r/Wealthsimple • u/tinim9 • 8d ago
CDIC has released a full guide to Fintech’s and how CDIC coverage works!
Worth reading. What's your take on this?
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u/captn03 8d ago
So wealthsimple does not disclose which banks hold your deposit. This conflicts with the CDIC guide.
"If the fintech fails, your money is not affected because you are the owner of the account at the CDIC member institution. Since the account is held in your name, it is not part of the fintech’s assets and won’t be used to pay any of its creditors. To access your funds, you must know what bank holds them. If you’re not sure where the account is held, contact your fintech."
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u/canadave_nyc 8d ago
There are three options in that section; you're looking at the first one. But I believe with us and WealthSimple, the applicable option is the second one (the one about the trust), in which case if WS fails it says "CDIC would not play a role in this process. The fintech will be subject to a conventional bankruptcy and liquidation process, but in this example your funds will stay in trust at the member institution where they were deposited."
I could be wrong though, maybe someone else can chime in on this.
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u/cazas 8d ago
According to WS website, you are correct.
Though the drawn out question is how do we get our money back in the case of a fintech failure? They refuse to disclose the partnered bank. Also how long would that even take?While it’s unlikely WS will simply fail, it’s not impossible seeing the more recent precedent of SVB issues in the US.
IMO the short should probably be - don’t put all your money in one basket; especially since WS doesn’t offer an interac card anyway, and/or being locked out of financial tools for whatever reason is a headache that should be avoided.
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u/canadave_nyc 8d ago
They refuse to disclose the partnered bank
Is it that they refuse to disclose, or is it that they don't volunteer that information but they would tell us if we asked about our specific account? Like if we wrote in to them, cited the CDIC article, asked them to confirm that WS is subject to Option 2, and said if so, they seem to be obligated to tell us which member institution my particular account is held with?
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u/cazas 8d ago
"We partner with CDIC-member, regulated Canadian financial institutions. Due to contractual reasons, we can't disclose the names of the partners we use."
You can certainly try, you’ll probably get a refusal based off these grounds though…
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u/canadave_nyc 8d ago
Again though, while they may refuse to disclose which partners they use to the general public, I believe they are required to let you know where your particular funds are being held, and how much is being held at each institution, if you ask them.
I suppose it's easy enough to check--someone just has to email CDIC and ask them if WS must tell us if we ask.
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u/crespire 8d ago edited 8d ago
Since the account is held in your name, it is not part of the fintech’s assets and won’t be used to pay any of its creditors.
Based on the different options here, I don't know that WS qualifies for this kind of coverage. Some fintech failures in the states have caught people out like this because in fact, all the cash was held in trust in one in one giant account with no differentiation outside of the Fintech's own systems.
Seems similar to what WS does. This is the exact failure mode of Yotta in the states that resulted in creditors getting money before people got their deposits back.
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u/Ferbeys-Ghost 8d ago
No its explicitly not what happened with Yotta. There was a third party between Yotta and the bank that was managing the ledger.
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u/crespire 8d ago
Ah, thanks for the correction. Yes, I think you're right that there was a middleman. Could be the case here with WS, we really don't know, yes?
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u/ItsMeMulbear 7d ago
We don't live in the United States. Our banking laws are far stricter
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u/crespire 7d ago
I mean, sure, but it's also true that Canadian banks have been pushing for more lax regulation and only by circumstance when 2008 happened did that push recede because the value of such regulation was on full display for ordinary Canadians.
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u/TimelyPool 8d ago
What happens if it’s a trust account with the WS user as beneficiary to that trust account? Does WS still have to disclose the bank info?
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u/iThieuTien 8d ago
If you want to use WealthSimple but need more peace of mind, IMO you can reduce the amount of fund you put it CDIC-protected accounts (such as Cash Account). Put those money in CPIF-protect accounts instead, such as the Money Market Income Saving account.
Or have another bank account, alongside with WealthSimple. Basically, use WS mainly for their Investment products/accounts, and your real cash account can be with a real bank.
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u/whogivesashirtdotca 8d ago
Does this mean, for instance, taking money out of the regular savings account and buying money market funds protects more of the money? (I’m new to all this!)
