A sizeable investment by Power Financial in one of Canada’s newest robo-advisors suggests the financial conglomerate is playing both sides to the middle in its quest to own the wealth management space.
Wealthsimple’s announcement Thursday no doubt caught many in the wealth management space by surprise given the Toronto-based firm’s only been in operation since last September. The move by the holding company likely sets in motion a domino effect amongst some of the biggest financial services’ companies in Canada.
So, why exactly did Power Financial make this investment in Wealth Simple?
Well, no one at the parent or the child (Investors Group
) is commenting (we asked) on the true motivation for making this relatively small investment in the robo-advisor – $10 million now and the possibility of another $20 million within the next 12 months – but speculation why has begun in earnest.
There are many factors that make Power Financial’s investment a smart move but none more so than the opportunity for it to gain access to an underserved portion of the Canadian wealth management industry – namely younger investors who are often referred to as millennials or Generation Y.
“The financial services industry is changing as many millennials desire smart, transparent, and low-fee services,” said Michael Katchen, Founder and CEO, Wealthsimple in its press release announcing Power Financial’s investment. “We are excited to be at the forefront of this change in Canada and Power Financial’s investment demonstrates a huge vote of confidence in our team and business.”
WP reached out to several industry participants to get their take on yesterday’s announcement. While there were a number of themes mentioned it seems a key reason Power Financial’s getting involved –
the Investors Group
advisor network brings Wealthsimple a huge audience allowing it to better monetize its technology.