Wealthsimple vs. Questrade: A Comparison of Online Investing Services

Wealthsimple vs. Questrade: A Comparison of Online Investing Services

Wealthsimple vs. Questrade: A Comparison of Online Investing Services
Reading Time: 8 mins

Due to recent technological advancements and the advent of discount brokerages, investing online has become quick and easy. What were once a little-known investing tools for tech-savvy investors, obo Advisors are now commonplace, with everyone from active traders to passive investors enjoying improved user interfaces and better user experiences.

Table of Contents

What is Wealthsimple?

Wealthsimple is a Canadian investing platform that offers automated financial planning services. Wealthsimple was founded in 2014 by Michael Katchen; today, it manages over C$5 billion in assets. The company also operates in the US and the UK.

Investment portfolios managed by Wealthsimple employ a passive strategy inspired by Nobel Prize-winning research. In order to accommodate the varying risk tolerances of its large pool of investors, the company has developed low-cost exchange traded fund (ETF) portfolios. The range of portfolios available include conservative, aggressive, balanced and growth portfolios.

Apart from the company’s ETFs, the company also offers DIY investing—a commission-free online brokerage: Wealthsimple Trade. The service currently supports stocks and ETFs trading on the following exchanges:

  • Toronto Stock Exchange (TSX)
  • TSX Venture Exchange (TSXV)
  • New York Stock Exchange (NYSE)
  • NASDAQ

Just recently, Wealthsimple introduced the Wealthsimple Cash Service—a hybrid account that offers very unique saving and chequing account features.

Wealthsimple has the backing of The Power Financial Group, one of the world’s largest financial companies. The company has won several accolades among them is the Webby Award for Best Financial Services website in the world in 2016 and 2017.

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What is Questrade?

Just like Wealthsimple, Questrade is a Canadian online wealth management company that has been in operation for more than twenty years. Founded in 1999, it introduced the concept of low-cost trades for regular Canadian investors. Today, Questrade manages over C$9 billion in assets.

With more than 50,000 new trading accounts opening every year, the company is considered the fastest-growing independent brokerage in Canada. Recently, Questrade introduced its own Robo Advisor, Questwealth Portfolios, whose most significant feature is its low management fees among its competitors. Questwealth employs an active management style.

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How does Wealthsimple work?

Wealthsimple’s digital money management services reach clients in their tens of thousands in Canada, the US and the UK. Its services cost much less in comparison with traditional money managers. Leveraging cutting edge tech, the company seeks to maximize returns as it automates investing in order to enhance customer experience. Investing in Wealthsimple does not require you to be an expert in investor—the algorithm will do the work for you. 

With the steady rise in management fees over the years, research has shown that returns on portfolios have been reduced to the detriment of investors as earnings from market returns for active managers have proved minimal. This has prompted Wealthsimple to reduce investment fees. To do this, the company has made simplified investment \ by employing proprietary algorithms that considers the investor’s investment profile (including net worth, risk tolerance, investment knowledge and financial goals among others). With this information, the company is able to find a customized portfolio mix that best fits the client. The portfolio is designed using low-cost index funds (ETFs) that will help minimize fees, boost long-term returns and are adequately diversified.

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What is Wealthsimple’s investing strategy?

The goal of active investing strategies is to actively generate returns that beat the market and maximize premiums for fund managers. However, active investment rarely generates returns that are worth the fees paid. On the other hand, the goal of passive investing is to earn market returns by holding a mix of assets that represent the market at a lower cost without picking winners.

Wealthsimple believes that passive investing outperforms active investing in the long run. In active investing, investors pay huge fees for skilled fund managers who in the Wealthsimple’s opinion, underperform. Wealthsimple therefore invests the clients’ money using technology and a diversified portfolio of low-cost ETFs. Wealthsimple’s model is based on the Modern Portfolio Theory that was established by the Nobel Laureate, Harry Markowitz. As the funds are diversified globally and on an industry basis, the client’s risk and investment costs are minimized while returns are maximized.