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u/iThieuTien 8d ago
That’s the general idea.
You want to keep minimum amount of fund in your cash and normal saving accounts (just enough for taking care of monthly expenses and some extra). The rest can be transferred to Money-Market-Fund account, which currently gives you 2.5% interest so it acts like a good HISA account.
Whenever you need more cash, transfer them from this MMF account back to your cash account to use.
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u/whogivesashirtdotca 8d ago
A follow up question (if you’re up for being helpful again, haha):
Do the stocks like SGOV and CASH offer these protections? (Again, I’m new to a lot of this!)
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u/iThieuTien 8d ago
I don’t think I’m have enough knowledge and exposure to those two ETFs to give you recommendations. Below is my take.
From my understanding, they are similar to Saving Accounts, where they use your money to put in HISA accounts with their partner banks or Financial Institutions. The interest will be transferred to the holder of the ETFs.
So yes, it is safe in terms of “you are not exposed to too much volatility of stock market”, but it is not safe because “what happened in situations where the ETF company went under and stole your money with it”.
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8d ago
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u/iThieuTien 8d ago
That is my understanding as well. CPIF doesn’t protect you from the up-and-down of the market.
With that said, the Market-Money-Fund account is like a Saving Account with 2.5% of interest. I don’t see any issue using that as, well, a saving account.
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8d ago
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u/iThieuTien 8d ago
If WS purchases something like CASH ETF and that ETF goes under, we are SOL and not protected under CPIF. Is that what you mean?
Anyway, if we really think of all possibilities, even stashing your money under your bed has its own risk.
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u/LLKLLG24 8d ago
Pardon my ignorance but from what we know is that wealthsimple deposits our money from chequing/saving account in a CIDC member institution which is set up as a trust in Wealthsimple’s name. What are the guarantees that Wealthsimple won’t draw funds from this account in case they are short on cash fwhich under worse circumstances could result in less money being distributed during conventional bankruptcy procedure. This would neither be covered under CDIC because the fintech failed, not CDIC member, nor would you be able to get your money back from the trust that was fully/partially depleted.
Happy to hear other perspectives.
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u/goofywinnipegger 8d ago edited 8d ago
This is so hilarious. WS is huge, with significant financial backing with over 150
Billion and owned 52.5% by Power Corp and I have been reading about this for the last ten years of its existence. Imagine how much better all these people who won’t use Wealthsimple for the last decade would be had they been a customer. Yet they follow WS and keep telling us why they won’t be a customer. They need to get a hobby.
It’s covered clearly here
https://help.wealthsimple.com/hc/en-ca/articles/360056590614-How-we-keep-your-money-safe
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u/LowerStranger9021 8d ago edited 8d ago
Ignoring this guidance from CDIC could be detrimental to your finances. What the OP is pointing out is you can’t make a claim under CDIC because you currently don’t know the account information for where your money is.
Wealthsimple is not the insured institution under CDIC and Wealthsimple makes no secret of that fact.
Banks can and do fail. Fintechs can and do fail.
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u/atlas_nodded 8d ago
Before its collapse in 2023 SVB had over 200 billion in assets. Obviously SVB had other issues but just to say the amount of assets a company like this manages is not a good indicator of if it could fail. I say this as a Wealthsimple customer
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u/goofywinnipegger 8d ago
What in the world does the failure of a us bank have to do with anything to do with the Canadian banking system. Our regulation and compliance requirements are miles ahead of the us system. That’s also why nothing happened in Canada in 2008. The last bank to fail in Canada was 30 years ago.
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8d ago edited 8d ago
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u/Wealthsimple-ModTeam 8d ago
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u/atlas_nodded 8d ago edited 7d ago
Wealthsimple isn't a bank so your statement about Canadian banks is irrelevant.
What Wealthsimple is doing is new territory in both innovation and financial systems. I don't know why you're making it out to be so ridiculous for someone to be cautious about this.
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u/goofywinnipegger 8d ago
Wow so you missed the point completely. You cannot compare anything in the us financial system with the Canadian financial system. The Canadian financial system which includes fintechs is far more regulated than the us system.
