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Email this7:56 am
December 20, 2019
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Generally I have to say WealthSimple seems to be a decent place to bank given all the perks, especially once you become generational.
But that's when you could run into some issues...
Generational means you have 500k plus in their accounts and since deposit insurance is 1 million at wealthsimple people will probably keep a million or more there.
So let's talk the tale of CAUTION
It is super easy to add accounts in a couple of key clicks so you can decide to make a second account and classify it as savings.
Hypothetically you put a million in this account at 2.75% interest and you keep maybe 10k in your original account which you called your spending account.
A couple of months go by and all goes well, interest on the million is $2,290 on average, not a bad haul. They will even add up to another 2% transfer top up literally almost doubling that interest.
So in the end you decide the double accounts is not actually working for you because there really is no difference, they are technically both cash savings accounts regardless of what you called them.
Hypothetically... It's mid August, time to move the savings into your original account and keep all the funds in one account. A few days later you close the empty account and all is well. So it would seem except WealthSimple will not pay out the interest on the closed account. A rep confirms that the half month interest is lost because the account was closed.
Now big banks will usually pay out this interest and WealthSimple is aggressively going after your savings. How much profiteering are they doing by coaxing you to make multiple accounts and then cheating you on the interest when you close it?
They need to be up front about this and put a warning on the account not to close it before interest is paid out.
Having been with them for a few months I'm generally pleased except for what I mentioned above and for me that was a lesson. Fortunately I'm only out a couple of hundred bucks because I was still in my precautionary phase with them, moving money in, out and all around to see if I found anything untoward at this organization.
So there are my first words of caution, I'll post more if I find them but I will say my feelings about this institution have now changed from almost trusted to proceed with caution.
9:17 am
September 11, 2013
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I have no business there but my impression is Wealthsimple is a brokerage first and foremost. Are they really soliciting clients that will only use them as a bank, only for earning interest in savings accounts?
9:33 am
December 20, 2019
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Bill said
I have no business there but my impression is Wealthsimple is a brokerage first and foremost. Are they really soliciting clients that will only use them as a bank, only for earning interest in savings accounts?
Yes, they are actively soliciting you to use them as your main bank. They give you perks if you auto deposit your paycheck and the reps contacted me to assure they have better protection than a regular bank with 1 million deposit insurance.
They are indeed becoming a bank and if I recall correctly even the Canadian Finance minister referred to them as such.
10:19 am
April 27, 2017
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This is incorrect. T&Cs clearly state that interest is accrued daily. If the account is closed then there will be a payment adjustment the following month, which will effectively follow the money transfer on account closure.
On a side-note… Who keeps $1M in cash unless they are buying a house or a boat?
WS are not technically a bank but they are certainly going after a full set of financial services, including rather nice chequeing accounts with transfers in and out at least a day faster than the Big 5. And with decent interest.
2% transfer top up is unusual for WS; I don’t believe they ever offered it with the exception of RRSP and Margin accounts (and you had to borrow against margin to get it).
10:55 am
December 20, 2019
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mordko said
This is incorrect. T&Cs clearly state that interest is accrued daily. If the account is closed then there will be a payment adjustment the following month, which will effectively follow the money transfer on account closure.On a side-note… Who keeps $1M in cash unless they are buying a house or a boat?
WS are not technically a bank but they are certainly going after a full set of financial services, including rather nice chequeing accounts with transfers in and out at least a day faster than the Big 5. And with decent interest.
2% transfer top up is unusual for WS; I don’t believe they ever offered it with the exception of RRSP and Margin accounts (and you had to borrow against margin to get it).
1. People with money have no issues having cash on hand, especially because it allows the flexibility to invest as needed. In between investments having larger sums of money is not abnormal.
2. They give a minimum of 1% bonus or 2% if you meet all criteria. They even gave me other gifts Apple Max headsets etc.
Like I said, all is nice at this place but I'm still waiting for the other hammer to drop. The interest clawback on closed accounts was the first, hopefully there is no second.
11:12 am
April 27, 2017
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KamWest said
1. People with money have no issues having cash on hand, especially because it allows the flexibility to invest as needed. In between investments having larger sums of money is not abnormal.
