Investing 101: Wealthsimple Trade or Questrade?June 07, 2021
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Some have correlated the surging investment interest on not just on a strong market, but with COVID-19. The theories range from people who are bored and looking for entertainment to others filling a void left by sports gambling. Whatever the reason, the online investment game has never been more popular.
While Robinhood leads the charge in the U.S., here in Canada the online trading app dominance lies between Questrade and Wealthsimple Trade (Robinhood is not yet available). Both are considered “discount” brokerages because they offer lower fees and commissions than the big Canadian banks.
So which online brokerage should you go with? Let’s break down the differences, as well as explain some basics of trading equities, ETFs (exchange-traded funds), and whether it’s a good idea to use “robo-advisors” to manage your investment portfolio.
Wealthsimple vs. Questrade (Pros & Cons)
When comparing Wealthsimple to Questrade you can see it as the hot new band versus the established classic rock act. Wealthsimple Trade entered the online brokerage market just over a year ago, while Questrade has been around since 1999. In other words, it’s experience versus the startup mentality. Let’s see what else defines their differences:
Commission Fees to Buy/Sell Stocks →
1 cent per share/or $4.95 min to $9.95 max
Online platforms →
Mobile app only
Desktop and mobile app
Minimum cash need to get started →
Account Types Available →
Personal (non-registered), TFSA & RRSP
Personal (non-registered), TFSA & RRSP, RESP, LIRA, RIF, LIF, and Margin
Currency Conversion →
Corporate rate + 1.5%
Min. $5000; fees may apply at withdrawal
ETFs (exchange-traded funds) →
Free to buy; $4.95 to sell
What's better for beginners?
As you see in the chart above, there isn’t an extreme difference between Wealthsimple Trade and Questrade. Both offer discounted trading fees, which should appeal to newbie investors who don’t normally have a big chunk of change ready to plunge down on the stock market.
New investors tend to make smaller trades – a couple of shares of Apple one month and a few shares of Amazon months later – and low fees will allow you to invest more and keep more of your gains when it comes time to sell. For comparison, big banks like CIBC and TD charge between $6.95 and $9.99 per trade, plus in some instances an account maintenance fee.
Advantage: Perhaps the most compelling benefit, if you’re a new investor, is Wealthsimple’s low barrier to entry. With zero minimum required to start trading you could get started with $100, for example. That’s going to be inviting for curious new investors who see Questrade’s $1,000 minimum as a potential hurdle.
Are both legitimate and secure?
Anytime you hand over savings to a financial institution, be sure to always do research on who is handling your money. In this instance, you should feel confident as Questrade has been around for over 20 years, managing $9 billion in assets, while Wealthsimple has become one of the biggest financial management institutions in our country.
Questrade is regulated by the IIROC (Investment Industry Regulatory Organization of Canada) and the CIPF (Canadian Investor Protection Fund). Plus, Questrade promotes the fact that all self-directed trading accounts are insured up to $10 million in the unlikely event Questrade goes under.
Wealthsimple, which launched its Trade product just over a year ago, manages over $5 billion in assets, and also protects your investment against company insolvency with CIPF. This should give you peace-of-mind that your money is secure against an institutional failure. It’s also worth noting that both companies boast state-of-the-art cybersecurity to protect your financial information.
Advantage: It’s a tie! Both companies offer equally secure online platforms, proper financial oversight, and insurance against company failure.
Is it possible to start trading with a TFSA or RRSP account?
Many traders like to use tax-sheltered accounts like TFSAs and RRSPs because the gains you (hopefully) make won’t necessarily be taxed, unlike interest from a personal non-registered bank account. For a TFSA, as long as you stay within your contribution limit, you can freely withdraw and deposit money without worrying about paying tax. An RRSP on the other hand, will hold profits tax-free, but any withdrawal will trigger a steep tax penalty depending on your income levels.
Both Questrade and Wealthsimple Trade offer both accounts to invest with, plus non-registered personal accounts. Questrade has a bit of an edge here, with a wider offering of accounts, including RESPs, LIRAs (locked-in retirement accounts), RRIFs (registered retirement income funds) and LIFs (life incomes funds). Those accounts mostly skewer to an older demographic and maybe not applicable if you’re new to investing.
Advantage: Slight advantage to Questrade for the wide array of investment accounts on offer.
How does transferring money work?
Both platforms use ETFs to make transfers pretty seamless. You need only to connect your Wealthsimple or Questrade investment account to your bank account and initiate the transfer. Questrade offers ten different ways to add funds to your account, which just about covers every option under the sun. Only Questrade offers the ability to transfer funds from both pre-existing TFSAs and RRSPs at other institutions. Wealthsimple only allows the transfer of pre-existing TFSAs. The process for both is a little more complicated than from non-registered accounts because it requires some government paperwork.
Advantage: Both offer a seamless transferring process, but only Questrade offers transfers from pre-existing RRSPs.
What is the minimum amount I can invest to get started?
The minimum amount required to start investing with these two brokers is a pretty gaping difference. You’ll need at least $1,000 to get started with Questrade, while Wealthsimple Trade is $0.
For new investors that $1,000 could be a significant impediment. Arguably it shows that Questrade is the platform looking to attract more serious investors and not necessarily the curious looking to dip their toe. That being said, it’s a good idea to have at least $1,000 to get started. Stocks are not cheap, and $1,000 might be barely enough to currently buy one share of Tesla.
Advantage: Big advantage for Wealthsimple with $0 to get started vs. Questrade’s $1,000.
What is the process when it comes to cashing out?
The majority of new investors will be opening one of three accounts – personal non-registered, TFSA or RRSP. Say you’ve bought into a rocketing stock, and want to cash out on your gains, it wouldn’t be any trouble withdrawing from your personal account or TFSA on a Wealthsimple or Questrade app. The transfer should only take a few days, and once the funds “settle” in your account, you can withdraw.
However, it gets more complicated with RRSPs. These investment vehicles are designed to discourage withdrawals because it’s supposed to be a retirement plan. Without getting too into the weeds on the pros and cons of RRSPs, just know that you should only use this type of account if you are planning a long-term investment strategy. If you want that money in the near term, expect a punitive withdrawal penalty from the government.
Advantage: Equal benefit when it comes to cashing out. Wealthsimple’s app offers a superior user experience with its intuitive design. However, it is not functional on a desktop computer like Questrade.
Which is better when letting someone invest for you?
Not everybody who is looking to start investing has the time to follow the stock market. Not to mention properly assess companies, earnings reports, guidance, analysts upgrades and downgrades, and all the other head-scratching financial market jargon. Some just want to hand over a sum and say, “you do the work!”
Wealthsimple made its name in 2014 as Canada’s top provider of “robo-advisors,” which is a term used to describe essentially a robotic financial advisor that uses algorithms to invest in ETFs for you. An ETF is basically a security that is comprised of different stocks tracked under one index. They are similar to mutual funds, but can be traded on the open stock market.
For example, you might not be able to afford Amazon and Alphabet stocks, but you can buy a cheap ETF that contains those stocks. Your position with those companies is much, much smaller, but you will still get to participate in the company’s stock gains and not pay the same high fees associated with managed mutual funds.
Questrade also provides robo-advisor services under their Portfolio’s banner. You’ll be asked to detail your financial goals and appetite for risk. Wealthsimple provides this service, but it is not part of Wealthsimple Trade. They are two separate entities and not part of the Wealthsimple Trade app.
Advantage: Both offer low-maintenance, automated investment services, but Wealthsimple probably wins because you can start with a smaller amount like $500 vs Questrade’s $1,000 buy-in.