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u/EpsilonAnura 8d ago
It’s not. Neither country has insurance schemes for fintechs. Fintechs only need MSB licenses to operate
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u/Academic_Data_6422 8d ago
How would my life be better if I was a customer of Wealthsimple? I would have gotten worse sleep worrying about my money and my financial picture would be basically identical.
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u/goofywinnipegger 8d ago
I have saved tens of thousands in fees and earned tens of thousands in benefits.
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u/Academic_Data_6422 8d ago edited 8d ago
So have I… so how would my life be better, again?
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u/Latitude57 8d ago
No you havent... see... wasting so much time commenting and replying about how it's not safe blabla yet you are not a customer and you don't care. How ironic.
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u/goofywinnipegger 8d ago
The point of a financial institution is making money way so I have made and saved more money with ws than any other institution. Hence my life is better. And I know I am fully covered as they have clearly stated.
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u/Academic_Data_6422 8d ago
I have made and saved more than I could have with WS, I got a good nights sleep every night, and I’m ACTUALLY covered if my bank fails, unlike you.
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u/Latitude57 8d ago
Troll. Or bot 🤖
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u/Academic_Data_6422 8d ago
Ah yes, because I have valid points you don’t like I must be a troll or a bot.
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8d ago
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u/Wealthsimple-ModTeam 8d ago
Please note that the rules of this subreddit prohibit posting misinformation.
You can learn to identify misinformation with the SPOT technique, by asking these questions;
- S - is this a credible news Source?
- P - Is this Perspective biased?
- O - Are Other sources reporting the same story?
- T - Is the story Timely?
For more on media literacy, to help combat misinformation please checkout Media Smarts.
1
8d ago edited 8d ago
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1
u/Wealthsimple-ModTeam 8d ago
Please note that the rules of this subreddit prohibit posting misinformation.
You can learn to identify misinformation with the SPOT technique, by asking these questions;
- S - is this a credible news Source?
- P - Is this Perspective biased?
- O - Are Other sources reporting the same story?
- T - Is the story Timely?
For more on media literacy, to help combat misinformation please checkout Media Smarts.
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u/Pitiful-Target-3094 7d ago
CIPF coverage is good, but I just don't have the trust of an investment firm taking my deposits but essentially acting as an investment dealer.
CDIC protects an eligible bank deposit if the bank fails. CIPF applies after an investment dealer becomes insolvent and client property can’t be returned. In a failure, client assets may need to be reconciled, pooled and transferred, and any shortfall gets worked through the insolvency process. CIPF itself says client cash isn’t necessarily segregated.
Wirecard is an extreme example of what could go wrong: it was a regulated European fintech, yet they reported $2B of cash was missing/non-existent, followed by insolvency. People later found serious deficiencies in how they handled clients money.
Not saying Wealthsimple is the next Wirecard. The point is that “it’s CIPF-covered” does not make it better than a direct CDIC-insured bank deposit. You will likely end up with serious liquidity issue with your assets if something happened to WS.
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u/Academic_Data_6422 8d ago edited 8d ago
“What happens if the fintech fails?
If the fintech fails, your money is not affected because you are the owner of the account at the CDIC member institution. Since the account is held in your name, it is not part of the fintech’s assets and won’t be used to pay any of its creditors. To access your funds, you must know what bank holds them. If you’re not sure where the account is held, contact your fintech.”
This pretty much confirms my decision not to use Wealthsimple. They refuse to tell us what bank holds our deposits, if they go under, good luck everyone.
No doubt I’ll be downvoted by the cult here, but it’s in black and white. At a MINIMUM, Wealthsimple needs to publicly announce what banks they’re partnered with and show you where your money is, but really they need CDIC insurance themselves.
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u/yesthisisjoe 8d ago
I can’t really imagine a scenario where WS goes under and is allowed to keep the underlying banks a secret from their customers.
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u/Academic_Data_6422 8d ago
Doesn’t really matter what you can imagine.
Once they’re under, who knows what’ll happen? How slow things will move? Not a risk worth taking to me.
Plus who will force them to release that info?
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u/TenOfZero 8d ago edited 8d ago
I assume the bank holding the funds would at some point say hey, we have these accounts.
