CDIC protection for WS Cash accounts increased to 500K | Page 6 | Wealthsimple | Discussion forum

savemoresaveoften said

If one has both WS cash and investment account, one will receive 2 separate statements monthly.

This is on the last page of the WS monthly cash account statement:

Our Cash product is offered by Wealthsimple Investments Inc. (“WSII”), a member of the Canadian Investment Regulatory Organization, and Wealthsimple
Payments Inc., a Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) registered money services business. The funds you add to a Cash
account (the “Funds”) are ultimately held securely in trust with a single or multiple members of the Canada Deposit Insurance Corporation (“CDIC”). CDIC
protects eligible deposits held at CDIC member institutions in case of a member institution’s failure. Wealthsimple Payments Inc. and WSII are not CDIC
member institutions. Under the trust framework, CDIC insures eligible cash balances up to $100,000 per beneficiary, per member institution, provided certain
disclosure rules are met. Coverage is free and automatic. Funds must be spread across at least 3 CDIC member institutions in order for up to $300,000 in
deposits to benefit from applicable CDIC coverage. The advertised interest rate for the Cash Account is derived from interest earned by Wealthsimple on the
funds. The Funds are settled with any CDIC member(s) one business day following the date that Funds are reflected in the Account.

This is part of the statement on the bottom of the WS monthly equity account:

STATEMENT NOTES
Client accounts for Wealthsimple Trade and Wealthsimple Invest held at Wealthsimple Investments Inc. are
protected by CIPF within specified limits in the event Wealthsimple Investments Inc. becomes insolvent. A
brochure describing the nature and limits of coverage is available upon request. http://www.cipf.ca.
Free credit balances in non-registered accounts represent funds payable on demand which, although properly
recorded in our books, are not segregated and may be used in the conduct of our business. Cash balances in
registered accounts are held in trust by Canadian Western Trust. Occasional failed deliveries from executing
brokers can cause shares to be desegregated based on approved segregation logic.
A statement of financial condition and a current list of directors and officers for Wealthsimple Investments Inc. will
be furnished upon request. Clients in British Columbia are entitled to certain additional information about
Wealthsimple Investments Inc., including information about commissions and fees that we charge, and about any
administrative proceedings that may relate to the firm or its staff.  

Thank you, savemoresaveoften. This refutes the theory Norman1 has articulated above. This is not to discredit or admonish what Norman1 has said, as he has just tried to interpret based on confusingly and, critically, vaguely worded public legal agreement language on their public websites.

As I suspected, the Cash account is held by both Wealthsimple Investments and Wealthsimple Payments. For example, when transactions are charged against the card, a pledge against those funds is credited to Wealthsimple Payments for end of day or next business day settlement, at which point the funds would be 'withdrawn' from the WSII account balance and credited to Wealthsimple Payments to settle the outstanding debit balance. But, in any case, because the accounts themselves are held within one's WSII portfolio, CIPF coverage thus applies.

I still wish they provided greater disclosure in terms of the financial institutions where the funds are held, but I guess this allows them to move funds around more quickly within their pooled trust accounts to take advantage of the best rates on offer.

Cheers,
Doug

I'm going to cut out the multi-threaded quotes here as there is no sense quoting and re-quoting the same thing.

Firstly, I never claimed Wealthsimple Payments, as a money services business, was eligible for CDIC deposit insurance. Nor has Wealthsimple. So I'm not sure why you bring that up. The CDIC deposit insurance is through one or more CDIC members (ostensibly either CIBC, Scotiabank, National Bank, and/or Canadian Western Bank or Canadian Western Trust) in which Wealthsimple Payments, Inc., has entered into a pooled trust deposit account relationship for end beneficiaries. CDIC deposit insurance does extend to pooled trust accounts, so long as reporting requirements by the CDIC member in connection with the trust agreement sponsor (Wealthsimple Payments in this case) are met. Thus, the discussion around segregated and unsegregated balances in non-registered accounts is a moot point because I believe it's quite clear that Wealthsimple Cash balances are segregated except for the amount equal to the as yet unsettled card balance transactions, for which that portion would not be CDIC insured, yes. (Note that there is a difference between "free credit balances" in a Wealthsimple Investments account and a Wealthsimple Cash account.)

Secondly, in both cases, CIPF coverage applies, for which I believe you have also incorrectly asserted that because the account/card is issued by Wealthsimple Payments, CIPF does not apply. In fact, by your own post above referencing the PAD agreement, Wealthsimple Cash is considered part of Wealthsimple Investments, a CIPF member. The only portion excepted from CIPF coverage would, again, be the unsettled amount of transactions occurring on the Wealthsimple Cash Card, the prepaid credit card product issued by Wealthsimple Payments, Inc.

Cheers,
Doug

It's not 'settled' though. I've articulated how Wealthsimple Cash is CDIC insured and protected by CIPF. It's a newer product that breaks many of our historical moulds because it's actually two accounts in one, issued by different legal entities, one of which deposits the funds into pooled trust accounts at one or more CDIC members, and the other of which is a spending card product.

Cheers,
Doug

We are now 107 post into this discussion, and I really have no idea, despite all the efforts to explain it, where my money would be if I deposited it to WS Cash or if it would be consistently insured.

As far as I can make out, WS is a fintech, considers itself better than a bank (see recent interview with CEO in Toronto Star - which I consider BS); fintechs are unregulated (last time I looked anyway); WS refuses to tell customers where their money is (while claiming it is in a trust account in your name - so why not tell us where it is if you know?; and their explanations are not convincing.

When I run into this lack of transparency and mumbo-jumbo with any other FI, I stop reading and move on. I don't see this as any different.