2. They give a minimum of 1% bonus or 2% if you meet all criteria. They even gave me other gifts Apple Max headsets etc.
Like I said, all is nice at this place but I'm still waiting for the other hammer to drop. The interest clawback on closed accounts was the first, hopefully there is no second.
1. “People with money” are different and many avoid trying to time the market.
2. Congrats on getting Apple headset but thats not the point. The point is that “criteria” for getting 2% at WS excluded Chequing accounts so your original post appears to be misleading.
I tend to classify these as “bribes” rather than “gifts”. Too many strings attached for an actual gift. WS does send an odd coffee mug, etc; those are actual gifts.
11:59 am
August 4, 2010
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"Accrued" in regards to daily interest savings accounts has a fairly specific meaning to bankers. The interest has been calculated and is on the books to your credit (WS actually makes a point of highlighting your accrued interest/cashback), and is usually paid or posted at the end of a month. WS's terms say "You'll receive interest monthly, calculated daily on your chequing account's closing balance (the balance at 11:59 PM EST each day). Interest accumulates throughout the calendar month and is paid out within 7 business days of the 1st of the following month."
They don't explicitly state what happens when an account closes. It could be argued that since the account is closed, the "paid out" action can't occur, and unlike most any other bank, closing the account doesn't trigger the payout. Given the accrued interest wasn't automatically paid, and a rep apparently confirmed that was by design, I guess they may actually have done things this way.
The puzzling thing is why they would do this. I'd think the residual interest from closed accounts would be pretty trivial in the grand scheme of things, and there is obvious reputational damage from customers who get caught by (and notice) this - it doesn't especially "feel" like WS to actively set out to chisel a penny or two like this. It could be that their agreements with the actual CDIC institutions holding the funds are based on something other than daily interest, I suppose, and they are being paid on monthly balances or something, but I wouldn't think so?
I think I've seen over the years that some "bonus interest" schemes require the account to be open and the end of the month to earn the additional bonus amount (unlike the residual interest from the actual posted base rate), but that's a different case, really, from base rate daily interest.
I'd suggest politely writing back to WS, pointing out an example or two showing that daily savings accounts generally pay out accrued interest on closing, and asking for written confirmation of the policy. Tell them you'd hate to misrepresent their position should you happen to find yourself talking to an internal or external ombudsman, or heaven forbid a member of the press 🙂
12:29 pm
December 20, 2019
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2:16 pm
April 27, 2017
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IMHO the interest will land in the account which was used to transfer the money to but it may take a few more days. There is no scenario under which the interest isn’t paid out.
3:48 pm
August 4, 2010
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mordko said
IMHO the interest will land in the account which was used to transfer the money to but it may take a few more days. There is no scenario under which the interest isn’t paid out.
That is possible, and I also would be somewhat surprised if WS is really not paying out accumulated daily interest. But for procedural reasons I'd also be surprised if it were paid out to another account. The interest is owed to the first account, and the transfer could have been to some sort of joint account, or a registered account, or an external transfer outside of WS. In theory, WS has no authorization to perform a second transfer of the residual interest to that destination. Even if the account is drained to zero before closing, there will almost always be some sort of residual interest owing, and their systems need to be able to deal with it. I think with EQ, you have to go through them and specify where the final payment goes (cheque or linked account, I think), although I've never closed my account either with them or WS.
This doesn't sound like just a confused rep, but if you bounce it up a bit you should be able to get confirmation of their policy one way or another. If the rep was wrong about it not being paid out, they would need to be chastised with a herring, at the least!
3:59 pm
December 20, 2019
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The rep checked with someone, I was on hold for quite a spell. Then I was put over to another department that confirmed no interest on closed accounts.
I just received an email back from the complaint I launched and all they said is they need to investigate. If it was policy to pay it out they would already have a clear answer for me.
That said it was a lesson learned for me, always leave your accounts open for a couple of months after moving funds out to assure all interest due is paid out.
