TABLE OF CONTENTS
- Transaction Details and Transfer Process
- Fees and Taxes
- Taxable Accounts, Save Accounts, and Traditional / Roth / SEP IRAs
- Other Account Types
- Portfolio Comparison
- Other Questions
Transaction Details and Transfer Process
What is happening to my Wealthsimple account?
Wealthsimple has made the decision to no longer provide investment advisory services in the US, and has agreed to transfer its existing US customer accounts to Betterment. The account transfer involves (i) the assignment by Wealthsimple US, Ltd., an SEC registered investment adviser, of each customer’s investment advisory agreement and account to Betterment LLC, an SEC registered investment adviser, and (ii) the transfer of each customer’s related brokerage account from Apex Clearing Corporation, an SEC registered broker-dealer and FINRA member clearing firm, to MTG LLC d/b/a Betterment Securities, an SEC registered broker-dealer and FINRA member.
When will the transfer take place?
We expect the account transfer to occur on or around June 12, 2021 (the “Transfer Date”).
Do I need to do anything to opt in?
No, the accounts of customers who do not expressly opt out will automatically transfer to Betterment on the Transfer Date. There is no need to create a Betterment account in advance of the transfer, though you are welcome to do so if you choose. Account assets will not move from Wealthsimple to Betterment until the Transfer Date. Betterment will send additional instructions for claiming your Betterment account closer to the Transfer Date.
Can I opt out of the transfer?
Yes. If you wish to opt out of the transfer, you can choose to receive a cash distribution from Wealthsimple (which may be subject to capital gains tax) or seek to transfer your assets to another custodian prior to the Transfer Date. Please contact Wealthsimple support at email@example.com prior to June 4, 2021 if you wish to opt out of the transfer.
How do I access my tax forms after my Wealthsimple account is closed?
You will still receive your 2020 and partial 2021 (for the period until your account is transferred to Betterment) tax forms from Wealthsimple.
Fees and Taxes
Will my fees change when switching from Wealthsimple to Betterment?
Yes. For investing, Betterment charges customers an annualized fee of 0.25% of assets under management, while Wealthsimple charges 0.40% to 0.50% depending on the customer’s account balance. Note that customers with account balances of at least $100,000 will be able to opt into a higher-fee tier (0.40%) that includes unlimited access to Betterment’s team of CFP® professionals. More information on Betterment’s fees can be found here.
Will I be charged any fees for transferring my account to Betterment?
No, there will be no fees to transfer your account from Wealthsimple to Betterment.
Are there tax implications for transferring my account?
Potentially, although Betterment will help to ensure that any tax implications are minimized. Your account assets will be transferred to Betterment in-kind, so there will not be any tax implications associated with the account transfer itself.
Once at Betterment, Wealthsimple customers will be given the option of holding their existing Wealthsimple portfolios at Betterment for a period of 12 months. We anticipate that all accounts may be transitioned to a Betterment portfolio after this initial 12-month period. Any transition to a different portfolio will entail selling certain securities in your portfolio and purchasing others with the proceeds, which may result in the realization of taxable gains. Such gains may be short-term capital gains depending on activity in your account. Additionally, once your account has been transferred to Betterment, if there are positions in your account which are not associated with the existing WealthSimple portfolio, our system will liquidate them and you may experience a tax impact for potential gains realized.
Betterment will provide discretionary investment advisory services in connection with the management of your account. This will involve, among other things, account rebalancing, which may result in the realization of taxable gains in your account due to the purchase and sale of securities. Your account may be automatically rebalanced upon arrival at Betterment in the event that your portfolio has drifted more than 3% from its target allocation.
Betterment strongly recommends that Wealthsimple customers who are concerned about the tax implications of transferring their accounts seek the advice of a qualified tax professional.
Taxable Accounts, Save Accounts, and Traditional / Roth / SEP IRAs
Will my portfolio composition change as a result of the transfer?
