In this Robinhood vs. Wealthsimple Trade comparison guide, you’ll learn about all the features and tools these commission-free trading platforms offer, the fees that investors might have to pay for upgrades, and if the upgrades are actually worth it.
This is a golden era for retail investors who have never had it so good since stock markets were regulated and investing went mainstream. Today, retail investors can access markets easily thanks to the number of discount brokers that have made it possible to invest with the bare minimum.
However, just because you can throw a stone and hit a discount broker doesn’t mean you should choose your broker like that. You have to look at the solutions and features they offer and whether they suit your investing style. There are differences among brokers that you need to be aware of.
We take a look at two of the most popular discount brokers in the US and Canada. Actually, calling them discount brokers would be a disservice to them. Both these platforms don’t charge investors any fees to trade. Robinhood in the U.S. and Wealthsimple Trade in Canada have completely revolutionized the world of retail investors.
Both of these are DIY (do it yourself) platforms that allow newbies in the investing world to test out waters with no commissions. Apart from stocks and exchange-traded funds (ETFs), investors can also look at trading in cryptocurrencies.
DIY investing is where investors trade on their own without any help from experts and financial advisors. While experts frown on this trend, it has increasingly become very popular in the last decade, and in no small measure, thanks to these brokerages. So let’s get into it.
Robinhood is a commission-free trading app that lets investors trade stocks, options, popular cryptos, and ETFs (exchange-traded funds). It was one of the first pioneers in the field of brokerage-free trading but as the list of its competitors has grown, so have its offerings.
It is one of the few brokers that lets investors trade cryptocurrencies. This app democratized trading and investing for everyone.
Origins and Legacy
Robinhood, launched in 2015, is unabashedly for the tech-savvy investor. Its target audience is people born after 1980: Millennials and Gen Z. Robinhood is a smartphone-first brokerage. It’s simple, clean, and bereft of many features that other brokerages add on. It has a website, but it is even more “bare-bones” than its mobile app.
This app could be suitable for first-time investors or people who like to buy and hold for a long time. Robinhood is like a training platform for investors. Anyone who is at least 18 years, has a valid social security number, a U.S. residential address, is a U.S. citizen, permanent resident, or has a valid U.S. Visa can open up a Robinhood account.
Robinhood opened up investing to people from all economic classes. A February 2020 report said that Robinhood has over 13 million customers. Its biggest legacy is that it forced discount brokers to deliver investing services at a lower cost. We have put all of Robinhood’s features into the Robinhood Pros segment and taken a look at areas that Robinhood can improve in the Robinhood Cons segment.
- Plug and Play with Robinhood Instant: It barely takes a few minutes to open an account on Robinhood, and a few days to get verified. However, if you have a deposit of less than $1,000, you can use it instantly. Robinhood Instant also eliminated the need of waiting for three business days before accounts were settled after selling stocks. Unlike some brokers, one doesn’t have to wait before getting access to funds.
- Zero-commissions: As we have said before, Robinhood charges zero-commissions to start trading shares, cryptos, ETFs, and options. While a bunch of brokers offers this facility now, Robinhood was the trigger that forced the brokerage world to change.
- No Minimum Investment: A complete newbie can start off by buying as little as $10 worth of Bitcoin commission free, unlike other crypto platforms.
- Options and Crypto: Robinhood Options lets you trade on no-fee contracts, and lets you trade multi-leg options as well. Robinhood Crypto is a new service that is launching state-by-state in the US. As of now, a little over 50% of the US population can use this service. However, you have to keep in mind that not all cryptocurrencies are traded on Robinhood Crypto. Users can trade Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and Dogecoin. They can however track the prices of several other cryptos.
- Fractional Shares: Similar to Revolut, Robinhood also lets investors buy fractional shares. According to its website, “Fractional shares are pieces, or fractions, of whole shares of a company or ETF. Since Robinhood Financial offers Fractional Shares, you can trade stocks and ETFs in pieces of shares, in addition to trading in whole share increments. Fractional shares on Robinhood can be as small as 1/1000000 of a share, and trading fractional shares is real-time and commission-free.”