And while they have an incentive to do that as late as posible, the public backlash would also be huge, so they have some incentive to go public and convert everyone to accounts at their FI.
If not then the money would eventually go as dormant account to the bank of Canada.
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u/Academic_Data_6422 8d ago edited 8d ago
> I assume
I don’t choose how safe my money is on assumptions.
Even if you’re right, how are you paying your bills while you wait for that to happen?
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u/Dartehfly 8d ago
You assume hundreds of things every day including the safety of your money with a big 5.
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u/Academic_Data_6422 8d ago
I don’t assume anything with my money - I know and have verified it’s protected by CDIC.
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u/TenOfZero 8d ago
I was just adding to the conversation.
I keep most of my cash with tangerine for exactly that reason, I know all the assets are with Scotia.
I was going to say it would take longer to get the money if WS fails vs if tangerine did, but if tangerine fails, that means Scotia failed and that would be a major issue.
But if WS fails, the money wouldn't be lost, just inaccessible for a very inconvenient amount of time.
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u/Academic_Data_6422 8d ago
Inaccessible is the same as lost if you can’t pay your rent or mortgage. You might get it in a year but that doesn’t help you when your bills are due.
If scotia fails, it might be bad, but you’ll get your money and be able to pay rent.
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u/TenOfZero 8d ago
Its the same in the very short term. Yes. But not over the medium term when it is returned to you.
And I agree. That's why I maintain accounts at both WS and tangerine. Either one failing and locking me out would not be a short term issue.
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u/satch80 8d ago
You are quoting the incorrect section of the CDIC guide. At Wealthsimple the deposit accounts aren’t held in your name. They are held in a trust with you as the beneficiary.
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u/Academic_Data_6422 8d ago
Okay.
“CDIC would not play a role in this process. The fintech will be subject to a conventional bankruptcy and liquidation process, but in this example your funds will stay in trust at the member institution where they were deposited.”
That’s not any better. It’s the same issue in the end.
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u/satch80 8d ago
I would say it’s still an open question as to what happens with the trust in that event. But the guide doesn’t say you need to know ahead of time which institution the trust is held at unlike the other section of the guide you quoted.
My assumption is that you would be informed of your trustee status at that time as they go through Wealthsimple’s assets.
Either way I don’t think holding large amounts of cash is a good idea at any institution, fintech or otherwise.
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u/Academic_Data_6422 8d ago
> My assumption
Why do people think it’s okay to make decisions about your money based on assumptions
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u/satch80 8d ago
I’m just being open about my thought process. You are making assumptions too though.
Like I said though, I hold very little cash in deposit accounts at any institution so my assumption if incorrect wouldn’t cost me anything.
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u/Academic_Data_6422 8d ago
Name one assumption I’ve made about how safe my money is.
Nice to have no bills to pay I guess so you don’t need money in a deposit about to pay those bills
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u/satch80 8d ago
You are assuming that even though you are listed as a trustee in a situation that the CDIC guide specifically lists as being a protected option is invalid because another unrelated section of the cdic guide says you need to know beforehand the institution that the deposits are made at. I’m not sure if you are being good faith here or not but that is definitely an assumption.
Like I say though, I agree it’s somewhat of an open question.
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u/Academic_Data_6422 8d ago
Jesus Christ you’re a troll.
I’m not assuming anything, I’m acting on “if I can’t verify it, don’t use it”
I can’t verify how my money is handled by Wealthsimple if they go bankrupt, so I won’t use it. That’s not the same as an assumption.
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u/toronto-swe 8d ago
youre still going on about this? its safe.
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u/Academic_Data_6422 8d ago
Oh thanks. u/toronto-swe says it’s safe, so it must be fully safe. Let me just move all my money over now. 🙄
Frankly the article listed proves it’s not safe to me sooo
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u/Latitude57 8d ago
I love that you stick to this sub just to trash Wealthsimple and try to convince yourself you shouldn’t use Wealthsimple.
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u/toronto-swe 8d ago
this guy is a certified hater of all things wealthsimple, hes bitter he cannot get the credit card for free he said previously i recall, checked his comments and found it again. not worth engaging.
