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ETFs Canadian robo-adviser Wealthsimple eyes British expansion

Michael Katchen, founder and CEO of Wealthsimple, is photographed in the company's Toronto office on April 21, 2016.

Fred Lum/The Globe and Mail

Robo-adviser Wealthsimple is jumping across the pond to expand its online services to investors in Britain.

With more than $1-billion in assets under management, Wealthsimple has plans to launch a beta version of its online investing platform this summer to British investors. A public launch will follow in September.

"Our mission is to make smart financial services accessible to everyone in the world," said Michael Katchen, chief executive of Wealthsimple. "There are a lot of people in the U.K. who aren't getting the tools and advice they need to live their best financial lives, and in particular young and first-time investors."

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Similar to its Canadian platform, investors in Britain will be able to open an investment account through Wealthsimple's website or mobile app. If needed, investors will be able to access a licensed adviser over the phone for a low management fee and will have the choice of either a standard or a socially responsible investment portfolio that consists mainly of exchanged-traded funds.

The first £5,000 ($8,448) invested is managed for free. Accounts up to £100,000 carry an annual management fee of 0.7 per cent, which drops to 0.5 per cent thereafter.

Toby Triebel, both a financial-technology entrepreneur and financial-services veteran, will be leading Wealthsimple's British business. Mr. Triebel previously co-founded the online lending platform Spotcap, a marketplace lender for small businesses.

This is the second international expansion for the Canadian robo-adviser. Earlier this year, Wealthsimple expanded into the U.S. market – an area already dominated by established digital investing platforms such as Betterment which manages $9-billion (U.S.) in assets for 270,000 customers.

There are approximately 50 online investment managers currently in the British market, according to Mr. Katchen.

"Financial services are being transformed around the world now and over the next 10 years, we are going to see the emergence of some really innovative companies who are going to be working on a global scale, and we have always wanted to be that company," Mr. Katchen said. "Companies that are able to compete globally are going to be better than their competitors because they are going to be able to learn from each individual market and apply that knowledge back into the company as a whole.

"We believe the package that we have created here in Canada has resonated so well with Canadians and it will be just as successful in the other markets we have decided to enter."

The quick expansion for the young company has allowed them to house more than 100 employees in just three years – up from the original six employees in 2014.

The British launch also comes on the heels of the company receiving additional funding by their largest financial backer, Power Financial Corp., which provided an additional $50-million (Canadian) in funding to the robo-adviser last month – bringing its total investment to $100-million to date.

Marketing is one of the toughest hurdles for robo-advisers in Canada due to the cost involved. Through the investment dollars handed over by Power Financial, Wealthsimple has launched aggressive marketing campaigns that include both television and print campaigns to bring in retail investors. In less than three years, Wealthsimple has grown to serve more than 30,000 clients on its Canadian platform. (Financial data on its U.S. platform has yet to be released.)

Entering into the British market where the Wealthsimple name is still widely unknown isn't a concern for Mr. Katchen.

In addition to investment dollars, Power Financial also brings the strength of global leadership. Through its subsidiaries, Colorado-based Empower Retirement and asset manager Canada Life, which has offices in Britain, the investment giant carries a presence in both markets that Mr. Katchen says is invaluable in helping them reach their global aspiration.

"These are markets that our partner Power Financial know quite well and that expertise has really helped us to understand how to carve out a presence in those markets," Mr. Katchen added.

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In addition, Mr. Katchen has set up local investment and marketing teams in each region so the investment strategies and cultural sensitives are considered in those markets.

Crossing borders also means adapting to new regulators, each of whom Mr. Katchen has personally met.

In both the United States and Britain, bringing clients on board does not require a phone call as part of a suitability assessment. Until recently, Canadian Wealthsimple clients had to speak directly by phone or in person to a portfolio manager. Just more than a month ago, the company received an exemption from regulators to allow clients to sign up without the need to speak to a portfolio manager first.

Editor’s note: A previous version of this story incorrectly said Power Financial had recently provided $30-million in additional funding to Wealthsimple, bringing its total investment to $100-million to date. In fact, Power Financial has provided an additional $50-million, bringing its total investment to $100-million to date. Clarification: An earlier version of this story also stated that, until recently, Canadian clients had to speak directly by phone or in person to a portfolio manager; the clients referred to were Wealthsimple clients.
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