Overview

We review your managed portfolio's risk assessment yearly to make sure you're on track to achieving your goals. This is our opportunity to give you an updated recommendation if you're getting closer to your goal, or your information or goals have changed.

We'll send you an email and prompt you in the Wealthsimple app when it's time to complete your risk assessment.

Understanding risk assessments

A risk assessment is a snapshot of your current financial situation that helps us select the most suitable portfolio for you. We recommend a portfolio that provides the highest likelihood of success by the time you need to access your money.

A risk assessment considers your household financials, your goals, the importance of achieving those goals within a set time frame, and your comfort with price fluctuations.

A successful portfolio offers a good range of potential outcomes for your goal, and we want to help you avoid outcomes that could prevent you from achieving what you want. Generally, the riskier the portfolio, the wider the range of potential outcomes.

We consider four risk dimensions in your assessment:

1. Portfolio risk
2. Risk required
3. Risk capacity
4. Risk tolerance

We'll recommend a portfolio that aligns with your goals and gives you the highest chance of achieving them, whether it performs near the top or bottom of the expected range.

Information we collect

To provide an accurate assessment, we collect the following information:

• Household financials
• Account goals
• Risk and loss tolerance

It's important to share accurate details so we can recommend the right portfolio for you.

Household financials

Household financials include your income, current savings, the value of your assets, your debts, and your source of funds.

• Your income indicates your tax bracket and helps us make your portfolio tax-efficient.
• The value of your savings across all bank and investment accounts shows us whether you can support yourself in an emergency. This can affect your capacity to take on risk.
• The value of your assets and debt indicates whether you're in a position to take on risk based on how much you've borrowed and need to repay. It isn't a good idea to invest when you have high-interest debt because your money should go towards paying it down. An investment portfolio is unlikely to provide a better, consistent return than the ongoing cost of your debt, which also limits your capacity to take on risk.
• Your source of funds — whether the money you're investing is from savings or borrowed — affects your risk ceiling. Investing borrowed money limits how much risk is considered appropriate for your situation.

Account goals

Your account goals are what you're saving for and when you'd need to withdraw the money. This also tells us how much risk you need to take to achieve your goals.

• If you have a long-term goal to maximize wealth, you tend to need more portfolio risk because expected returns are higher, and you accept the lower end of the expected outcome.
• If you have a goal of ensuring that you can make a specific payment in the short term and you're on track to have saved most of the money required, you tend to need a less risky portfolio.
• Many investors approaching retirement still need to take on risk to meet spending goals. This is because they'll hopefully have a long time to spend the money they've saved.

Risk and loss tolerance

Investing can be unpredictable with inevitable ups and downs. Your risk and loss tolerance indicates your willingness to withstand negative portfolio outcomes without making a panic-based investment decision.

Our data suggests that most investors can withstand portfolio volatility and stay invested. However, some make damaging decisions, like exiting the market after a loss. These kinds of decisions can hurt long-term outcomes, so we try to help investors assess their ability to withstand these outcomes.

We ask you one question — a slider-style question with four positions: Very low risk, Low risk, Moderate risk, and High risk. Each position comes with a plain-language description so you can choose the one that best reflects how you'd respond to a loss.

The best portfolio is one that you can stay invested in. More experienced investors might consider how they've handled losses in the past and what they've learned to predict their future behaviour.

How suitability triggers affect your recommendation

Beyond your goal, timeline, and risk tolerance, we run four checks on your financial situation. These checks can lower the maximum risk level available to you — they act as a ceiling, not a penalty.

• Emergency fund check: If your savings don't cover a reasonable emergency cushion, we may recommend a more conservative risk level or suggest building your emergency fund before increasing investment risk.
• High debt check: If you're carrying high-interest debt, we may recommend a lower risk level or a savings-first approach, since the cost of debt is likely to outpace investment returns.
• Limited cushion check: If your overall financial situation — income, net worth, or age — suggests limited room to absorb losses, we'll recommend a more conservative portfolio.
• Source-of-funds check: If the money you're investing is borrowed rather than saved, we apply a lower risk ceiling to reduce the chance you'd need to sell at a bad time to repay the debt.

Review your recommendation

Once you've updated all your information, we'll make new portfolio recommendations that align with your goals. If your assessment is similar to the last time you took it, you might receive a recommendation to keep your portfolios as they are.

Your managed portfolio risk levels are:

Why you were recommended this portfolio

If you're wondering why you were matched to a particular portfolio, here's how the recommendation comes together:

• Your goal and timeline set the foundation — they determine how much risk you need to take to reach your goal in time.
• Your risk and loss tolerance shapes the recommendation — it tells us how much fluctuation you're comfortable with on top of what's required.
• Your financial situation sets the ceiling — if any of the four suitability checks apply, the recommendation will reflect the highest risk level that's appropriate for your circumstances.
• Your portfolio type — Classic, Summit, or Income — is then matched to that risk level based on your eligibility and the goal you've selected.

You can always choose something more conservative than the recommendation. The recommendation is the highest level we consider suitable — it's not the only option.

Changing your risk level or portfolio

You can change your risk level or portfolio type at any time — you don't have to wait for your annual risk assessment. To make a change, follow these instructions.

Frequently asked questions