With Wealthsimple, and roboadvisor’s in general being relatively new, you are probably asking “Is Wealthsimple Safe?” this question really can be taken several different ways:
- Is it safe from an investment perspective?
- Is it secure and safe to use?
- Is their Cash account product safe?
What is Wealthsimple?
Wealthsimple started as a roboadvisor, where put simply, they take your money and invest it based on your risk tolerance and rebalance frequently. Since then, they have expanded into Crypto, Bank Accounts and online trading to name a few. They currently have over $3 billion dollars in assets under management, making them one of the largest roboadvisors in Canada since starting in 2014.
Is Wealthsimple safe?
Wealthsimple is safe, if you have selected a portfolio that aligns with your risk tolerance, then long-term your assets should grow. Wealthsimple is not investing in anything that would be considered outside the norms of a diversified portfolio. One of the biggest benefits of Wealthsimple is the instant diversification it gives you, which can help lower risks such as currency, geography, and interest rate risks to name a few.
Another piece of protection is that Wealthsimple is a member of the Canadian Investor Protection Fund (CPIF). Which provides certainty that if Wealthsimple were to go out of business, you would get your investments out (with certain limits). Also, note that this covers you in the event Wealthsimple goes bankrupt, it does not protect you from market losses (i.e., the value of your account decreases due to the underlying funds decreasing in value). This coverage is automatic and you as the investor do not have to do anything to opt in.
Wealthsimple also uses a clearing company to hold their investors assets, Apex Clearing Corporation. Which is an independent corporation that is a member of the Securities Investor Protection Corp (SIPC), which protects the securities (up to $500,000 per account) of Wealthsimple’s customers.
Is Wealthsimple Cash safe?
Wealthsimple has a product called Wealthsimple Cash that is essentially a high interest savings account. Originally it was not CDIC insured, however they now are, meaning balances up to $100,000 per account are covered. It is important to note that the balances on your Cash account appear not to be held by Wealthsimple themselves. As they state on their website that they are held in trust by a CDIC member institution. Which makes sense as operating bank accounts is not their primary business but one that is probably designed to bring clients in and use their “Invest” product. To learn more about CDIC insurance read our article here, we also did a more in-depth article on Wealthsimple being CDIC insured which can be located here.
