Skip to main content

The financial headlines have got a Wealthsimple client worried.

Not about falling stock and bond markets, or the impact of these declines on the registered retirement income fund and tax-free savings account Wealthsimple has managed for her and her spouse since 2018. No, what’s worrying this retiree are the headlines about Wealthsimple itself.

A quick recap: IGM Financial, the largest shareholder in Wealthsimple, announced in May that is has devalued its investment in the company by 20 per cent as a result of a pullback in the value of technology companies. In June, Wealthsimple itself laid off 159 employees, or 13 per cent of its work force.

“Overall we have been pleased with [Wealthsimple’s] performance and any communication with them has been fine,” this reader wrote. “We realize that this is not the time to move money and are hanging in there in the midst of this financial mess hitting everyone. However, with the news of the IGM downgrade on May 6 and the layoffs of June 15 we are getting jittery. Is Wealthsimple in jeopardy, do you think? Should we move the money? We’d be grateful for any impartial advice.”

The headlines about Wealthsimple are a result of leaner times in the investing world. Stocks and bonds have been pummelled, particularly in the tech sector. Wealthsimple’s owners have acknowledged this by marking down their investing in the company. The market downturn has also cooled the hyperenthusiasm people showed in the two previous years to invest and trade. In 2020, Wealthsimple nearly doubled its assets under management to $9.7-billion over the previous year.

Every boom in investing is followed by a retreat, if not a bust. It’s not unusual for companies like Wealthsimple to staff up for the high times and reduce headcount when business declines. Expect to see more headlines about layoffs in the financial sector if markets don’t rebound.

Wealthsimple has two investing arms – one offers stock and cryptocurrency trading through the Wealthsimple Trade app and the other is a robo-adviser that builds and manages low-cost portfolios of exchange-traded funds.

Stock trading and robo accounts are covered by the Canadian Investor Protection Fund, Wealthsimple and CIPF confirmed this week. CIPF insures eligible accounts at member firms against insolvency or bankruptcy. Eligible accounts are insured for up to $1-million in losses from securities and cash missing from your account (not market losses).

“In the extremely unlikely event that Wealthsimple were to go out of business, your account would remain safe and be largely unaffected,” Wealthsimple said in an e-mailed answer to questions. “All securities are beneficially held under your name, and if we were to close, you could choose to keep your money with Wealthsimple Investments Inc. or transfer it to a new advisor or your bank account.”

Tense times for stocks and the economy tend to get people thinking about the stability of the companies they invest with. Follow that impulse, if you’re feeling it. You’re never wrong to ask of your investment firm, “What happens to my money if you go under?”

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.