Pramod Udiaver looks at some portfolios and sighs. As an example, he singles out one from a 40-year-old who holds a 2020 target date fund.
The auto-rebalancing product would be careening toward a conservative asset mix, perfect for someone retiring in four years, but not the person holding it. This kind of stuff stresses Mr. Udiaver out: "Not because they didn't understand what a target-date fund was. It's because a colleague of theirs told them it was a good product."
In May of 2015, after more than a dozen years with the Toronto-Dominion Bank, he and friend Dan Poole launched Invisor Financial Inc. One of the first "robo-adviser" services in Canada, it requires no minimum balance for an account, and focuses on building client portfolios based on broader financial goals while trying to be product-agnostic.
Canada's automated investing sector has grown very busy since then, leaving smaller firms such as Oakville, Ont.-based Invisor clamouring for clients among big-hype startups such as Wealthsimple and big-bank entrants such as Bank of Montreal's SmartFolio.
With demand for these online advisory services heating up, Mr. Udiaver and Mr. Poole hope to clinch a chunk of the growing market by shaving investment decisions down to their core – a client's end goals – and by framing themselves as a nimble, low-cost competitor.
It is not easy, but it's slowly working, Mr. Udiaver says. "Even after a year and a half, we're still working on creating awareness of this segment – that this is an option for the mass market," he says. "The more players in this space, the better for all."
Mr. Udiaver was born and raised in India, and joined TD in Canada in 2001, working in a number of different areas of asset management. He met Mr. Poole, a lifelong insurance professional, in the Mississauga cohort of his Queen's University accelerated MBA course in 2005.
They kept in touch for years, deciding to strike out on their own together after realizing they shared a mutual frustration over the motivation behind some financial advice. In particular, Mr. Poole was frustrated by "the conflict created by distribution and manufacturing in the same organization" – the motivation, in other words, to recommend products that could financially benefit the adviser or their firm.
He and Mr. Udiaver left their corporate jobs in mid-2014 and began setting the groundwork to launch Invisor. It took a self-funded year of building the technology infrastructure and back-and-forths with regulators before they launched. When they finished raising seed capital in May of 2015, Invisor opened up shop, positioning itself as a personalized and personable service – regularly noting the real adviser behind your portfolio is a phone call away.
"We would argue that there is a big segment of the mass market which is not even served," Mr. Udiaver says. "We try and serve that segment of the market that we really believe needs help, needs advice. Most incumbents are not really addressing that need."
The seven-employee company is registered as a portfolio manager in Ontario, British Columbia, Alberta, Saskatchewan and Manitoba. Investment management fees start at 50 basis points for a client's first $250,000 – similar to heavyweight competitor Wealthsimple – and drop as low as 30 basis points as balances get higher.
Mr. Udiaver and a second staff adviser build portfolios for clients largely with exchange-traded funds, as well as some F-class, or fee-based mutual funds, with the goal of minimizing the management expense ratios passed down to the client. They offer funds from BMO, BlackRock iShares, Invesco and Vanguard. The clients, meanwhile, aren't charged trading fees when their portfolio is rebalanced.
This is all part of being a goal-focused advisory service, rather than a product-focused one, according to Mr. Udiaver. "It's really about a top-down approach, as opposed to a bottom-up approach that exists today in the mutual fund world, where the focus is really about selling a mutual fund," he says.
Invisor is still trying to define itself, a year and a half after opening – both against traditional advising competitors and new, similar self-directed services from incumbents.
Pauline Shum-Nolan, a finance professor at York University's Schulich School of Business and president of PW Portfolio Analytics, says that robo startups such as Invisor can stand out in the field by being fully transparent about their portfolios, laying out exactly how they're constructed and performing against benchmarks. Invisor already does this to some degree. "Put comfort in the investor's mind to generate credibility," she says.
Chuck Grace, a wealth-management consultant and finance lecturer at the University of Western Ontario's Ivey Business School, says that Invisor was smart to position itself as primarily goal-focused. "That's where every financial conversation needs to start. Many of the firms aren't doing that," he says. But Invisor, he says, "needs to get beyond that in the hurry." That includes recognizing that focusing on its low cost can be "a race to the bottom," and therefore Invisor should offer a suite of services.
That happens to be what Invisor has in mind. The company is about to release a suite of financial tools, as well as an online-focused insurance offering that leverages Mr. Poole's history in the industry. "We're still looking to identify some providers ... with simpler products, more transparent compensation, and greater technology enabling," Mr. Poole says.
Where Invisor could really win clients, Mr. Grace says, is by marketing all these offerings to potential clients who've been historically sidestepped. "The mid-market and entry-level market has traditionally been difficult to serve cost effectively, and as a result has been a little underserviced. I'm not saying it will be easy to enter those markets, but it'll be easier than other alternatives."
One potential tactic, Mr. Grace says, might be to reach out to specific niche markets with Invisor's value proposition – say, analytically minded engineering students on the cusp of building wealth who would enjoy playing with the service.
While the company has seen some small growth, Mr. Udiaver says, "you need to get up to a level of scale before it's meaningful in real numbers. So we know we're going through a phase to create that awareness."
Mr. Poole suggests that it's their competitors who'll help them reach that scale, pointing to a recent campaign from "one of Canada's big banks" about new, lower mutual fund fees.
"What that's doing, really, is helping identify an issue in the market, which is expensive products," Mr. Poole says. "Cost is important. Cost does matter. And that's why you should look not only at traditional providers and the large incumbents, but smaller, nimbler competitors who are willing to offer you a service at an equal or lower cost."