Robo-adviser Wealthsimple is in discussions with several Canadian wealth managers as it looks to separate its Wealthsimple for Advisers business in order to focus on its online services for direct consumers.
The business was designed specifically for financial advisers looking to offset some investment-management tasks. But after a strategic review this fall, Wealthsimple CEO Michael Katchen told The Globe and Mail his two business lines – which include an online robo-adviser for investing – were gaining scale at a greater pace than originally anticipated and it “became apparent” the company needed to find a partner for its financial adviser business.
“When we looked at whether we could successfully support both of these growing businesses, the answer was maybe sub-optimally,” Mr. Katchen said in an interview. “The needs of advisers are different than the needs of a direct-to-consumer audience and we knew we needed to put 100 per cent of our time and attention into our core segment.”
There are about 15 robo-advisers in Canada that have emerged in the online advice space over the past five years. Wealthsimple is the largest provider with just more than $6-billion in client assets. While still only a fraction of the larger asset-management market in Canada, robo-advisers are offering alternative investment advice to digital-savvy customers. These web-based platforms offer clients an online risk-assessment tool that calculates an appropriate asset allocation based on age, financial goals and risk tolerance.
Managing about $1-billion in assets, Wealthsimple for Advisers first launched in 2017. It now has 500 independent advisers who access the online company for back-office services.
Mr. Katchen says he is still in the process of finalizing a partner to take over the business but is in “late-stage discussions” with “two to three interested parties.” He did not provide details on what the partnership would involve in financial terms.
Today, Wealthsimple has more than one million Canadian clients using its financial products, which range from online investing, savings, trading and tax services. The strategic decision to move away from the financial advisory business will allow the company to focus on expanding the consumer business into a “primary financial institution” for clients.
Last May, Wealthsimple – in which investment giant Power Financial Corp. holds a combined voting interest of 88.9 per cent – raised $100-million in a financing round led by Germany-based Allianz X. Wealthsimple CEO Michael Katchen said at the time that some of those funds would be used to “evolve” its business-to-business platform for advisers and financial institutions.
Over the years, several robo-advisers have launched business-to-business platforms – allowing financial advisers to access their portfolio-management tools for a discounted price. In September, CI Investments partnered its robo-adviser business, Wealthbar, with Assante Wealth Management to launch Assante Connect.
Online portfolio manager Nest Wealth was one of the first to pivot its robo-adviser business to allow investment firms to license an online portfolio service for their own clients, and has approximately 20 financial institutions on its platform.
“The future of the wealth management industry is all about advisers and firms being supported by great technology," said Randy Cass, CEO of Nestwealth. "There are a lot of firms that are recognizing survival and growing market share means that they need to get better in these areas real fast.”
Mr. Katchen said he will continue to support advisers and their clients during the transition to a new platform, which is expected to be complete before the end of next year.
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