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Wealthsimple HISA
October 2, 2023
6:47 pm
suburbs4life
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Bluesky, great to hear I am not alone in considering WS save. Hopefully it’s all smooth sailing from here on.

October 3, 2023
7:40 pm
everhopeful
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Norman1 said
The funds are ultimately deposited in the name of Wealthsimple Investments Inc. in trust. Any CDIC payouts would be sent to the trustee, Wealthsimple Investments.

So if WS vanished, would we have a process where we would have accounts set up at whoever WS chose to place our funds with, or would whomever was appointed to administrate WS assets disburse the funds to us directly?

I'd really like to understand this completely before entrusting a large amount of funds to this account, which is very enticing both for the interest rate, but also the debit card (which just arrived today sf-smile ).

October 3, 2023
8:05 pm
mordko
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They would disburse them to you, all being well. May take a while.

October 4, 2023
9:01 pm
Norman1
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Wealthsimple is not actually placing the funds like a deposit broker would. Instead, Wealthsimple is accepting the funds and giving a Wealthsimple Cash account balance in return.

Any of the funds Wealthsimple may then deposit with a CDIC member are going to be in an account in Wealthsimple's name. One isn't going to have any access even if the funds are in Wealthsimple's name, in trust. The CDIC member owes the deposited funds from Wealthsimple to Wealthsimple.

Should Wealthsimple disappear, then one would be dealing with whoever is appointed to settle Wealthsimple's debts.

Does the Wealthsimple Cash account statements or online display say, for example, something like "Balance....$30,000 " or does it say "Deposit with (name of CDIC member)....$30,000"?

October 5, 2023
8:22 pm
Loonie
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Bearing in mind Norman1's analysis, it would seem that the WealthSimple savings account is not insured by CDIC and is more vulnerable than banks and CUs in general. The money may be placed with a bank that is generally considered safe but there is no guarantee that, if WealthSimple failed, one would get one's money back.

Accordingly, I don't think WS belongs on our HISA chart. I think it's reasonable for forum members to expect all FIs listed there to be insured by either CDIC or provincial CU insurance.
Therefore I believe WS should not be on our list.

October 5, 2023
8:25 pm
AltaRed
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I agree with Loonie, but if it is kept, it should be asterisked with a disclaimer.

October 6, 2023
5:20 am
mordko
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For amounts up to 100K, WS is more vulnerable than banks.

Whether savings with WS are more vulnerable than with CUs is debatable. It going into administration would be very similar to a brokerage where you hold stocks going into administration. There will be some costs relating to administration which are covered by insurance but your stocks (or WS cash) would be very safe. Thats assuming there is no fraud which is always an issue outside insurance anyway.

To me, WS HISA appears safer than CU HISAs but its for everyone to decide for themselves.

October 6, 2023
5:56 am
InterestThis
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Looks like the risk is in fact in the Save account.
https://help.wealthsimple.com/hc/en-ca/articles/14905388487579-Understand-how-CDIC-coverage-works-in-your-Cash-account-

https://www.wealthsimple.com/en-ca/legal/legal-disclaimers

Wealthsimple Investments Inc. is a member of CIPF.

https://www.cipf.ca/cipf-coverage/about-cipf-coverage#coveragelimits
What Are the Coverage Limits?
If securities, cash or other property (excluding property not eligible for coverage such as crypto assets) in client accounts are missing, CIPF will provide compensation for the value of the missing property as at the date of the member firm’s insolvency, up to the limits prescribed in the CIPF Coverage Policy.

October 6, 2023
2:56 pm
TINAisOver
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I agree with Loonie and AltaRed. Just because both Chartered banks, CU's and brokerages, like WS, can be placed under administration does not make them equal. In liquidation , the administrators would not be required to adhere to another layer regulation, CDIC or CU insurance. This alters the Creditor order. I would say this fact is not debatable.

Having WS being grouped on the HISA chart even with an asterisk gives it a sense of equivalence that I'm sure it is not intended. Obviously, WS can still be discussed in the forum but it does not meet the HISA standard.

Besides, if one is going to place cash in a Brokerage, then might as well place it in a ISA fund. It's almost as liquid, it pays higher interest and its CDIC protected.

Trader first, Saver second

October 6, 2023
3:30 pm
AltaRed
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TINAisOver said
Besides, if one is going to place cash in a Brokerage, then might as well place it in a ISA fund. It's almost as liquid, it pays higher interest and its CDIC protected.  

Indeed! But then some folk do not like the T+1 settlement concept of ISAs or MMFs. They are so used to the basic bank account format that doing a T+1 trade/sell is either uncomfortable or a 'bridge too far'. I can understand that but they also need to recognize WS Cash is not really a bank account in true form either.