4:45 pm
April 21, 2022
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KamWest said
The rep checked with someone, I was on hold for quite a spell. Then I was put over to another department that confirmed no interest on closed accounts.I just received an email back from the complaint I launched and all they said is they need to investigate. If it was policy to pay it out they would already have a clear answer for me.
That said it was a lesson learned for me, always leave your accounts open for a couple of months after moving funds out to assure all interest due is paid out.
Yeah, I'm sure I've read a similar story recently about a mainstream bank, might have been RBC, where the account was closed before the interest was paid out. Same end result, client was out a good chunk of change and no recourse. The only difference, I believe it was stated in the terms and conditions.
6:04 pm
April 6, 2013
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KamWest said
Yes, they are actively soliciting you to use them as your main bank. They give you perks if you auto deposit your paycheck and the reps contacted me to assure they have better protection than a regular bank with 1 million deposit insurance.
They are indeed becoming a bank and if I recall correctly even the Canadian Finance minister referred to them as such.
None of the Wealthsimple companies are a bank.
That account that they now call a Chequing Account is with Wealthsimple Payments Inc. which is neither a bank, an investment dealer, nor a CDIC member.
Wealthsimple Payments has CDIC coverage on any of the funds (that were yours) that they deposit in the partner banks, by disclosing the beneficial owners to multiply the $100,000 coverage. But, you don't because a $1 million balance in the Chequing Account is owed to you by Wealthsimple Payments Inc. and not by any of their partner banks.
There's no recourse to OBSI. The Chequing Account is not an account with their investment dealers Wealthsimple Inc. or Wealthsimple Investments Inc. that are under OBSI's jurisdiction. Their Filing a chequing account or card complaint with us page explains that:
If you are not satisfied with our decision
If you are not satisfied with our decision, there are different options available to you depending on the product(s) your complaint relates to and the province or territory you live in.
Your chequing and USD savings account(s), prepaid card, credit card, and any related services, are offered by Wealthsimple Payments Inc. (“WSP”), a Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) and Revenu Québec (“RQ”) registered money-services business. WSP has appointed an agent, Wealthsimple Investments Inc. (“WSII”), to perform certain payment activities offered through the account(s) on its behalf. Complaints relating to chequing and USD savings account(s), prepaid card, credit card, and any related services that are referred to the compliance team will be reviewed in line with WSP’s Complaints Handling Policy.
Complaints related to your chequing and USD savings account(s), and prepaid card
If you are not satisfied with our decision related to your chequing and USD savings account(s), prepaid card, or any related services, other options available to you include:
- arbitration, and/or
- litigation or civil action.
…
6:18 pm
April 6, 2013
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KamWest said
The rep checked with someone, I was on hold for quite a spell. Then I was put over to another department that confirmed no interest on closed accounts.I just received an email back from the complaint I launched and all they said is they need to investigate. If it was policy to pay it out they would already have a clear answer for me.
…
It possible there's no policy and that's just a consequence of how they calculate and pay the interest.
Wealthsimple Payments may not do any daily accruing of interest. Instead, they only run the program once a month to scan the open accounts to calculate the interest from the daily balances and credit the interest. If an account is no longer open, then the program skips it.
6:22 pm
December 20, 2019
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6:25 pm
March 30, 2017
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I find it interesting that if an account is closed before month end, that the accrued interest will still be paid out actually. Isn't the wording using something like "accrued daily and pay at month end, etc" ?
If that is the case, once the account is closed, it's natural it's not paid out, as no account to pay it out on !
And why would someone close an account during the month knowing there are accrued interests that are not paid out yet ??
6:36 pm
October 27, 2013
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We have had this discussion before. You only get $1M CDIC coverage indirectly by WS Payments, as trustee, flowing your deposits in trust into (up to) 10 separate CDIC insured entities, likely the ISAs of the big Canadian banks. Each of the big banks offer ISAs from their multiple CDIC insured entities. Technically, WSP could go rogue and fail in their trustee obligations, albeit unlikely given the backing of Power Corp.
Clearly a lot of people enthused/raptured about WS feel any 'minute' risk is worth it, just like I think putting $1M (well outside CDIC insured limits) into any one of the big 5 banks is also safe.