Your account assets will be transferred to Betterment in-kind. Upon arrival at Betterment, Betterment will maintain your portfolio allocation and your selected risk level. You will have the option to invest your account assets in accordance with your Wealthsimple portfolios for a period of 12 months, after which we may transfer all accounts to a Betterment portfolio. This treatment will apply to all taxable accounts, Traditional / Roth / SEP IRA accounts, and Save accounts. In addition, you will have the option to select any of Betterment’s portfolio offerings for your account at any time following the completion of your account transfer to Betterment. You can learn more about Betterment’s portfolio offerings here. Note that Betterment’s Tax Coordinated Portfolio feature is not available to customers for any period of time in which they remain invested in the Wealthsimple portfolio and its Tax Loss Harvesting+ feature will not function on Wealthsimple portfolios.
You may not be able to transfer securities which are not part of a standard Wealthsimple portfolio to Betterment in-kind, including, but not limited to, individual stocks. Such securities may need to be liquidated or transferred to a different custodian prior to the Transfer Date. If you are unsure whether any of your holdings are eligible to be transferred to Betterment in-kind, please contact Wealthsimple support.
What will happen to my joint taxable account?
Joint taxable accounts will receive the same treatment as individual taxable accounts: your assets will be transferred to Betterment in-kind, and you will have the option to have your account managed in accordance with your Wealthsimple portfolio allocation for a period of up to 12 months following the transfer. Betterment accounts will be created for each joint account owner.
Does Betterment offer a Halal portfolio option?
Betterment does not offer Halal portfolios at this time. However, we offer a range of SRI options – more information can be found here. Customers wishing to maintain Halal portfolios should work with Wealthsimple to transfer these accounts to a different custodian prior to the transfer date.
Will I be able to continue investing in my Wealthsimple portfolio for the initial 12-month period following the account transfer?
Yes, we will enable customers to continue investing in their Wealthsimple portfolios over the initial 12-month period. We anticipate that all accounts may be transitioned to a Betterment portfolio after this initial 12-month period. This will entail selling certain securities in your portfolio and purchasing others with the proceeds, which may result in the realization of taxable gains. In addition, any capital gains incurred from additional investments into Wealthsimple portfolios following the transfer may be subject to short-term capital gains tax.
Other Account Types
Will I be able to transfer my UGMA/UTMA account?
No. Betterment does not currently support custodial accounts. Customers wishing to maintain such accounts should work with Wealthsimple to transfer these accounts to a different custodian prior to the transfer date.
Will I be able to transfer my SEP IRA account?
Betterment supports SEP IRAs for only one plan participant. Typically, small businesses with two or more participants may also set up a SEP IRA for multiple employees. However, Betterment does not support this type of SEP IRA at this time. If you have a SEP IRA with more than one plan participant, you will not be able to transfer this account to Betterment.
I have a Living Trust or Corporate Trust account. Will my account be transferred to Betterment?
Trust account customers who would like to transfer their trust account to Betterment will be receiving instructions on how to do so from Wealthsimple.
I have a Beneficiary IRA, Simple IRA, or Investment Club account. Will my account be transferred to Betterment?
No. Given the specialized nature of these accounts, Betterment will be unable to accommodate a transfer. Customers wishing to maintain such accounts should work with Wealthsimple to transfer these accounts to a different custodian prior to the transfer date.
Can I invest in crypto with Betterment?
No, Betterment does not offer crypto at this time.
Investing Options with Betterment
Betterment offers investors the choice to invest in a few different portfolio strategies, each suitable for different purposes. By default, Betterment recommends its Core portfolio strategy. Betterment also offers three Socially Responsible Investing portfolios, one focusing on Broad Impact, one on Climate Impact, and another on Social Impact. These portfolios invest in all of the same global asset classes as the Betterment Core portfolio, but each portfolio invests in a different set of ETFs that screen their investments for a subset of environmental, social and governance issues. In addition to Betterment managed strategies, Betterment offers the option to invest in portfolio strategies provided by third parties, including Goldman Sachs Smart Beta portfolios and BlackRock Target Income portfolios. For investors with views that differ from Betterment’s available managed portfolio strategies, they can use a Flexible Portfolio, which allows them to invest in the same ETFs as the Betterment Core portfolio strategy with the ability to adjust the individual weights to each asset class. Additionally, Betterment offers a high-yield cash account.