October 6, 2023
5:02 pm
InterestThis
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CIPF coverage to is to 1 million.

https://www.cipf.ca/cipf-coverage/about-cipf-coverage#coveragelimits
Below is a summary of the coverage limits provided for in the CIPF Coverage Policy based on both the type of client and the type of account(s) the client has with a member firm. For complete details, please refer to the CIPF Coverage Policy.

Limits for Individuals

For an individual holding an account or accounts with a member firm, the limits on CIPF protection are generally as follows:

$1 million for all general accounts combined (such as cash accounts, margin accounts, TFSAs and FHSAs), plus
$1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus
$1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.

October 6, 2023
6:02 pm
mordko
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“ In liquidation , the administrators would not be required to adhere to another layer regulation, CDIC or CU insurance. This alters the Creditor order.”

If WS goes bankrupt CDIC would be completely irrelevant. Its there to protect against the failure of the third party which WS is using rather than WS itself.

Brokerages don’t tend to fail because of the nature of their business. And if they do, either another brokerage would buy/take over the failing firm or the administrator/trustee would transfer accounts to another brokerage. Insurance is there to cover the cost of transfer. And customers have priority over claims of other creditors, so as long as your funds are not being stolen, they are still yours.

In my mind its really safe, more so than provincially run CU insurance. At least thats what I concluded when I looked into the safety of my shares with a brokerage.

https://mnpdebt.ca/en/corporate/resources/blog/understanding-securities-firm-bankruptcy

November 10, 2023
5:16 pm
everhopeful
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Just noticed that the Cash account is now viewable on desktop signin, but not with all the functionality of the phone app yet. Very pleased to see this progress, once it reaches full functionality I may make it my daily banking account... why not earn 4% on my "float"?

November 25, 2023
1:09 pm
NorthernRaven
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Norman1 said
Wealthsimple is not actually placing the funds like a deposit broker would. Instead, Wealthsimple is accepting the funds and giving a Wealthsimple Cash account balance in return.

Any of the funds Wealthsimple may then deposit with a CDIC member are going to be in an account in Wealthsimple's name. One isn't going to have any access even if the funds are in Wealthsimple's name, in trust. The CDIC member owes the deposited funds from Wealthsimple to Wealthsimple.

Should Wealthsimple disappear, then one would be dealing with whoever is appointed to settle Wealthsimple's debts.

Does the Wealthsimple Cash account statements or online display say, for example, something like "Balance....$30,000 " or does it say "Deposit with (name of CDIC member)....$30,000"?  

I don't think this is quite right? Amounts in a WS Cash account are deposited with three Schedule 1 banks (likely National, CIBC and Scotia) in the same nominee-name trust arrangement as ISAs are - it is individual coverage in that same fashion, with WS the trustee as a broker would be for an ISA. It isn't "we took your money and owe it to you, but what we did with it is internal to us".

If one of those banks fails badly enough that CDIC kicks in, as with any nominee deposit, any CDIC makegood would go to WS as your trustee on that deposit and flow through to you. If WS goes bad, the trusteed deposit is likely still there and can be returned to you by the liquidator - I don't believe assets in trust like this would go into a general pool for creditors. If I'm wrong, or if somehow WS had managed to drain the deposits in some obscure machination, then you'd have the $1 million CIPF coverage for unreturned assets.

What you do agree to with a WS Cash account is that all interest earned belongs to them, and all they are responsible for is to give you whatever rate they've set for you. They are likely depositing with those 3 institutions I mentioned - those are the three that CASH.TO and PSA deposit to. Those ETFs are showing a gross yield of around 5.3% right now, and WS is probably getting a similar rate from their banks, although being individual nominee deposits it might be a smidge less for the overhead. So WS is probably grossing over 1% for their 4% customers and over 0.5% for their 4.5% customers (the 5% 500K clients are closer to flowthrough). That's better than the 0.5-0.4% commission they charge on the robobroker Invest side of things! Of course, they are providing transactional account services out of that margin.

Peter, it would be nice if there was a footnote or something for them, indicating the $100K/4.5% and $500K/5% rates. Those levels are for your total Wealthsimple portfolio, not just the Cash deposit, and there's probably a lot of people who have or might become $100K Wealthsimple trading clients, or even the $500K Generation level.

They actually just had a "set up your Direct Deposit with us" targeted invite promo recently which provided either a 0.5% or 1.0% "boost" to whatever your rate was, and I saw one report of a 5% client who got the 1% invite for a total of 6%! I don't know how many invites and what mix, but anything over 5% would be getting into loss-leader territory for them, and while I didn't see an explicit end date on the boost promo pages, I suspect they wouldn't continue long term. Still, would have been a nice goody for those who got it.

