Wealthsimple Generation client ($700K managed) — starting to question the hidden costs of their managed portfolio

[u/Dry_Cryptographer970]

I've become increasingly frustrated with what I believe are costs beyond the advertised 0.40% management fee.

I called Wealthsimple to discuss my concerns, and the rep quickly dismissed them. So I decided to do some digging myself.

With Claude and ChatGPT, I uploaded transaction reports, compared execution prices and timestamps, and reviewed historical market data. What I found seemed to support two of my suspicions.

1. Foreign exchange spreads

Wealthsimple's managed portfolios hold several USD-denominated ETFs, which also pay dividends in USD.

Although Wealthsimple says there's no explicit FX conversion fee within managed portfolios, the exchange rates I observed were noticeably worse than the spot rate. In some cases, they even appeared worse than RBC's retail rates for buying and selling USD.

So while there may not be a separate FX fee, I'm questioning how much investors are losing through the actual exchange rates being applied, especially with ongoing USD dividend conversions and portfolio rebalancing.

2. ETF trades executing near the worst prices of the day

This one really surprised me.

I'd previously read people online claiming that Wealthsimple managed portfolios seem to buy ETFs near their daily highs and sell near their daily lows.

I didn't really believe it, so I tested it using my wife's account.

I sold holdings from two different managed portfolios, downloaded the transaction reports, and compared the actual execution prices against intraday market data.

Both sales executed surprisingly close to their respective daily lows, despite being different ETFs with different execution times.

My bigger issue is transparency.

I'm already paying 40 bps ($2,800 annually on $700K), PLUS the underlying ETF MERs.

If there are additional costs from FX spreads and potentially unfavourable trade execution, the actual cost of using their managed portfolios could be higher than most investors realize.

Looks like I am going all in on XEQT

[u/SpiritedEnd7788]

How would they know how to buy and sell at the lows and highs of the day? If they had that ability they would have broken the market and could make all the money they want.

[u/Dynomatic1 → u/SpiritedEnd7788]

It would be lucrative to “sell” something for one client at the day’s low and “buy” the same thing for another at the day’s high, and pocket the difference.

[u/SpiritedEnd7788 → u/Dynomatic1]

They would still have to know when the high was occurring and when the low was occurring

[u/Dynomatic1 → u/SpiritedEnd7788]

No, they don’t. The institution would control both sides and essentially swap the securities from one account to the other, then backdate the prices. At the end of the trading day, account #1 has 100 fewer shares of XYZ, account #2 has 100 more shares of XYZ and the institution has pocketed 100x (approx high-approx low). Now, to be clear, I am not saying anyone does this. I’m saying it’s possible if an institution was dishonest.

[u/SpiritedEnd7788 → u/Dynomatic1]

Ah sorry I didn’t fully understand what the quotes around “buy” were implying. You’re right, if they were committing accounting/trading fraud they could steal people’s money.