How does Wealthsimple Invest compare to Betterment’s Core portfolio offering?
Betterment and Wealthsimple Invest both offer portfolios comprised of low-cost ETFs that give investors exposure to a number of different asset classes across the globe. Despite their similarities, however, there are some differences that you should consider when deciding whether to move management of your account to Betterment.
Betterment’s Core portfolio strategy includes both stocks and bonds in the U.S., international developed, and international emerging markets. The Wealthsimple portfolio includes exposure to all of these asset classes except for international bonds. The performance of bond markets in different regions is tightly connected to the interest rate environment in each region. Investing in international bonds provides a level of global interest-rate diversification, which helps mitigate interest rate risk. Conversely, by investing in a portfolio with a global bond allocation, the bond portion of the portfolio could underperform a bond portfolio with exposure only to the U.S. market.
While both the Betterment and Wealthsimple portfolios invest in stocks across the same global markets there are some differences in how stocks are weighted in each region. The stocks in Betterment’s portfolio include a tilt toward size and value, two drivers of long-run historical outperformance identified by Fama & French. Practically, this means Betterment invests more in companies with smaller capitalizations and companies with a low price relative to their perceived intrinsic value. The Wealthsimple portfolios do not tilt toward size and value factors, but instead toward low volatility. Wealthsimple uses minimum volatility funds that aim to reduce exposure to stock market volatility. This type of strategy can potentially minimize the peaks and valleys of typical market-cap weighted stock allocations.
Another key difference between the Wealthsimple and Betterment portfolios is that the Wealthsimple portfolio invests in gold. Betterment’s portfolio does not invest in gold or any other commodity. Some research suggests that exposure to gold can help investors hedge against inflation or deflation risks, when compared to more typical stock and bond investments. Betterment’s portfolio does not include gold because Betterment feels the long-run expected return and risk profile of commodities is significantly less favorable when compared to stock and bond investments. Both Betterment and Wealthsimple portfolios invest in treasury inflation-protected securities as a hedge against inflation.
How does Wealthsimple Save compare to Betterment’s Core portfolio offering?
Wealthsimple Save offers investors exposure to a low-cost ETF portfolio suitable for an investor looking to save with minimal risk. The Wealthsimple Save portfolio invests in U.S. municipal and treasury bonds.
Betterment offers both a 100% bond ETF portfolio, as well as a high-yield cash account. Betterment recommends our 100% bond portfolio as the final destination for some of our investing goals, where we recommend a reduced stock percentage over time as you get closer to your goal. For savers who want a low-risk option for an extended period of time, Betterment suggests our high-yield cash account. This cash account provides the security of FDIC insurance, is more liquid, and offers a competitive yield compared to our short-term 100% bond portfolio.
Betterment’s 100% bond portfolio consists of U.S. short-term investment grade bonds and treasury bonds. Municipal bonds offer investors tax-exempt income, whereas investment grade bonds do not. Corporate bonds typically offer investors a higher yield in return for not being tax-exempt.
Can I talk to a financial advisor before I transfer?
You are welcome to speak with a financial advisor of your choice prior to account transfer. Once you create a Betterment account, you will be able to speak with one of our financial advisors through the purchase of a financial advice package.
Where can I learn more about Betterment?
Here on Betterment’s website, you can learn all about Betterment’s offerings and services. Explore how Betterment works, or learn more about our Investing product. You can explore our pricing information.
Our account terms and related disclosures are available in our legal documents, including our Form ADV Part 2, Form CRS, and customer agreements.