Wealthsimple offers a variety of accounts that are designed to meet the specific needs of its clients. In Canada, they include TFSA, RESP, RRIF, LIRA and corporate investment accounts. These accounts go by different names in the US and in the UK. The company’s portfolio and investment offerings are the conservative portfolios which consist of 30% stocks and 70% bonds, the balanced portfolio which consists of 50% stocks and 50% bonds, and the growth portfolio which consists of 75–90% stocks and 10–25% bonds. Every portfolio type has several index ETFs that guarantee adequate diversification and minimized costs.

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What are the benefits of Wealthsimple investing?

1. Minimum amount

Wealthsimple does not have a minimum threshold that one should meet before beginning to invest. Therefore, a client can begin to invest with any amount that they have, no matter how small. Investment can be made into the Wealthsimple Basic Account, Wealthsimple Black Account or the Wealthsimple Generation Account.

2. Automatic rebalancing

At Wealthsimple, portfolio rebalancing is automated to ensure that your asset allocations remain on track. You therefore, do not have to worry about manual rebalancing every once or twice a year. This helps to make your investment stress free.

3. Personalization

At Wealthsimple, your portfolio is customized to respond to your specific financial needs and level of comfort with risk.

4. Free financial advice

In the event that there is an issue concerning your investment, Wealthsimple’s financial advisors are readily available and can be reached by call, text and email. Financial advice is provided free of charge.

5. Automatic deposits and dividends reinvestment

Wealthsimple provides for scheduling automated deposits into the investment account. This makes the investment process easy even with small contributions and this helps in growing your investment. Also, dividends are automatically reinvested—increasing returns.

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How does Questrade work?

Questrade offers a variety of investment products and has been recognized to be among the best online brokers for new investors. Even though it has its physical infrastructure in Toronto, which is also its headquarters, Questrade carries out its operations online. Investors can buy many investment products on its online platform.

Informed by your investing comfort level, investment goals and risk tolerance, you can trade in stocks (US and Canadian), ETFs, mutual funds, Guaranteed Investment Certificates (GICs), international equities, Initial Public Offerings (IPOs), precious metals and other options. You need a minimum amount of C$1,000 to commence trading with Questrade but you can open an account with less.

Once you have signed up with Questrade, you can make an investment into one or a number of the available accounts. The accounts include the Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP), RIF, Margin accounts and other business investment accounts.

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What are the benefits of Questrade investing?

1. Low Fees

Compared with other popular brokerage platforms such as Direct Investing and Scotia iTrade, the fees paid on services offered by Questrade are consistently low with stock trading at 1% per share.

2. Commission-free ETFs

With Questrade investing, you can purchase ETFs free of charge. You are only expected to pay a small commission when you sell. Bonds and GICs are also commission-free.

3. There is no annual fee

There is no requirement for an annual fee; however, there is a quarterly inactivity fee if the account remains dormant.

4. Mobile Trading App

You can carry out your trading activity using Questrade’s mobile app—available on both iOS and Android devices.

5. Multiple Accounts

With Questrade investing, you have the freedom to invest in multiple accounts. It was also the first of the top Canadian brokerages to allow holding US Dollars in registered accounts.

6. Account transfer fee rebate

Questrade rebates the transfer fees that you incur when you transfer your account from another institution to Questrade. The rebate can go up to a maximum of C$150 per account.

7. Versatile trading platforms

You can trade on IQ Web (browser-based) and IQ Edge (a downloadable desktop platform). These are Questrade’s two main trading platforms.

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What are the differences between Questrade and Wealthsimple Trade?

1. Trading fees

Wealthsimple Trade charges no fees for buying and selling stocks and ETFs except when you make USD trades where you are required to pay a 1.5% currency conversion fee. Questrade on the other hand, charges a minimum of C$4.95 per trade when selling ETFs to buy or sell stocks. It also charges a C$19.95 quarterly inactivity fee which is only waived if your account balance is C$1,000 or more or when you have transacted at least once in the last three months.

2. Investment products

Wealthsimple trade offers only two products, stocks and ETFs. Despite these assets being available on the Wealthsimple trade app in their thousands, not all Canadian stocks and ETFs are listed. On the other hand, Questrade offers most of the popular investment products among Canadians. These include ETFs, GICs, bonds, stocks, mutual funds, initial public offerings and other options.