- Recurring Investments: This feature from Robinhood is a great complement to Fractional Shares. With this feature, you can choose to decide what amount you want to invest, what time of the month do you want to invest (weekly, monthly, etc.) and in which security you want to invest. Robinhood will execute the trade for you. For example, John Snow invests $20 on the 10th of every month in a particular stock.
- DRIP: This acronym stands for Dividend Reinvestment Plan. Any cash dividend that one receives from a stock or an ETF can be reinvested in the stock. One factor to note here that is only stocks or ETFs that have the option of fractional shares can make use of this feature.
- Robinhood Gold: It is an upgraded account by Robinhood that is of great use to the active trader. It lets users trade on margin calls. It says, “When you upgrade to Robinhood Gold, you gain access to premium features such as professional research and Level II market data, and instant transfers up to your Portfolio Value starting at $5,000 (up to a max of $50k), rather than just $1,000 with a standard instant account. Additionally, if Robinhood approves your account for margin trading, you will be able to trade on margin with Gold.” This costs users $5 a month and a 2.5% annual rate on margin trades. You will have to maintain $2,000 worth portfolio value in your Robinhood brokerage account. Even if you are not an active trader or someone who trades on margin, the Gold account gives you access to Morningstar research. Gold also gives you access to pre-market hour trades (30 minutes) and after-market hour trades (2 hours after market close).
- Easy to Use: The bare-bones structure of the app makes it very easy for anyone to start investing through Robinhood. You can also file your taxes through its TurboTax sync feature. The app is very intuitive and the user experience is excellent when it comes to monitoring one’s portfolio or interested stocks, futures, and ETFs.
- Cash Management: Robinhood’s Cash Management feature swipes unutilized cash into savings and lets its customers earn a solid 0.3% APY (annual percentage yield). It’s worth mentioning that the 0.3% APY is variable, hence, be sure to double-check the exact APY on the official platform. This account comes with a debit card and you can withdraw cash from over 75,000 ATMs. The account is also insured for up to $1.25 million of FDIC insurance as part of Robinhood’s agreements with banks.
- Day-trade Tracking: Robinhood limits users to not more than 3-day trades in a 5-day period “unless you have at least $25,000 of portfolio value (minus any cryptocurrency positions) in your Instant or Gold account at the end of the previous day.” If users cross the limit, they need to have a portfolio value greater than $25,000 at the end of the trading day to be able to continue day trading the next day.
- Trading Delays: The app has lagged on multiple occasions, and in March 2020, there were 21 outages. The most consistent complaint against Robinhood is that stock quotes on its app are delayed. The spread of cryptos in its app is also quite wide compared to other platforms. This will matter to traders who trade large quantities for tiny differentials.
- Bad Research Tools: When you build a simple app, it might be frictionless and it might get you a record number of users but you have to compromise somewhere. For Robinhood, it’s the research tools that have failed to impress users. The charts and lists are easy to read but they are very basic tools and can be used mainly for monitoring. They are not as customizable as some of the bigger brokers out there. Robinhood lacks research filters and other tools to analyze the trade.
- Limited Customer Service: Robinhood doesn’t offer either live online or phone customer service. This is quite a big challenge when most Robinhood customers are newbies who are trying their hand at trading for the first time. Robinhood support completely relies on email.
- Bowed to the Man: For an app that touts itself as democratizing the investing world, Robinhood got a bad rep when it restricted people from trading GameStop shares at the height of the short-squeeze fiasco. This resulted in a huge blow-up and bad publicity for Robinhood (more on this later).
- Restricted Trading: You can’t buy mutual funds on Robinhood and you can only operate an individual taxable account here. There’s no 401(k), joint account, partnerships, or any other account that works on Robinhood.
In 2014, Wealthsimple, an online financial services provider was launched in Canada. Over the years, it launched a robo-advisory for investors but its most significant offering was a beta service in 2018 called Wealthsimple Trade. This product was publicly launched in 2019.
Wealthsimple Trade is Canada’s answer to Robinhood. This platform lets Canadians buy and sell thousands of stocks and ETFs in Canadian and US exchanges for free. This is a zero-commission platform, just like Robinhood. This was a massive move from Canada’s traditional system of buying and selling stocks and ETFs, where a trade could have easily cost investors anywhere between $4.95 to $30.
