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Email this10:34 pm
March 27, 2019
Offline10:56 pm
September 28, 2023
Online
The more they increase it, the less trust I have in it actually.
I use WS Cash as my daily banking account since they wooed me with the direct deposit bonus, and it works well, but I don't let it grow to more than a few thousand. I would much rather keep large balances with an FI that has direct CDIC coverage in its own name.
It is time for CDIC itself to increase their coverage limit. Next year will be 20 years since they last upped it.
6:26 am
March 15, 2019
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everhopeful said
The more they increase it, the less trust I have in it actually.I use WS Cash as my daily banking account since they wooed me with the direct deposit bonus, and it works well, but I don't let it grow to more than a few thousand. I would much rather keep large balances with an FI that has direct CDIC coverage in its own name.
It is time for CDIC itself to increase their coverage limit. Next year will be 20 years since they last upped it.
I asked the CDIC a few years ago about increasing the coverage. They said that the coverage was sufficient for the vast majority of Canadians.
Also, bear in mind that the "Big 6" banks are the biggest contributors to the CDIC fund and it is highly unlikely they would go bust because they have an implicit guarantee from the Canadian government.
Trudeau and Freeland would have to resign if any of the Big 6 banks go bust and voting age people lose their deposits/GIC's.
8:59 am
January 12, 2019
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.
Well ... it looks like those ⬆ resignations you speak of, have already started ❗
Freeland resigned yesterday. Maybe Truedow will be next ❓
We can only Hope 
- Dean
" Live Long, Healthy ... And Prosper! "
9:24 am
April 6, 2013
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No-one is going to resign because people lose the part of their deposits that's above the CDIC deposit insurance limit. That's wishful thinking. It will be spun so that those minority of people look like idiots.
Same with that so-called implicit guarantee. Federal government has made it clear, since bringing in those bail-in regulations in September 2018, that it won't be the one taking a hit should one of the D-SIB's run into problems.
6:05 pm
October 27, 2020
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From the Wealthsimple FAQ (page linked to in post #1 in this thread):
What happens if Wealthsimple goes out of business?
In the improbable event that Wealthsimple goes out of business, client funds are to be recovered in accordance with Canadian bankruptcy laws and proceedings.
Why is the answer not: Client funds will be recovered fully with the help of the CDIC.
The actual answer on the Wealthsimple page scares me.
8:53 pm
April 6, 2013
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That's because the balance in your Wealthsimple Cash account is owed to you by Wealthsimple Payments Inc. (a FINTRAC registered money services business) and not owed to you by the CDIC member "Banking Partners".
Wealthsimple Payments Inc. is not a CDIC member. Consequently, CDIC won't be involved should Wealthsimple Payments fail and there is a shortfall in funds.
10:11 pm
September 28, 2023
Online
Wow... the little faith I had left in the scheme got decimated by the last 2 posts. Makes me want to sweep my savings out to other FI's more frequently than I have been doing (or buying a HISA ETF in the trade account). I have been using the Cash account for short term fund parking between Simplii and Tang promos, but this is making my stomach churn a bit.
WS Cash's rates are becoming just mediocre anyhow, even with the direct deposit bonus included. Will see what their credit card offering is soon, and if I don't go for that then I might switch my DD to EQ and get their better bonus for their all-in-one account with prettywell the same featureset (and simple, direct $100k CDIC coverage).
It would be nice if CDIC would step in and confirm or debunk this scheme, though they probably won't for a myriad of legal reasons. If something happened and people full into Cash lost their shirts, CDIC's credibility would take a massive hit. Hopefully this scheme never needs to be tested, but I won't have much skin in the game if it does.
11:48 pm
August 4, 2010
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Caution is always good, but so is understanding. More specific details would be in the Wealthsimple agreements, but basically there are two Wealthsimple entities involved, Wealthsimple Investments ("WSII") and Wealthsimple Payments ("WSP"). WSII probably takes your money you provide to the Cash account and places it with WSP, which is depositing it with a bank (or banks) in your name under CDIC trust relationships with WSP as the trustee. It isn't just a big pot of money sitting (or not) at WSP - short of blatant fraud, those funds are very unlikely to be available for them to use for other purposes.
Furthermore, neither WSP nor (probably) WSII are doing anything hugely risky like large scale investment banking, draining swamplands or whatnot. I'd guess the main risk of going bankrupt would be some sort of insurmountable debt problems, maybe? In any case, while not a lawyer etc. etc., I'd be pretty sure that those trust accounts belong to you and would eventually be returned, and would not be part of any corporate bankruptcy estate.
The non-registered Cash account has the additional wrinkle of the card, but doesn't change anything as far as I know. The cash is still in CDIC trusts at banks, and WSP merely transfers amounts as necessary to the Card provider, Koho, which doesn't hold the balance.
Whether WSP is using 1 bank or 10, it shouldn't really matter as none of the trust deposits should exceed the $100K limit. The only difference with more banks is a larger risk that a presumably unlikely bankruptcy of one of those Schedule 1 banks means CDIC gets involved in whatever money WSP has in your name at that bank.
Peace of mind is worth whatever one wants, and if someone is uncomfortable or uncertain about WS Cash accounts, there are other alternatives.