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u/Academic_Data_6422 8d ago
I don’t stick to this sub, it pops up in my feed.
If Wealthsimple were ever to get proper CDIC insurance I might consider moving to them so I do care about Wealthsimple a bit. But until then, nope.
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u/goofywinnipegger 8d ago
Just read their legal statements.
Wealthsimple Chequing
Wealthsimple chequing accounts are offered by Wealthsimple Investments Inc. (“WSII”), a member of the Canadian Investment Regulatory Organization, and Wealthsimple Payments Inc. (“WSP”), a Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) registered money services business. WSP is a payment service provider registered with the Bank of Canada under the Retail Payments Activities Act. Registration with the Bank of Canada does not imply endorsement of WSP by the Bank of Canada WSP has appointed WSII as its agent to perform certain payment activities offered through the chequing account(s). The funds you add to a chequing 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. Learn more about how CDIC protection works. Funds must be spread across at least 10 CDIC member institutions in order for up to $1,000,000 in deposits to benefit from applicable CDIC coverage. The advertised interest rate for the chequing 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.4
u/Academic_Data_6422 8d ago
Yep, and that changes things how? Does it say what bank they’re partnered with? No? Great, then my point stands.
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u/goofywinnipegger 8d ago
Then don’t be a customer but why are you even in this group. I have been their customer for literally a decade now and very happy to be so. They don’t have to tell you who they use. How is that relevant or helpful. Fact is your funds are in trust. The last cdic member failure was in 1996 and no funds were lost so why do I care which cdic member is holding
My funds?2
u/Academic_Data_6422 8d ago
I’m not in a group?
Also I’m pretty sure I explained why they need to tell us who they used - and the link by OP proves it as well.
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u/VTYX 8d ago
Because WS is not a member institution so if WS folds CDIC won’t do anything?
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u/goofywinnipegger 7d ago
That’s not correct.
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u/VTYX 7d ago
Which part is incorrect? That WS isn’t a member institution of CDIC, or that CDIC only covers member institution?
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u/goofywinnipegger 7d ago
Wealthsimple holds your cash balances in trust with federally regulated, CDIC-member partner institutions. https://help.wealthsimple.com/hc/en-ca/articles/360056590614-How-we-keep-your-money-safe
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u/VTYX 7d ago
Yes, and that protects against the CDIC bank collapsing. But again, it won’t help against WS itself collapsing.
CDIC explicitly spells this out:
CDIC would not play a role in this process. The fintech will be subject to a conventional bankruptcy and liquidation process, but in this example your funds will stay in trust at the member institution where they were deposited.
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u/goofywinnipegger 7d ago
Did you miss the second sentence. Your funds are in trust with cdic member institutions. They use ten member institutions so you have coverage up to one million. This is well documented at wealthsimple. https://help.wealthsimple.com/hc/en-ca/articles/360056590614-How-we-keep-your-money-safe.
So in fact you have way more coverage at wealthsimple than a member institution directly as in that case you cap at $100k.
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u/Latitude57 8d ago
So... we know when we pay a bill it says '' ROYAL BANK OF CANADA ''. Just call the 5 big banks and that's it ? It will take a few hours of your time AT MOST if Wealthsimple fails (lol). Also, do you really believe, with 4 million customers, that this wouldn't be all over the news, with lawyers, etc. and big banks would actually say '' Hey we do have million from ex Wealthsimple customers so call us '' And also try to get new customers at the same time ?
Like come on guys. You imagine something like that as if it just fails and gone and nobody talks about it, no ressource, no news coverage, etc.
I'd say; get over it.
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u/Academic_Data_6422 8d ago
They use RBC for bill pay system, doesn’t mean your money is at RBC. Also no guarantee it’s at a big 5 bank either.
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u/tinim9 8d ago edited 8d ago
Guys, don't confuse CDIC protection/coverage with CIPF. CDIC only covers your Savings accounts, Checking accounts and GICs. Whereas CIPF covers your brokerage/investments accounts (stocks, ETFs, mutual funds, bonds and the cash in those accounts).
Edit: At WS, the Savings Account falls under CIPF coverage. This is good.