience

I did not see a specific thread on this so decided to post my experience. I have has Questrade as my broker for wife and I's TFSA, RRSP accounts, and in general have been happy with their service. Both my wife and I have DB pensions, and while we take investing in TFSA, RRSP seriously, in general we know that our retirement will be funded through DB.

The idea of auto-pilot investing was intriguing, and we have been thinking of testing Wealthsimple for some time now. On the birth of our child, we decided to take the step and start his RESP with Wealthsimple. The initial sign up process was a breeze, as well as the auto-bank account linking feature. Once our initial deposit was made, the CEGS grant was automatically applied and deposited in a few weeks. For now, we are very happy with this, and plan on continuing with auto-deposit feature. The interface, ease of use and auto-invest is all really well done, and makes the entire investing experience a breeze.

Over the long term (10+years), I'm unsure how I would feel given that my portfolio choice doesn't exactly line up with Wealthsimple, in particular their decision to start using low volatility products. While appealing, I understand that low-vol products depend heavily on construction of the underlying portfolio, and I have not seen any documents from Wealthsimple on particular choice of these products was made over other competing products. I also feel that it may benefit their ability to keep clients during deep equity drawdown, however, I would like to see the benefit to portfolio. Overall, this is a minor concern, and the impact compared to auto-invest should be little.
5 replies
Deal Addict
User avatar
May 11, 2014
4427 posts
5161 upvotes
Iqaluit, NU
While the simplicity feature of a roboadvisor is attractive, I do not recommend them for people who already are comfortable with DIY purchases. Using a service such as Wealthsimple incurs the 0.3-0.5% surcharge per year.

Assuming the MER is 0.5% (as RESP balances tend to not reach $100k), Investments earnIng 5%, no provincial granta and you do the most efficient contribution system
year 0 $16500
years 1 to 13 $2500
Year 14 $1000
Year 15 to 18 zero

Questrade buyIng your own funds should be around $115967.76. Wealthsimple? $107004.04. Not a bit difference overall, but a few thousand dollars in difference. Index ETFs are more or less the same product so buying similar will yield a difference very close to the fee difference. And of course you could.buy the exact funds Wealthsimple does as well. But as you mentioned you do not have the freedom to choose other investments.

Of course you can make the argument that the few thousand dollar difference is worth the time saved, but if you are already comfortable with buying your own ETFs, I would be cautious of using a roboadvisor. Remember, even rebalancing by selling would trigger at most $30-40 in fees every couple years but still can save you thousands in this scenario.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
[OP]
Jr. Member
Jun 23, 2012
118 posts
14 upvotes
Calgary
Thanks xgbsSS. I'm certainly comfortable with DIY purchases and have done it for over 10 years. Cost is only part of the decision to go with Wealthsimple. I wanted something automatic, as well as wanted to follow the idea of being broadly right than precisely wrong. Your approach assumes perfect record for 18+ years, and while many people stick with it, I'm really starting to feel that even one mistake during the entire investment horizon can end up costing you dearly, and I certainly do not wish to make that with a RESP.

The differences you point out, could easily be much larger due to timing of purchase luck, or minor portfolio variances. Ultimately, fee matters, but only to a certain extent, especially when it is fraction of a percentage point.
Deal Addict
User avatar
May 11, 2014
4427 posts
5161 upvotes
Iqaluit, NU
Rhinox87 wrote: Thanks xgbsSS. I'm certainly comfortable with DIY purchases and have done it for over 10 years. Cost is only part of the decision to go with Wealthsimple. I wanted something automatic, as well as wanted to follow the idea of being broadly right than precisely wrong. Your approach assumes perfect record for 18+ years, and while many people stick with it, I'm really starting to feel that even one mistake during the entire investment horizon can end up costing you dearly, and I certainly do not wish to make that with a RESP.

The differences you point out, could easily be much larger due to timing of purchase luck, or minor portfolio variances. Ultimately, fee matters, but only to a certain extent, especially when it is fraction of a percentage point.
The difference when sticking prudently with purchases should even out over the 18 years (if you bought at a high price one month, you probably at some point will randomly.buy at a lower price in another month later on). If you stick to a plan, especially if sticking with ETFs, IMO it would be very difficult to make a mistake.

To me fees dont matter unless comparing index-based funds as essentially the difference between funds should really only be fees. A mark of active fund performance is often when the performance is better prior to fees. So for myself, if I were to look at a mutual fund (eg. Mawer Balanced) and I see outperformance despite a higher MER (around 1% vs fractions for ETFs), I am OK with the difference in fees. However the differences between equivalent index funds shouldnt be different other than for fees, so even a small difference like the 0.30~0.5% is significant In my opinion especially as that is always a constant.

But I can't fault wanting an automated system for purchases though. This could change with brokerages and I am hoping they start implementing services such as this. Regardless of whether the fee is worth it, you are investing in a prudent method for your child and regardless it should do well compared to other products out there.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Addict
User avatar
May 11, 2014
4427 posts
5161 upvotes
Iqaluit, NU
One interesting aspect with Wealthsimple is the existance of the Halal investment fund. This fund is 100% equity, but doesnt invest In haram industried which would include alcohol, tobacco, casinos, tourism etc.
While you wouldnt have exposure to these industries, for the most part, you get decent exposure to most things, but the best part when talking to WealthSimple is that there is no management fees as WS just buys stock and eats the fees via the surcharge they tack on.
My sister and her husband are muslim and decided this route for my nephew, but their non-muslim friends decided to go this route after hearing about it as it is 100% equity (somethIng not offered with WS's other portfolios) and zero fees other than the surcharge charged by WS.
Support your local Credit Union!

Sask Pension Plan Upto $6600/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
[OP]
Jr. Member
Jun 23, 2012
118 posts
14 upvotes
Calgary
Thank you. I did not know about that! I'm not muslim so did not even look at the portfolio choice, but certainly interesting to know.

I principally agree with you in that if similar level of automation service was available for cheaper, perhaps through a brokerage, I would switch :)

Top