How does a Wealthsimple FHSA work?

First time home buyers might find it challenging to achieve their dream of homeownership due to Canada's housing crisis. Property prices have risen, and the supply of houses remains low. If you have clients who are facing difficulties in buying their first property, you can check if they are eligible for the FHSA. 

A lot of banking institutions offer this type of account, and one of them is Wealthsimple. Their FHSA product is designed to help clients save for their first home. It offers a tax-free way to grow one’s savings, making it easier for first-time buyers to reach their goal.  

In this article, Canadian Mortgage Professional will discuss everything you need to know about Wealthsimple FHSA. We will tackle how it works and how first-time home buyers can use it. Want to see if this can help your clients prepare for their future home’s initial deposit? Read on for more. 

What is an FHSA?   

The Canadian federal government announced the creation of the First Home Savings Account (FHSA) in 2022. This registered savings plan is designed to help homebuyers save up to $40,000 when purchasing their first property in the country. 

Today, many banks and financial companies like Wealthsimple are offering this type of account. 

How does it work?

FHSAs work like the typical investment accounts that people are likely familiar with. It is a tax-free savings account which allows clients to hold varying types of investments to grow their savings. This is to fund the initial deposit when buying their first property. 

Here is a video explaining how FHSA works: 

Find out more about the FHSA, its requirements, rules, and other important details in this article. 

Get to know Wealthsimple 

Wealthsimple Inc. is an online investment management service in Canada which was established in 2014. Currently, it has over $50 billion in assets under management (AUM). 

Here’s a video about Wealthsimple’s growth and vision through the years: 

In 2024, Wealthsimple entered the Canadian mortgage market by partnering with digital mortgage lender Pine.  

Why should your clients open an FHSA with Wealthsimple? 

Your clients can enjoy many benefits if they choose Wealthsimple when opening an FHSA. They have the luxury of investing in a few minutes online. They can open an FHSA without the need to go to the bank in person or set up an appointment. 

There is also no need for submitting physical copies of essential documents. They can make their contributions or withdrawals with a few simple taps on Wealthsimple’s mobile app. 

Reach out to Wealthsimple any time 

While Wealthsimple operates mainly online, your clients can easily talk to their representatives for any questions about their FHSA. They can contact Wealthsimple’s team all week via: 

• phone 
• chat 
• email 

Wealthsimple FHSA: Requirements 

Your clients must be considered as first-time home buyers if they want to open an FHSA with Wealthsimple. Here are the other requirements that they need to meet: 

• must be 18 to 71 years old   
• must be a Canadian resident  
• must not reside in a property which they (or their spouse) owned in the last four years 
• must not intend to buy property for investment purposes 

Wealthsimple FHSA contributions and withdrawals 

Wealthsimple has a yearly contribution limit of $8,000 for FHSA holders. Any unused funds can be carried forward to the following year. 

You should advise your clients not to overcontribute to avoid the 1% penalty. This can be incurred for every month that they go over the contribution limit until they make the correction. 

The total contribution space for 15 years is $40,000. This period is also the limit for using the FHSA funds. This begins from the date your client opened their FHSA with Wealthsimple.  

How do I transfer an FHSA to Wealthsimple? 

Clients can transfer their existing FHSA from another bank to Wealthsimple. They can choose to transfer it into a new self-directed investing FHSA or a managed FHSA: 

• Self-directed investing FHSA: This is an FHSA where your clients will manage their investments directly   

• Managed FHSA: this is an FHSA where Wealthsimple will invest your clients’ funds on their behalf. 

Here are two simple steps that your clients should take when transferring their existing FHSA from another banking institution to Wealthsimple: 

Step 1: Open an FHSA in your Wealthsimple profile 

Wealthsimple does not allow a direct conversion of your client’s FHSA account from another bank. Instead, your client will need to open a new Wealthsimple FHSA before they can proceed with the account transfer from the external FHSA. 

As a general rule, it will take about four weeks to transfer your client’s funds to a Wealthsimple FHSA. 

Step 2: Initiate your transfer 

Once your client has created a new FHSA, they can set up an in-cash transfer from their existing FHSA to the newly created Wealthsimple FHSA. They can either do this through Wealthsimple’s mobile app or via web. We have listed the steps for both options below: 

Transfer through a mobile device 

1. Sign in to the Wealthsimple app on a mobile device 
2. Tap the Move tab at the bottom of the screen 
3. Tap the Move an account to Wealthsimple menu option 

Transfer through the web 

1. Log in to a Wealthsimple profile 
2. From the Home page, select Move an account 
3. Open the Account type menu 
4. Choose the account type to transfer 
5. Select Next to continue 
6. Follow the prompts to complete the account transfer 

Investing with Wealthsimple FHSA 

If your clients choose to invest with Wealthsimple, they can either select self-directed investing or managed investing. If they decide to manage their FHSA directly, Wealthsimple will give them full control over where they will invest their savings. 

Your clients can choose from over 14,000 stocks and exchange-traded funds (ETFs). They can buy and sell or automate their investments—plus, it’s free of commission fees. They can also begin trading with up to $250,000 in instant deposits. 

On the other hand, if your clients prefer letting Wealthsimple invest on their behalf, they can go for the managed investing option. Wealthsimple will create a custom portfolio for your clients based on their personal and financial objectives. Wealthsimple will also consider your client’s reported timeline. 

Your clients can buy and sell stocks with ease through Wealthsimple’s mobile app called Wealthsimple Trade. Watch this tutorial to help clients who might be interested in using this app: 

Maximizing Wealthsimple FHSA for your clients’ finances 

With Wealthsimple FHSA, clients can manage their accounts easily and take advantage of the available investment options. This is to assist them in boosting their savings to achieve their homeownership dream. 

Be sure to advise your clients to leverage Wealthsimple’s features such as reducing their annual taxable income. It works in the same way as a Registered Retirement Savings Plan (RRSP). They can also enjoy tax-free withdrawals for their investment gains if they use it to buy their first property. 

If your clients decide not to buy a house, they can easily transfer their FHSA’s funds from Wealthsimple to their RRSP. This will not affect the latter’s contribution room. Your clients will get to keep 100% of their FHSA savings. 

Would you recommend Wealthsimple FHSA to your clients? Let us know in the comments below