6:43 pm
April 6, 2013
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KamWest said
@norman1From here: https://help.wealthsimple.com/hc/en-ca/articles/360056590614-How-we-keep-your-money-safe
…
That's exactly what lawyers are supposed to do with the money they too hold in trust for their clients.
What happens when the balances of those trust accounts don't quite add up to what is owed to the clients by the lawyer or fintech?
That's what happened with that failed fintech Synapse in the US. All the funds were advertised to be FDIC covered. In reality, it was just all the funds that were still on deposit in those FDIC institutions when Synapse failed.
One woman received the news that only $500 of her $282,153.87 could be found among the FDIC-insured accounts opened by Synapse.
8:09 pm
April 27, 2017
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These weren’t “trust accounts” under a fiduciary regime like a lawyer’s IOLTA account (Interest on Lawyers' Trust Accounts). They were pooled accounts where Synapse controlled the ledger, and customers had only a contractual right, not a segregated, legally protected trust claim.
In Canada, when Wealthsimple holds deposits, it does so “in trust for clients” at multiple CDIC member banks. Those trust arrangements are explicitly recognized by CDIC rules. CDIC’s own materials clarify that deposits placed in trust can receive distinct insurance coverage per beneficiary.
Wealtshimple must disclose the beneficiaries, and each client’s share is eligible for separate CDIC coverage (up to $100K per bank, stacked across several banks). Lawyers’ trust accounts and IOLTA operate on a similar principle: segregated, reconciled, and regulated trust holdings.
If Wealthsimple fails to place funds in trust, that's like a lawyer stealing money. Except that Power Corporation of Canada has more to lose than a lawyer. Regulators could investigate, and the Retail Payments Activities Act (RPAA) gives the Bank of Canada powers to supervise and enforce segregation rules, but it's not as clean cut as with a big 5 “losing” your funds. If Wealthsimple seriously “lost” client funds, Power Corp might choose to step in to protect its reputation and investment — but you cannot rely on that.
Of course there is risk. Always is, with any institution. It's just that the two situations are not comparable. With WS chequing the risk is higher than with big 5 under 100K because of a slight “middle man” risk but it's not comparable to Synapse which didn’t hold funds in trust.
I like WS and turned WS into my main bank account ( with RBC as back-up) but putting over $1M into WS chequing as cash wouldn’t be my first choice. Then again I wouldn’t do it with big 5 either.
And yes, we discussed it before.
1:05 am
September 28, 2023
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I have very little at WS anymore, just a few penny stocks in my trading account.
I really like that WS has pioneered many changes with FIs in Canada, but now it seems that everything they have done, someone else is doing better.
The reason I signed up with them is they were the first to offer commission free trades in Canada, a huge change at the time. But now Disnat, NBDB, Questrade and others are doing so as well. And they also have separate USD accounts without the monthly fee WS still clings to. Exchange rates are worse elsewhere, but can do Norbert's Gambit (journaling for a small fee) with the others which WS disallows.
Then I opened a Cash account when they offered 4% interest, and they even offered me $100 to take my direct deposit to them, so I made it my daily account. The rates have now dropped to barely half that. Yes, rates have dropped everywhere, but I took my DD over to EQ once the spread was over 1%. Also I trust a much larger balance at EQ because they are a CDIC member in heir own right (Equitable Bank). WS 3x, 5x, and now 10x promises (with banks they won't disclose) have never felt trustable to me, as I feel things would get complicated if they were ever to fail, or some fine print could burn me.
Then I considered bringing my DD back to WS once they launched their credit card. Not having to remember what card to use at what stores to get most cashback would be nice, having one simple card would be awesome. I am glad I delayed, since the DD requirement went to $4k from $2k each month to avoid the annual fee. That cuts out a great majority of us who are in most need of the cashback rewards. Oh well, the bonus interest amount with DD at EQ outweighs the extra cashback I would get on the WS card by a very large margin.
I know a lot of these limitations could be eliminated if I kept over $100k with them, but the above reasons dissuade me from doing so, so it is kind of a catch 22. I thank WS for much needed innovation in the Canadian banking sector, but it seems like competitors have leapt past them.
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