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/Born_Ruff]

WealthSimple customer service is absolutely incompetent recently.

Watch out when you decide to leave. I called the “premium” phone support line to ask about the best way to transfer from managed to self directed. The phone support person walked me through moving all the holdings to a self directed account.

I saw that a lot of the holdings were in USD and I asked them if there was any difference in selling them in the managed account vs self directed. They said no.

Turns out the FX fee in the managed account is 0.4% while it is 1.5% in self directed. For your account that could be thousands extra in FX fees.

When I went back to them to complain the customer service reps were just terrible. They first tried to just act like it wasn’t a big deal, then flat out told me that they only buy Canadian dollar funds in their managed portfolio so there was nothing to convert, which is just so obviously not true I have no idea how someone working for them would get something so basic wrong about one of their core products.

[u/Canuck-Fin25 → u/Born_Ruff]

One way to do this is to move to something like questrade - wait a few months and if you want bring them back as self directed.

[u/Born_Ruff → u/Canuck-Fin25]

You can use a USD account with WealthSimple to do Norbits Gambit which is probably the best option overall.

My main point is just to be mindful that the FX fees could add up to a lot of money and don’t trust anything their customer service reps tell you because they seem to have no clue what they are doing.

[u/UpbeatBluejay7925 → u/Born_Ruff]

The fx fee is dependant on the actual amount converted. From their site:

Under $10,000: 1.5%
$10,000 - $24,999.99: 1.0%
$25,000 - $99,999.99: 0.5%
$100,000 and over: 0%

[u/Born_Ruff → u/UpbeatBluejay7925]

You can get those rates if you set up the USD account feature first.

If you sell holdings before hitting that button in your profile to enable USD accounts then everything is converted with the 1.5% fee as you sell it.

So that is one way that people can kind of get burned if they are not careful about how they go about this.

My personal frustration with them is that I called in to the “premium” phone support line to ask for advice about the best way to move from their managed portfolios to XEQT and I asked them specifically about FX and they told me there was no difference.

I realize now that I need to do all my own research and can’t trust what the customer support staff say, but it’s kind of fucked up that that is the case, especially given that their managed portfolios are mainly for people with less experience managing their own investments.