The flurry of activity in the online wealth management industry has been impressive of late. Following on the arrival of U.S. so-called robo-advisor sites like Wealthfront and Betterment a few years ago, a whole crop of similar companies are popping up, in Australia, the UK, here in Canada. The latest name in this brand new space is Wealthsimple, a technology-driven investment manager that officially launched in Ontario and British Columbia yesterday.
Canada's nascent, so-called 'robo-advisor' industry has just evolved to a whole new level.
Firms that combine online access with radically-low investment fees, as well as access to a real, live, advisor, are charting a new trend in the industry. Just a couple weeks ago Vancouver-based firm spun out of well-known West Coast wealth management firm, tk, gained regulatory approval. Now comes the launch of Wealthsimple, a company start-up based in trendy Toronto new-media neighborhood along Spadina between King and Queen streets.
The company's slick website, www.wealthsimple.com, outlines the fees and services. Going after a younger, less asset-rich crowd than traditional firms, Wealthsimple will take clients with as few as $5,000 in assets, charging just 0.35-0.50% for portfolio management, rebalancing, investing product, as well access through email, skype or phone to a real advisor.
This is the new wealth management model evolving out of the new business opportunities offered up by the net. This is an attempt, as founder Michael Katchen, puts it, to leverage the new potential of digital technology to offer every Canadian, no matter what their assets, basic access to wealth management. “This is transformative,” says Katchen.
One can’t help but be impressed by the energy and experience at the new company.
Katchen was just twelve-years old when he won his first stock picking contest. "I've been investing since," he says in an interview with WP. After graduation he went to work for McKinsey & Co., consulting in the financial services area, often with pension funds. Fascinated by technology--his hero is electric-car entrepreneur Elon Musk--he moved to San Francisco, immersed himself in the techno culture of Silicon Valley, helped bring a start-up, 1000Memories, to light. The website let people organize and share old photos. It was shut down in late 2013 after being acquired by Ancestry.com.
Offering up a new challenge, Katchen started fund-raising for this business in February. Key to the company’s creation was convincing members of the team, then ensconced in San Fran, to relocate to Toronto. “We love working together. We had one good success. I moved home to start new business and managed to convince a bunch of the team members. I sold them on Toronto...though, that was in the summer. We’ll see what they think now,” he says with a chuckle. “They visited in the summer…and it seemed like a great idea. Now that it’s getting into the fall, I’m wondering what they’re thinking,” says Katchen, a hometown player.
He’ll just have to keep the kids focused on the mission.
The company's business model stems from the shock he experienced when he moved back to Canada. Wealth management fees were double here what he was used to in America. “I was really surprised at how much higher the fees were here,” he says. He began to think about a way to get out in front of the market.
“People know this is what they should be doing, they just need someone to make it easy. I saw rise of WealthFront and Betterment there. I didn't see any in this space. "I've been thinking about this idea of allowing people to invest in a smart portfolio for years.
"We're going to service everyone in Canada who is looking to invest. I think our earliest adopters will be 25 to 40...the generation that is comfortable with tech....the people who don't have half a million to go to full-service fee-based advisor,” he says.
“It has been amazing to see the success this model has had in the space. From zero to two billion in two and a half years. We'd like to do that. There are a lot of people desperate to invest like this. People see it as the future of investing in Canada,” says Katchen.
The company is building a team of advisors known as wealth concierges. Basically, on-call advisors, available through e-mail, skype, phone. “We don't' take clients for lunch and golfing. It’s not that kind of business. You have someone here who is on call as you want them. We have a whole bunch of young people coming on board,” says Katchen.
Already on board are an impressive number of backers, investors, advisors. Anyone familiar with the Canadian investment industry will recognize the names. Roger Martin, the former dean of the Rotman Business School, is on-board as an investor. Well-known Toronto private equity investor, Brett Belzeberg, the founder and senior managing partner of private equity firm TorQuest Partners, a director of CIBC, Mount Sinai Hospital and a member of the Governing Council of the University of Toronto, is involved. So is Eric Kirzner, head of value investing at the Rotman School of Management and a former Director of Investment Industry Regulatory Organization of Canada (IIROC) , and an external advisor for the Healthcare of Ontario Pension Plan, helped design the index portfolios. Joe Canavan, the former chairman and CEO of Assante Wealth Management, is also on-board. Which is impressive. “We’ve got names that have defined the financial industry in Canada over the last thirty years,” Katchen points out.
But there are younger talents as well. Wealthsimple's portfolio manager and chief compliance officer, David Nugent, has a decade of wealth management and trading experience, most recently serving as investment advisor at RBC Dominion Securities where he shared management of $300M in client assets. David has the CIM and PDO designations.
Here is the site, https://www.wealthsimple.com/