November 25, 2023
2:11 pm
Norman1
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NorthernRaven said

I don't think this is quite right? Amounts in a WS Cash account are deposited with three Schedule 1 banks (likely National, CIBC and Scotia) in the same nominee-name trust arrangement as ISAs are - it is individual coverage in that same fashion, with WS the trustee as a broker would be for an ISA. It isn't "we took your money and owe it to you, but what we did with it is internal to us".

No, the WealthSimple Cash accounts are not nominee deposits.

Notice the fine print that says the Cash account funds are "ultimately" deposited with, and not a deposit, with a CDIC member: "The funds you add to a Cash account (the “Funds”) are ultimately held securely in trust with a single or multiple members of the Canada Deposit Insurance Corporation (“CDIC”)."

As I asked before, when people look at their WealthSimple Cash account statements or display, do they see something like "Balance....$30,000 " or do they say "Deposit with (name of CDIC member)....$30,000"?

One will also find out when the T5 slips come out in a few months. If those WealthSimple Cash accounts are individual nominee deposits, a CDIC member or multiple CDIC members, and not WealthSimple Investments or WealthSimple Payments, will be issuing individual T5 slips to each Cash account holder.

November 25, 2023
2:23 pm
NorthernRaven
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I don't see that "ultimately" as some sort of weasel word. An ISA with a broker is also "ultimately held securely in trust" at a bank, after the cash has routed it way through the broker and however it wends its way through the system to get to the bank as a nominee trust deposit. I think thats all WS means here as well. And if it was all just in Wealthsimple's own account, that wouldn't be "securely in trust".

More important, if it is just in their own account, and not in individual nominee deposits, there would be no $100,000 coverages to talk about. They are using the same wording from the nominee/trust process ("Under the trust framework, CDIC insures eligible cash balances up to $100,000 per beneficiary, per member institution, provided certain disclosure rules are met. Coverage is free and automatic. Learn more about how CDIC protection works"). WS isn't going to be making bald-faced lies about CDIC coverage, and I can't imagine these are anything other than nominee deposits.

I'm actually considering moving my brokerage portfolio from TDDI (although they've been a good home) to WS (platform now seems to have the basics of what I need), and I'll be talking with someone there this coming week - I'll ask for confirmation.

November 25, 2023
3:47 pm
Doug
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Norman1 said
There is no CDIC protection for the Wealthsimple Cash account holder because the funds are not deposited in the Cash account holder's name with a CDIC member.

The funds are ultimately deposited in the name of Wealthsimple Investments Inc. in trust. Any CDIC payouts would be sent to the trustee, Wealthsimple Investments.

The deposits are disclosed to be in trust for multiple clients. So, the CDIC coverage is multiplied and is not just $100,000 shared by all the Wealthsimple Cash account holders.

It really doesn't matter if a Wealthsimple Cash account holder also happens to have deposits with a CDIC member that Wealthsimple Investments has deposited funds from the Wealthsimple Cash accounts. Deposits Alice has personally with a CDIC member have separate coverage from any deposits Wealthsimple Investments has in trust for Alice with the same CDIC member.  

Actually, Norman, that information is out of date. It's made more confusing by the fact that Wealthsimple has marketed similar savings products over the years, including Cash, Save, and a precedessor 'Cash' account. It's that predecessor 'Cash' account that did not have CDIC insurance, but in this case, the funds are now held in the end beneficiary's name on a prepaid credit card, whose balances are held in trust by Canadian Western Trust Company, for the benefit of Wealthsimple Spend members. CWT Trust is the trustee of the assets and either CWT and/or CWB is the CDIC deposit product where the balances are held.

An easy mistake, given the various product name changes, made worse by the legal documents that could be worded more clearly.

Cheers,
Doug

November 25, 2023
4:03 pm
Doug
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NorthernRaven said
I don't see that "ultimately" as some sort of weasel word. An ISA with a broker is also "ultimately held securely in trust" at a bank, after the cash has routed it way through the broker and however it wends its way through the system to get to the bank as a nominee trust deposit. I think thats all WS means here as well. And if it was all just in Wealthsimple's own account, that wouldn't be "securely in trust".

More important, if it is just in their own account, and not in individual nominee deposits, there would be no $100,000 coverages to talk about. They are using the same wording from the nominee/trust process ("Under the trust framework, CDIC insures eligible cash balances up to $100,000 per beneficiary, per member institution, provided certain disclosure rules are met. Coverage is free and automatic. Learn more about how CDIC protection works"). WS isn't going to be making bald-faced lies about CDIC coverage, and I can't imagine these are anything other than nominee deposits.

I'm actually considering moving my brokerage portfolio from TDDI (although they've been a good home) to WS (platform now seems to have the basics of what I need), and I'll be talking with someone there this coming week - I'll ask for confirmation.  