This is a great platform for Canadians because Wealthsimple Trade has solved the problem of paying a large percentage of your earnings (or adding on to your losses) to brokers and banks. It has made trading easing and affordable to a lot of Canadians with limited budgets. When you only have a couple of hundred dollars, you really can’t afford to pay $5 to discount brokers or $10 to banks.
Users’ funds in Wealthsimple are protected up to $1 million in the event of the platform going belly up.
Wealthsimple Trade Pros
- Seamless Sign-Up: Wealthsimple Trade has one of the easiest processes to sign up. There are no account fees, starting-up charges, or minimum deposits. This is a great platform for beginners, investors who want to learn to trade, and people on a budget.
- Zero Commission-fees: This feature is very tough to beat. Wealthsimple Trade is the only completely free trading platform in Canada. Its competitors charge a minimum of $4.95 for a trade. There are no fees even when your account is inactive.
- Access to US Stocks: Canadian investors and traders get access to thousands of US stocks and ETFs on major US exchanges like NYSE (New York Stock Exchange) and stocks on the TSX (Toronto Stock Exchange).
- Easy to Use: Wealthsimple Trade has a clean, frictionless interface that is user-friendly and intuitive.
- Supports Multiple Account-types: Wealthsimple Trade currently supports three account-types: Tax-free savings accounts (TFSA), Registered retirement savings plan (RRSP) accounts, and Non-registered personal accounts. There are certain factors to keep in mind- You can only open one of each account type in Wealthsimple Trade. Further, if you have an existing RRSP or TFSA with another institution and you’d like to move it to Wealthsimple, you can request a transfer You can also have separate TFSAs, RRSPs, and non-registered personal accounts in both Wealthsimple Trade and Wealthsimple Invest.
- Doesn’t Restrict Stock Trading: When the whole GameStop short squeeze saga was playing out in the US, brokers like Robinhood restricted trades on the stock. Wealthsimple Trade didn’t, and it deserves a lot of credit for that.
- Syncs with Bank Apps and Other Apps: Your Wealthsimple Trade account syncs seamlessly with bank apps and other finance apps like Mint.
- Customer service is getting better: Wealthsimple Trade has an option to speak to ‘real humans’ instead of just an email. While it is not the best customer service in the world, the service is getting better, according to user reviews.
- Wealthsimple Trade Premium: This is a recently launched feature by the platform. The site says, “When you buy a premium subscription to Wealthsimple Trade, you’ll gain access to real-time market data through snap quotes instead of seeing a 15-minute delay. You’ll also get a $1,000 instant deposit limit. Upgrading your account costs $3 a month + tax.” This is not a bad trade-off at all for users who want to day trade. Premium also lets you add deposits up to $1,000 immediately every 3 business days. You can use it all at once as a single deposit, or over multiple deposits in the 3-day period
- Wealthsimple Crypto: Users can trade Bitcoin and Ethereum through the Wealthsimple Trade app. The zero-commission rule applies to trading in cryptos as well. Imagine, buying and selling Bitcoin without paying through your nose in charges.
- No Real-time Data: Unlike Robinhood, where stock prices might have a slight delay, Wealthsimple definitely has a time lag of 15 minutes. For a trader (either day or short-term), this sort of delay is unacceptable. The Wealthsimple help center says, “Quotes on the Wealthsimple Trade app are delayed by 15 minutes. When you submit a market order, we send this to market right away. This means the price your order is filled at will reflect the real-time price for the asset (which can differ from the price it was trading at 15 minutes prior). We do protect market buy orders against any major price fluctuations with a 5% collar, but if you wish to have greater control over the price at which your order gets executed at you may want to use limit orders.” However, you can navigate this problem by subscribing to the Premium account at $3 a month plus tax.
- No Analysis Tools: Like Robinhood, serious traders will find a lack of tools to help them make better decisions. There are no research reports or in-depth information for investors.
- Lack of Access: Wealthsimple doesn’t let you trade in options, or let you set up automated buys and sells.
