At a time when more and more of us bank online, one wealth management company is expanding into banking
By Katrina Caruso
The Toronto-based wealth management firm Wealthsimple recently launched a new online savings account in Canada and the United States. Smart Savings accounts offer a premium 1.7% interest rate in Canada (1% in the States), with unlimited free transactions—including withdrawals—and no fees, and you can open an account with as little as one dollar.
The digital investing service, also known as a “robo-advisor,” launched the savings account in partnership with EQ Bank, which is backed by Equitable Bank in Canada, and so Smart Savings accounts will be insured through the Canada Deposit Insurance Corporation. The account is available for new and pre-existing clients and can be accessed online and through a mobile app. The savings account can seamlessly sync to clients’ Wealthsimple investment accounts.
Wealthsimple hopes that the premium rate will attract investors looking for an alternative to the Big Five banks. The rate is higher than the average in Canada, with high-interest savings accounts rates ranging widely, anywhere from 1.05% to 2.25%, according to Ratehub. However, Canada’s Big Five banks typically offer savings accounts with interest rates from only 0.05% to 1.7% (the highest being Scotiabank’s Monentum Plus account). While the banks will offer higher interest rates at times, it’s usually for a limited time only.
According to Investor Economics, 35% of all Canadians’ financial assets are sitting in savings accounts. The CEO and co-founder of Wealthsimple, Michael Katchen, said he believes this money can be better used. “Canadians need to wake up to the fact that they’re not earning enough on their money,” he said.
Wealthsimple tested the account in January with a small user base and opened access to all of Canada and the United States in early April. The savings account is the company’s first product not meant specifically for investing. The company currently has no plans to create chequing account options, although Katchen has said the company would consider the idea depending on consumer demand.