4:16 am
April 27, 2017
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^ nice summary
4:29 pm
August 20, 2019
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10 trust accounts now? How quickly can they become zero?
11:05 pm
April 6, 2013
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NorthernRaven said
… More specific details would be in the Wealthsimple agreements, but basically there are two Wealthsimple entities involved, Wealthsimple Investments ("WSII") and Wealthsimple Payments ("WSP"). WSII probably takes your money you provide to the Cash account and places it with WSP, which is depositing it with a bank (or banks) in your name under CDIC trust relationships with WSP as the trustee. It isn't just a big pot of money sitting (or not) at WSP - short of blatant fraud, those funds are very unlikely to be available for them to use for other purposes.
Trust accounts don't work that way. Trust accounts are opened in the name of the trustee in trust for the beneficiaries. Trust accounts are not opened in the name of the beneficiaries.
By definition, the trustee always holds the legal title. That applies to trust bank accounts and other assets held in trust, like land and shares of a company.
Consequently, there is a big pot of money sitting in bank accounts in WSP's name that WSP is supposed to hold in trust for holders of Wealthsimple Cash accounts.
WSP (not the Partner Banks) owes those holders the balances in the Wealthsimple Cash accounts.
WSII is only involved if one tries to do direct deposits to or pre-authorized debits against one's Wealthsimple Cash account. WSP will open a DD/PAD account with WSII to receive the direct deposits and pre-authorized debits. The received direct deposits and pre-authorized debits are then settled against one's Wealthsimple Cash account with WSP.
Furthermore, neither WSP nor (probably) WSII are doing anything hugely risky like large scale investment banking, draining swamplands or whatnot. I'd guess the main risk of going bankrupt would be some sort of insurmountable debt problems, maybe? In any case, while not a lawyer etc. etc., I'd be pretty sure that those trust accounts belong to you and would eventually be returned, and would not be part of any corporate bankruptcy estate.
…
What's left in the trust accounts will eventually be returned. But, what's left may not be 100% of what everyone put in through WSP.
Synapse was doing something similar in the US. When Synapse failed, what's left in the FDIC insured bank accounts fell short by at least $65 million.
CNBC (Nov 22, 2024): ‘I have no money’: Thousands of Americans see their savings vanish in Synapse fintech crisis has sad stories about people who thought they had FDIC coverage for their savings deposited with fintechs, that behind the scenes, went through Synapse to the FDIC-insured banks and lenders.
This is one of the stories:
When she [former Texas schoolteacher Kayla Morris] and her husband sold the house last year, they stowed away the proceeds, $282,153.87, in what they thought of as a safe place — an account at the savings startup Yotta held at a real bank.
Morris, like thousands of other customers, was snared in the collapse of a behind-the-scenes fintech firm called Synapse [that Yotta used to offer bank-like services] and has been locked out of her account for six months as of November. She held out hope that her money was still secure. Then she learned how much [FDIC member] Evolve Bank & Trust, the lender where her funds were supposed to be held, was prepared to return to her.
“We were informed last Monday that Evolve was only going to pay us $500 out of that $280,000,” Morris said during a court hearing last week, her voice wavering. “It’s just devastating.”
5:20 am
April 27, 2017
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Consequently, there is a big pot of money sitting in bank accounts in WSP's name that WSP is supposed to hold in trust for holders of Wealthsimple Cash accounts.
It's not one big pot of money with a bank in WSP’s name. It's a bunch of individual pots of money separated not just by trustee but per beneficiary, per deposit category.
And that’s how CDIC coverage of up to $100K per bank, per beneficiary and per deposit category is achieved even though WS has far more than that with each bank.
6:32 am
November 18, 2017
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everhopeful:
It is time for CDIC itself to increase their coverage limit. Next year will be 20 years since they last upped it.
But they have more recently increased the number of CDIC classes, with corresponding coverage totals.
RetirEd
8:42 am
October 27, 2013
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All this financially engineered stuff is why I wouldn't put much, if anything, into WS Cash. There are simply too many other competitive alternatives with a direct line of sight.
9:44 am
October 21, 2013
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I'm with AltaRed on this one.
Pretend-a-bank seems to be a new and rowing industry. Everyone wants a piece of the (your) pie. Be careful!
10:22 am
March 17, 2018
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AltaRed said
All this financially engineered stuff is why I wouldn't put much, if anything, into WS Cash. There are simply too many other competitive alternatives with a direct line of sight.
Loonie said
I'm with AltaRed on this one.
Pretend-a-bank seems to be a new and rowing industryEveryone wants a piece of the (your) pie. Be careful!
Hypothetically, if one put 1M into their new managed beta Bond Portfolio account or a money market ETF like CASH.TO, wouldn't they be covered fully under CIPF if WS went bankrupt ?
11:12 am
April 27, 2017
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They would. Within the scope of CIPF. For investments WS is no different to other brokers like Questrade or TDDI.
The difference in coverage is only for cash accounts because money is placed by WS with counterparty banks covered under CDIC rather than by you directly. There is some extra risk but to me it seems smaller than using provincially insured credit unions (for example).
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