- No Margin Trading: Wealthsimple Trade doesn’t offer margin trading. Apart from the lack of real-time data, this limits the number of traders who will use the platform.
- No Mutual Funds: You can’t trade mutual funds or buy IPOs using Wealthsimple Trade.
- Currency Loss: If you want to invest in US stocks, you will be charged a 1.5% currency conversion charge as the platform doesn’t let one hold US dollars. As the site says, “Wealthsimple Trade charges a 1.5% currency conversion fee on Canadian to US dollar conversions (and vice versa) when trading US-listed securities.” This means that you need to be sure you are making a profit of at least 3% (1.5% for a buy trade and 1.5% for a sell trade) to cover your costs in trading in US stocks.
- Deposits Take Time: You will be able to use funds instantly only if the deposit amount is $250 or lesser. If you deposit more than $250 into your Wealthsimple Trade account, your funds will be available after 3 business days. Wealthsimple says, “The $250 instant deposit limit resets every three business days. You may choose to deposit $250 all at once, or deposit $100 on the first day and then $150 the next day.”
It wouldn’t be an exaggeration to say that Robinhood and Wealthsimple changed the way North America trades and invests. These two platforms are the best examples of the power of technology that democratized stocks and investing. They have got millions of individuals to take their first steps into the world of trading.
Robinhood is a great tool for US citizens to start trading. And if you don’t mind paying the extra $5 to upgrade to the Gold account, you can unlock even more features that could help ensure a flawless trading experience.
Wealthsimple Trade is easily one of the best options in Canada to invest and trade in stocks and ETFs. There is literally no competition to it when it comes to zero-commission trades. The lack of research options can easily be taken care of by using free research tools on Morningstar, Google, and Yahoo.
There are multiple options for finance screeners, and if you aren’t a serious day trader, Wealthsimple Trade is the platform for you. On the whole, even though Wealthsimple Trade says it is a platform for trading, it is not really recommended for day traders who are just starting out. The 15-minute delay will turn most traders off from the platform. It is an excellent platform to buy stocks and ETFs and to rebalance your portfolio more regularly than other platforms.
Robinhood may be a good option for US citizens who can open an account. Wealthsimple Trade is great for Canadians who want to trade stocks and ETFs without paying exorbitant fees. It is also a great option for Canadians to buy and hold stocks for the short term.
Robinhood vs Wealthsimple Trade | FAQs
Is Robinhood good for beginners?
Yes, Robinhood may be a great option for beginners. It offers a lot of features geared towards retail investors. These features include:
– Easy signup process;
– Minimum investment amounts of as little a $10;
– Intuitive interface on both mobile and web platforms;
– Easy access to the stock, ETF, crypto, and Options markets;
– Commission-free trades;
– Fractional trades feature allowing users to invest in fractions of a stock;
– Recurring investment for people who would like to set it and forget it.
How does Robinhood work?
Robinhood is an online investment application that enables retail investors to directly access the stock, ETF, and Options markets without middlemen (brokers). Signing up is easy and only takes a few steps. Users have to satisfy that they are over 18 years of age, reside in the US, and have a Social Security Number (SSN). With that, anyone with an account can start trading with as little as $10 commission-free. Account activations are typically done in less than an hour allowing the customer to deposit funds and start investing.
How does Wealthsimple work?
Wealthsimple is an online robo-advisor. This means that it takes advantage of computer algorithms to create investing strategies tailor-made to its users. A new user will be asked to describe their investing philosophy including their goals, risk tolerance, and retirement targets. The system will then suggest the best investment strategy to use to achieve their goals. Additionally, users can opt to automate their investment strategies by making regular deposits to their accounts and allowing Wealthsimple to invest the funds in assets it deems the best to achieve the investor’s goals.
Is Wealthsimple better than Robinhood?
Wealthsimple and Robinhood may both be online DIY (do it yourself) investment tools but they have different selling propositions. Whether one is better than the other comes down to your goals as an investor. Wealthsimple offers a more hands-off approach to investing allowing the application to come up with investing strategies and optionally executing them. Robinhood, on the other hand, offers a more hands-on approach. Investors create their strategies and execute them.