Interview with Wealthsimple: low-cost, online advisor services offering responsible investment funds

Interview with Wealthsimple: low-cost, online advisor services offering responsible investment funds

There are now two ‘robot advisor’ or low-cost, online advisor services in Canada offering responsible investment funds. We’ve previously interviewed ModernAdvisor, and now we’re setting out to give you, our readers, the information you need on the responsible investment options at WealthSimple.com. Please read right to the end where you’ll find Wealthsimple offers ethiquette’s community an interesting opportunity if you think that their services will be good for you. This interview with Wealthsimple: low-cost, online advisor services offering responsible investment funds, was conducted with Yasser Mawji, Director of Research at Wealthsimple.

Ethiquette: Please explain what you do, why people might like to invest using your platform – what are the benefits of online investing?

Wealthsimple is the largest online investment service in Canada. We offer highly diversified portfolios consisting of exchange-traded funds (ETFs), which provide exposure to a broad range of stocks and bonds at a low cost. We also take care of virtually everything for you, including re-investing dividends and rebalancing the portfolio to maintain your target asset mix.

When and why did you start to offer responsible investment portfolio options to your clients?

Wealthsimple launched its socially responsible portfolio in March 2016. We decided to do so for several reasons. First, a large number of existing and potential clients had expressed an interest in socially responsible investing (SRI). Second, SRI has become an important aspect of the investment landscape and now constitutes over 30% of all financial assets in Canada. Third, we believe SRI can be a force for good by incentivizing companies to become more mindful of their social impact.

Do you know anything about your users that are purchasing responsible investment portfolios with you (demographics, percentage of your clientele, percentage of their portfolios that tend to be in responsible investment products,…)?

Roughly 10% of our clients are invested in the socially responsible option. They come from all walks of life and age groups — contrary to popular belief, SRI appeals to more than just Millennials. Clients who request the SRI option have typically done so for all of their accounts at Wealthsimple, rather than taking a piecemeal approach.

Can you speak specifically to each of the different responsible investment ETFs that you offer? What makes them responsible?

We selected the following ETFs for the SRI portfolio, taking into account their degree of social responsibility, diversification, and fees:

    • iShares MSCI ACWI Low Carbon Target ETF (CRBN): Global stocks with a lower carbon exposure than the broader market. For what it’s worth, the United Nations is an investor in this ETF.
    • iShares Jantzi Social Index ETF (XEN): Canadian stocks, excluding companies with a poor social responsibility record based on broad ESG criteria.
    • Vident International Equity Fund (VIDI): Developed and emerging economies with sustainable growth, based on criteria such as human rights and low corruption.
    • PowerShares Cleantech Portfolio (PZD): Cleantech innovators in the developed world.
    • BMO Mid Federal Bond Index ETF (ZFM): Fixed-income exposure via Canadian government bonds, in order to optimize for risk.

Do you include questions related to personal values in your Know Your Client form and proactively suggest responsible investment when there may be an interest? Or how does someone go about choosing a responsible investment portfolio?

As part of our onboarding process, clients answer an online questionnaire designed to gauge their risk tolerance. At the end of the questionnaire, we ask if you have a preference for SRI or would like to obtain more information, either through our website or by speaking with a Portfolio Manager. Clients who opt for SRI will automatically be placed into an SRI portfolio.

Do you have responsible investment options for all risk-return profiles?

Absolutely. As with our regular portfolios, we offer socially responsible investment options across a broad range of risk-return profiles. Based on your answers to our online questionnaire, we’ll automatically place you in the SRI portfolio that has the right risk-return profile given your risk tolerance and financial goals.

Is there a price differential between responsible investment products and others?

Wealthsimple’s fees are the same for our responsible option, however the fees charged by the firms that manage the ETFs are modestly higher – approximately 0.1% more than the fees on ETFs in our regular portfolios. The difference is largely due to the research costs of identifying socially responsible companies.

Can you tell us about your promotional program to encourage young or small investors to try out your services?

Wealthsimple believes no account is too small. We don’t have any account minimum and the first $5,000 will be managed for free.

Anyone who opens an account through the Ethiquette promo page gets their first $10,000 invested with Wealthsimple managed for free, during 2 years.

  • I.e. The standard $5,000 managed free is boosted to $10,000 managed free.
  • The promo is applied once the client funds an account (i.e. if someone opens an account and never transfers money, they’ll never see the 10K promo. The day they transfer 100$, they’ll see the promo applied to their account)

*Message from  Ethiquette: Please note that Ethiquette will also receive a small stipend for every account opened using the Ethiquette promo page. Ethiquette wants to be transparent about this and be clear that we are not endorsing or recommending the service, but feel that if with the information we’ve provided, you decide to invest and it helps fund the independent information services we provide you on all responsible investment offerings, then nothing is compromised. You may also want to read this blog post on the Wealthsimple responsible investment funds : http://www.ethiquette.ca/en/sustainable-robo-advisor-wealthsimples-socially-responsible-portfolio/

Do you have any offerings that exclude fossil-fuels from the portfolio?

Our socially responsible portfolio emphasizes a low-carbon footprint. Companies that rely more heavily on fossil fuels, resulting in a larger carbon footprint, will generally be given a smaller weight or excluded from the portfolio. Completely excluding fossil-fuels is an impossible undertaking, in my view, because every company is reliant on fossil-fuels to some degree.

Is there anything else that you’d like to add?

As part of our research on SRI, we were pleasantly surprised to find academic research indicating that socially responsible investors are also better investors. Specifically, they are less susceptible to the common investing mistake of panic selling in response to short-term volatility. It could be that knowing you’re making a positive contribution to the world reduces your sensitivity to daily market noise, allowing you to focus more on the long-run. That’s a significant advantage when it comes to investing and one of the core investment principles that Wealthsimple advocates to clients.

 

Yasser Mawji, Director of Research at Wealthsimple

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