3. Minimum investment

You need only C$100 to start trading on your Wealthsimple trade account. There is no requirement for a minimum account balance. You can actually open an account with C$1. On the other hand, you need a minimum balance of C$1,000 to commence trading on Questrade.

4. Trading platform

Wealthsimple’s trading app has a clean interface and is easy to navigate. Their trading platform is unavailable on desktops and is separate from the Wealthsimple Invest account (the Robo-advisor service). Contrary to this, Questrade has a web app (IQ Web) whose functions are across all devices, a mobile app and an IQ edge which is a downloadable desktop software. While Questrade’s mobile app does not rate as highly as Wealthsimple, its web platform has an excellent rating.

5. Market data

Wealthsimple trade gives free stocks and ETF price data which can delay up to 15 minutes. A basic Questrade account on the other hand, comes with free access to snap quotes. However, clients need to pay C$19.95 to C$89.95 monthly in order to access their streaming real-time data.

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What are the similarities between Wealthsimple and Questrade?

1. Account options

Both Wealthsimple trade and Questrade provide the three most popular investment accounts—TFSAs, RRSPs and personal non-registered accounts.

2. Account safety

Both Questrade and Wealthsimple Trade are regulated by the Investment Industry Regulatory Organization of Canada (IIROC)—so your money is safe. They are also both members of the Canadian Investor Protection Fund (CIPF), which insures your investments for up to a million dollars in case your provider becomes insolvent!

3. Socially Responsible

Both services also offer socially responsible investment versions of their portfolios, which invest in companies that prioritize environmental and social concerns. For example, Wealthsimple offers Halal portfolios, for those who adhere to Islamic law.

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Wealthsimple vs Questrade Portfolios—Which One Should I Choose?

Choosing whether to invest with Wealthsimple or Questrade should be based on careful consideration of the benefits of each company. Apart from the trade comparison, comparing the two companies’ portfolio and their online wealth management services provides a basis upon which the investment decision can be made. The following can inform your decision making:

1. Management fees

Wealthsimple has a tiered fee structure based on the size of your account. The annual fee for accounts operating below C$100,000 is 0.50%. This percentage drops to 0.40% as soon as your combined portfolio value goes beyond C$100,000. It provides for huge savings when compared to charges on equity mutual funds. Questrade on the other hand, has a charge of 0.25% for balances below C$100,000 and 0.20% for accounts with more than C$100,000.

2. Minimum investment

Wealthsimple has no requirement for a minimum balance. For Questrade, you need at least C$1,000 in your account for your investment to commence. A bonus for Wealthsimple—if you transfer at least $5,000 in funds from elsewhere, they’ll pick up your transfer fees!

3. Investing strategy

Wealthsimple’s investment strategy is passive while Questrade’s is active. Passive investment has been proved to be more efficient and effective compared with active investment.

4. Account types

Wealthsimple Invest offers all the basic accounts. These include RRSP TFSA, LIF, RESP, PRIF, LIRA, personal non-registered and business investment accounts. They also have an offer of a hybrid (savings and checking) account. This will be one of its kind when it is fully rolled out.

5. Investment options

Both Wealthsimple and Questrade have offers for portfolios that meet a variety of levels of risk tolerance such as conservative, balanced and growth portfolios.

6. VIP perks

As soon as your account exceeds C$100,000, Wealthsimple upgrades it into the Wealthsimple Black category. This enables you to receive free access to VIP perks which include financial planning sessions, tax-efficient funds and a lower management fee at 0.40%. When your account exceeds C$500,000, you receive personalized and comprehensive financial reports. You will also receive financial planning and 50% off a Medcan Health Plan. Questrade doesn’t provide for any of these VIP perks.

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Verdict

Whether you choose Wealthsimple or Questrade, you cannot go wrong provided your aim is to move away from your bank’s high management fees. Both offer superior customer service experiences, and have an outstanding reputation for customer service, offering support over the phone, through chat, or by email.mSo what’s the verdict? You should make a decision based on your personal financial needs.

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