Wealthsimple: Meet the UK's newest robo advisor

Most of us aren’t experts in the world of stocks, shares and bonds, so investing your hard-earned cash can be pretty daunting - particularly for first timers. For decades, UK consumers would lookup the name and telephone number of a local financial advisor, for the reassurance of having a qualified professional to talk through your options. After all, few of us have the time, inclination (or sometimes nerve!) to pick and manage our own portfolio.

But before you go down the old-fashioned route, there’s now another option for the uninitiated investor: Robo advisors. They might have sounded distinctly dodgy a couple of years ago, but robo advice has now come of age - or at least reached its adolescence - with numerous players in the UK market and thousands of investors trusting these new kids of the block with their money, won over by the lower fees and increased convenience they offer.

Popular UK operators include Nutmeg, Moneyfarm and Wealthify, but we wanted to take a look at one of the newer entrants into the UK market – Wealthsimple - to see what it has to offer and how it compares.

What is Wealthsimple?

Launched in 2014 in Canada, Wealthsimple describes itself as a digital investment manager that helps people to achieve their financial goals, whether that's saving to buy a home, investing for retirement or building a rainy-day fund. The company only appeared in the UK last year, however it is already pretty established in Canada and the US, with 75,000 customers globally.

Like other robo advisors, Wealthsimple uses the power of technology to replicate the long-term investment management offered by financial advisors, but without the high fees and no minimums on how much you can invest. This is in keeping with its mission to make investing transparent, low-cost and accessible to anyone, no matter their age or net worth.

What products does it offer?

With Wealthsimple, you can invest in a stocks and shares ISA, a Junior ISA (JISA), or a personal account, which is like the stocks and shares ISA but without the tax benefits of the ISA wrapper. There is no pension option yet, however Wealthsimple is also one of the only roboadvisors to offer a Socially Responsible Investing Portfolio, which means that your money will be invested in companies that prioritise things like low carbon emissions, fair labour standards and cleantech innovation. To take advantage of this, you must invest a minimum of £5,000.

What are the fees like?

Charges are 0.7% for investments of up to £100,000 and for more than that the fee drops to 0.5% with the Wealthsimple Black service. As with all robo advisors, this is significantly lower than those charged by most financial advisors (usually between 1% and 2%). And Wealthsimple also compares very favourably with other robo-advisors. For example, Nutmeg and Moola both charge 0.75%.

What’s the account set-up like?

You can set up your account via the Wealthsimple website or mobile app and we love the design of both, finding them clean, accessible and easy to navigate, with minimum text to wade through. The set-up process is also simple and straightforward, with a number of questions about why you’re investing, for how long, your attitude to risk and to get some personal details. They say this only takes five minutes and that felt about right, plus easier and quicker than other robo advisors we’ve tried. Minimum fuss for those who are short on time and attention.

Following the questionnaire, you’re allocated a risk level and receive your portfolio recommendation based on that, including a rundown of the specific funds that will be included. This isn’t something that other robo advisors offer until after you’ve invested, so this bodes well for transparency and overall customer experience.

When it comes to filling your online piggy bank, you can choose to transfer funds from an existing investment account, and if you transfer over £5,000 then Wealthsimple will cover any transfer fees. Alternatively, you can start a new account, transferring your funds with a debit card, bank transfer or with regular contributions.

Another great feature is that if you do want to speak to an actual human, Wealthsimple does give you the opportunity to arrange a call with an advisor. Basic advice is free, or you can pay extra if you’d like a more detailed advice. This isn’t something that any of the other robo advisors offer, giving valuable reassurance to those who need it, and marrying up the human touch with the automated service.

How is your money invested?

Wealthsimple’s investment strategy is based on Modern Portfolio Theory, introduced by economist Harry Markowitz (who won a Nobel Prize, no less!) prioritising diversification and passive management. That basically means that your investment is spread across a diverse range of assets to reduce the risk, and that buying and selling of assets is kept to a minimum, again reducing risk while benefiting from long-term trends in the market.

Your cash is also invested based on your Wealthsimple risk profile, of which there are three types - Growth, Balanced and Conservative - incorporating levels from one to nine. Your portfolio is automatically balanced on a daily basis, in response to market price changes, deposits, withdrawals and changes to your risk profile, to ensure the balance of asset classes remains consistent and up-to-date.

And the performance?

Finally, the question on everybody’s lips: how much money are you going to make?! Well, as with any investments, predicting returns accurately is impossible, and as Wealthsimple hasn’t yet been around for 12 months, it isn’t allowed to publish its past performance either. However, this should be available imminently as it reaches its first birthday in September.

However, Wealthsimple’s approach of passive investing — tracking the market over time using a diversified portfolio — beats active investing 96% of the time.

Conclusion

If you’re a first-time investor, or you’ve been stung by high fees with a traditional financial advisor, then Wealthsimple definitely offers a good alternative. It’s by no means the only robo advisor on the market, but competes well in terms of fees, product offering, and we were particularly won over by its user-friendly design and ease of set up. Also, look out for the super useful content on its website and in the app, if you fancy getting more clued up on managing their money.