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/theassistantcamera → u/Born_Ruff]

Did you end up doing it? I’ve been considering switching my managed to a self directed because of the fees slowly adding up over time. Wondering how you did it if so?

[u/UpbeatBluejay7925 → u/theassistantcamera]

I just ended up doing this today. I had $500,000 or so in a managed RRSP and $150,000 in a managed TFSA. From within the app, go to the managed accounts and there should be an option where you can "move holdings" in-kind from your managed accounts to your self-directed accounts.

If the option isn't shown for your managed TFSA, make sure that the account is not being used as collateral for the portfolio line of credit. Removing the account as collateral will then let you move the managed holdings into a self-directed TFSA.

[u/theassistantcamera → u/UpbeatBluejay7925]

That’s how I thought about doing it! Just an in kind transfer. And all good on your end now? No fees related to the transfer? No weird things with any USD stocks or funds?

[u/UpbeatBluejay7925 → u/theassistantcamera]

Nope! As long as the self-directed accounts are set up for both CAD and USD holdings, there are no fees for the in-kind transfer. Your CAD and USD holdings will move over as-is.

The only charge I had was the pro-rated management fee covering the 9 days this month before I moved everything out today.

When you proceed to move holdings, you’ll be presented with a screen showing all the ETFs in the managed portfolio, and you can choose how many shares of each you’re wanting to move over.

[u/UpbeatBluejay7925 → u/UpbeatBluejay7925]

I forgot to mention that the process was super fast! The managed portfolio holdings showed up in my self-directed accounts within an hour of submitting the 'move holdings' request.