The interview in the Toronto Star (I think it was in the last 3 days) is worth looking at, not because it's a good interview (it's weak, and interviewer did not do their homework), but because the CEO just uses this as an advertising opportunity and doesn't answer the limited questions adequately. I found him to be very slick, and not someone i would trust.

For these reasons, I wouldn't touch it. Lots of people will, however; the guy clearly knows his target audience.

davidgeorge said

If I trade stocks, I will use WS because I can move unused fund in trading account to cash account to earn 4% interest. Is the following statement true? I can move available balance in trading account to cash account every day after trading hours to earn interest, and move fund back to trading account next day before trading hours to do trade stocks. This would be very beneficial to day traders.  

That's exactly what I do and use WS for (not day trade but cash I intend for trading I leave it there.) I wont use it as a parking place for $$$$ as daily account like some used it for. Whether it's 4 or 4.5 or 5% (depends on how much assets u have with them etc.) I just don't feel comfortable not knowing 100% how they "manage" the cash.

For equity trading, keep in mind they don't offer every single name (no pref shares for example last time I checked) and their app is primitive and more catered to the meme stock crowd (aka gamestop type) users in my mind.

Loonie said
We are now 107 post into this discussion, and I really have no idea, despite all the efforts to explain it, where my money would be if I deposited it to WS Cash or if it would be consistently insured.

As far as I can make out, WS is a fintech, considers itself better than a bank (see recent interview with CEO in Toronto Star - which I consider BS); fintechs are unregulated (last time I looked anyway); WS refuses to tell customers where their money is (while claiming it is in a trust account in your name - so why not tell us where it is if you know?; and their explanations are not convincing.
…

Where my money ends up actually is not as important as who owes the money back to me!

In many cases, the money deposited in a bank is long gone and not in one of the bank's vaults for safekeeping. Money for a 5 year GIC, for example, isn't sitting in a vault for five years. The money is often lent out by the bank to a borrower who is or looks likely to repay the bank in five years with interest.

The question is not

Loonie said

It's 3a.m. do you know where your money is?

Instead, it would be better to ask the question "It's 3 a.m. Do you know who owes you that account balance back?"

If WS was doing something illegal, we’d be reading about it in a newspaper under “news from the court”.

Instead we have a chat room with a few of us being weirdly fond of big banks regardless of how badly they treat clients, and picking on literally nothing to badmouth a relatively new fintech company offering a bunch of competitive services.

Not sure I get Canadian love affair with the “colour” banks. They are just bad, bad, bad in my limited experience but to each their own.

The thread is not going in circles for those with a rational evidence-based mind and thinking process.
Would not waste even one second listening to uninformed people who don't even use Wealthsimple, speculating about things they don't understand.

Some people are making excellent INCOME TODAY (withdrawing, spending, investing) using the WS products, including the Cash slush-fund at times, combined with the brokerage, TFSA, RRSP, tax and other services.
Lesson of the day, don't take advice from "jailhouse lawyers".

The Star article on WS is just fine, its a standard article. https://www.thestar.com/business/no-it-s-not-a-bank-but-wealthsimple-says-it-feels-the-pain-of-younger/article_531d2cee-f115-11ee-845c-07f2a610f931.html

Norman1 said

Loonie said
We are now 107 post into this discussion, and I really have no idea, despite all the efforts to explain it, where my money would be if I deposited it to WS Cash or if it would be consistently insured.

As far as I can make out, WS is a fintech, considers itself better than a bank (see recent interview with CEO in Toronto Star - which I consider BS); fintechs are unregulated (last time I looked anyway); WS refuses to tell customers where their money is (while claiming it is in a trust account in your name - so why not tell us where it is if you know?; and their explanations are not convincing.
…

Where my money ends up actually is not as important as who owes the money back to me!

In many cases, the money deposited in a bank is long gone and not in one of the bank's vaults for safekeeping. Money for a 5 year GIC, for example, isn't sitting in a vault for five years. The money is often lent out by the bank to a borrower who is or looks likely to repay the bank in five years with interest.

The question is not

Loonie said

It's 3a.m. do you know where your money is?

Instead, it would be better to ask the question "It's 3 a.m. Do you know who owes you that account balance back?"  

Yes, I am aware of all this, and actually thought someone might make the bank comparison. This is valid. The difference is that with a bank, we do know our money is retrievable where we placed it, in a regulated bank, and that it is CDIC insured to max. And that is what we are used to, so we think of our bank "deposit" as being in the bank even though we know it has been loaned out etc. The bank owes us. So does Wealthsimple, but without the regulatory oversight and apparently without the insurance.
WS could have billions in the bank trust account, but only 100K of it CDIC insured; is that right? To claim that your 500K is CDIC insured seems very misleading to me, but I can see why it's attractive.

This makes me think of those "bare trusts" that we were discussing earlier, wherein all beneficiaries have to be identified. In this case we do know that it is a trust, unlike with joint accounts. Does that have any application here?

(BTW, I have yet to be convinced that the money you deposit all goes into a trust at banks. Which 5 banks regularly pays interest in excess of 4 to 5%, allowing for profit?)

There are just too many things here that don't add up for me.

The Star article said CEO and co-founder's previous experience was with an online genealogy start-up that he sold to ancestry.com. This does not inspire confidence. What will it be next?

InterestThis said
.
But some of us have used the site thousands of times and are getting excellent results, while some others are giving out incorrect, false and misleading information.

Not saying WS is like Lehman nor WS is run by a bunch of liars, but Lehman mini bond investors were all getting excellent results (aka return) and proclaim how safe their money were, just saying.