Is Wealthsimple Trade Actually “Free”?

If you are a Canadian investor, it is likely that Wealthsimple Trade has made the shortlist of your options for self-directed trading platforms.

After all, with its zero commissions and no account fees or balance requirements, it does make a great option for Canadian investors of modest means. However, does all of this add up to Wealthsimple Trade offering a free service for account holders?

Wealthsimple Trade is truly free for Canadian investors trading Canadian stocks in CAD. However, unless you subscribe to Wealthsimple Trade Plus, the platform does charge a 1.5% currency conversion fee for buying and selling U.S.-listed stocks.

While this may seem innocuous, investors do need to give this some consideration. Many of the world’s most popular stocks are listed on U.S. exchanges, so it is very likely that you will lose purchasing power when trading these securities on Wealthsimple Trade.

Read on to find out everything you need to know about the cost of buying and selling stock on Wealthsimple Trade.

Is Wealthsimple Trade Free?

Wealthsimple Trade is free when buying and selling Canadian stocks using CAD. 

However, when buying and selling U.S.-listed stocks, the platform charges a 1.5% currency conversion fee. This is because Wealthsimple Trade’s freemium platform is not set up to hold USD in its users accounts. Therefore, any time a U.S. trade is executed, the platform must convert your CAD into USD (or vice versa), requiring a fee.

While this information may seem like a non-issue for account holders, there are a couple of reasons why it is important to be properly educated about how these conversion fees work.

First, many of the world’s most popular stocks are listed on U.S. exchanges. If you want to get a piece of companies such as Apple, Google, or Netflix, you will have to convert your CAD to USD. Next, although the 1.5% currency conversion fee does not seem like much, it can actually be quite debilitating for high-frequency traders or investors of modest means.

Let’s do some math to demonstrate. Say you have $1,000 CAD that you want to invest in a U.S. stock. At the current CAD/USD exchange rate (.79), that $1,000 CAD would be worth roughly $790 USD.

However, Wealthsimple Trade takes 1.5% from this conversion rate. This would make the conversion rate you receive .77815 (.79 X .985). Therefore, instead of getting $790 USD, you would only get $778.15. 

Now, say that your investment appreciates to where it reaches an even $1,000 USD and you decide to sell your shares. Instead of getting the current USD/CAD conversion rate of 1.27, you will only get 1.25095 (1.27 X .985). Therefore, instead of getting $1,270 CAD, you will only get $1,250.95.

On the surface, you made $250.95 off of your initial $1,000 investment. This is good for an impressive 25% ROI.

However, when you factor in the conversion fees of roughly $30.90 CAD, a little luster is lost. This $30.90 represents 12.3% of your total profit–a figure that should not be dismissed by astute investors. 

As a result, if you are the type of trader who likes to make frequent, low margin trades, then the conversion fees for dealing in U.S-based stocks can be prohibitive. If you are more of a buy and hold type of investor and are looking for big, long-term gains, then it may not be as much of an issue.

What Fees Does Wealthsimple Trade Charge?

The only fee that Wealthsimple Trade charges its Trade Basic account holders is the aforementioned 1.5% foreign currency exchange fee. They note that this is more competitive than most brokerages, which typically charge around 2% for the same type of service.

Other than that, there are no other fees for holding a Wealthsimple Trade account. This means that if you are willing to trade nothing but Canadian stocks, you can truly do it for free through Wealthsimple Trade. Among the services that the company charges nothing for include:

• Commissions on trades
• Account opening or closing
• Deposits or withdrawals for bank EFT transfers
• No inactivity fees

As Wealthsimple Trade charges no fees other than for currency exchange, you may be wondering just how the platform generates revenue. Among the ways that it makes money, check out my article here that goes into each method in detail – 4 Ways Wealthsimple Makes Money (From Each Product)

What About Wealthsimple Trade Plus?

To help lessen the burden of foreign exchange fees, Wealthsimple recently launched Wealthsimple Trade Plus. For a $10 monthly subscription, account holders can buy and sell an unlimited amount of foreign stocks without incurring exchange fees.

While this is definitely an exciting option for users who frequently trade U.S.-listed stocks (I am a Plus Customer), there are a couple of things to keep in mind.

First, you will still be required to pay a conversion fee when turning your CAD into USD and vice versa. However, the upgraded version allows you to hold funds on Wealthsimple Trade in USD without converting them back to CAD. This is beneficial because a Trade Basic account takes conversion fees for every transaction. There is no ability to hold uninvested funds in USD. 

With the upgraded Trade Plus, the only time you will incur a fee is when you are ready to move from one currency to the other. You can hold funds in USD for as long as you like. 

This is extremely beneficial for active traders. If you are a Canadian account holder and want to trade U.S. listed stocks for the indefinite future, you can make as many trades as you want for as long as you want in USD without having to convert it back to CAD until you are ready.

Is Wealthsimple Trade Actually Free: Everything You Need to Know

Wealthsimple Trade is free as long as you buy and sell Canadian stocks using CAD. However, if you purchase any U.S.-listed stocks and you are not a Wealthsimple Trade Plus customer, you will pay a 1.5% conversion fee for each transaction.

To help lessen these exchange fees though, Wealthsimple has recently launched Trade Plus – offering unlimited foreign trades for a $10 monthly subscription.

Geek, out.