You're more or less right, NorthernRaven, on the CDIC eligibility of Wealthsimple Cash. It's a bit complicated, as Koho Financial is the contracted issuer of the Wealthsimple Cash prepaid credit card, but Wealthsimple is the card sponsor and administrator. Prepaid credit card balances are now CDIC insured (as of 2022, I believe), which is an important aspect to keep in mind. Prepaid credit card balances aren't reported in the same manner on the public OSFI financial return databases, but are nonetheless subject to CDIC insurance. Wealthsimple essentially puts up a bond to Koho Financial, I think, to settle the transactions actually occurring on the prepaid credit cards at the end of each business day, and settles that internally by withdrawing the funds held in trust with a CDIC member issuer at custodian, Canadian Western Trust company.

The funds may not be traditional nominee accounts like the ISA accounts on the FundSERV platform, but essentially the funds are CDIC insured through them being prepaid credit card balances.

As for T5 slips being issued, that's not required for CDIC insurance to be valid. I can't see Wealthsimple Payments paying the taxes on the interest income, though, so likely they will issue T5s for 2023 in early 2024. But what I am saying is even if the T5 is issued by Wealthsimple Payments, that is not indicative of whether the funds are CDIC insured.

Cheers,
Doug

November 25, 2023
4:30 pm
Norman1
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NorthernRaven said
… And if it was all just in Wealthsimple's own account, that wouldn't be "securely in trust".

More important, if it is just in their own account, and not in individual nominee deposits, there would be no $100,000 coverages to talk about. They are using the same wording from the nominee/trust process ("Under the trust framework, CDIC insures eligible cash balances up to $100,000 per beneficiary, per member institution, provided certain disclosure rules are met. Coverage is free and automatic. Learn more about how CDIC protection works"). WS isn't going to be making bald-faced lies about CDIC coverage, and I can't imagine these are anything other than nominee deposits.

A trustee does not have to be a nominee. Someone can open one in-trust bank account in his/her own name and declare the twenty beneficiaries to the bank to multiply the CDIC coverage on the bank account up to 20 x $100,000 = $2 million.

There is no CDIC requirement for the trustee of an in-trust account to be the nominee of the declared beneficiaries.

The account and CDIC coverage are for the direct benefit of the account holder, the trustee, not for the beneficiaries.

So, it is possible under the CDIC trust framework for Wealthsimple Investments to open a single in-trust bank account in its own name and multiply the CDIC coverage on that account by up to $100,000 per declared beneficiary.

Yes, it would be interesting to hear how Wealthsimple answers the question. Will Wealthsimple say the $30,000 one has in a Cash account be $30,000 owed by (1) IIROC member Wealthsimple Investments, (2) money services company Wealthsimple Payments, or (3) one or more of their "Banking Partners"?

November 25, 2023
4:49 pm
Doug
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I believe I have things figured out with respect to Wealthsimple Cash. It's a pooled registered cash account at a nominee broker, not an in trust for nominee account at CDIC member at a nominee broker (as in the case of an ISA). See more at: https://www.cdic.ca/financial-community/for-brokers-and-other-financial-professionals/new-changes-to-deposit-insurance-affecting-nominee-brokers/industry-best-practices-brokered-deposit-advisory-group-bdag/

In this case, the nominee broker is Wealthsimple Payments, Inc., who, in turn, holds a pooled registered account at Canadian Western Trust Company that, in turn, holds the funds across three member institutions.

Wealthsimple Payments, Inc., transmits, or maintains a list of all end user beneficiaries that it can transmit to Canadian Western Trust Company, upon request, when CDIC asks for it within three business days, along which it assigns a Unique Client Identifier to each ultimate beneficiary in the list. Annually, Canadian Western Trust Company issues a T5 to Wealthsimple Payments, Inc., then Wealthsimple Payments, Inc., in turn, will issue T5s to every end beneficiary that shared in that one large pot if interest payments in 2023.

If Wealthsimple Payments, Inc., were to fail, creditors of Wealthsimple Payments, Inc., would have absolutely zero claim to these assets as they're not held on the balance sheet of Wealthsimple Payments; they are custodial assets held by Canadian Western Trust Company. A receiver would be appointed for Wealthsimple Payments, Inc., and would take over the assets and reporting requirements of Wealthsimple Payments.

If a CDIC member were to fail, CDIC would pay those funds to Wealthsimple Payments, or its receiver, if Wealthsimple Payments also failed, who, in turn, would pay its end beneficiaries. sf-cool

You're welcome. 🙂

Cheers,
Doug

Postscript: Of note, in one of CWT Company's financial data returns in the preceding 12 months, they reported an increase in custodial deposits of approximately $3 billion, which closely correlated with the reported amounts held in Wealthsimple Cash and Save, which had previously been custodied by Equitable Bank as EQB's "partnership deposits."

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