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Wealthsimple CEO Michael Katchen is not a fan of the idea that his company is starting to look like a big bank.

“Canada doesn’t need another bank,” Mr. Katchen said in a recent interview. “We need something better than the bank, and I think that’s really what we’re aspiring to build. Our ambition is to become our clients’ primary financial relationship.”

Many aspiring bank challengers have said this in the past – with a zero-per-cent success rate. Through their longevity, the ubiquity of their branches and undeniable acumen, the big banks have built one of the most competition-proof franchises in Canadian business.

Put your money on Wealthsimple as the first to break through as a one-stop financial services alternative.

Since its 2014 launch as what was then called a robo-adviser, Wealthsimple has attracted more than three million clients and $30-billion in assets by steadily building on the services it offers. You can now invest with Wealthsimple, do your taxes, park your savings and conduct most of your day-to-day banking.

“Business today is booming,” Mr. Katchen said. “We just had our best month ever last month, writing over a billion dollars of net deposits, which in Canada is a very big number. And the thing that’s most exciting about that is it’s pretty diversified. It’s the high-interest chequing account. It’s the trading business. It’s the wealth management business.”

With its clever marketing and influential backers that include Power Corp. of Canada POW-T, Wealthsimple has become Canada’s most visible and influential upstart competitor to banks and the rest of the financial services establishment. But there have been setbacks along the way. The company laid off 13 per cent of its staff in 2022 as the pandemic boom for technology companies faded, and a Bloomberg report last month said Wealthsimple’s valuation as a company fell to about $2-billion from more than $5-billion in 2021 as a result of the tech pullback.

Today, Wealthsimple is pursuing an aggressive five-year target of increasing its assets to $100-billion, which compares with nearly $1-trillion or more for each of the biggest banks. Mr. Katchen said the company will grow by adding products and services that are relevant to people’s financial lives. Right now, the company is experimenting with mortgages in partnership with a handful of mortgage brokers.

Expect a future Wealthsimple mortgage product to reflect the company’s strategy of being transparent in rewarding customers for the amount of business they bring to the company. At $100,000 in assets, for example, clients get a reduced fee on the portfolios Wealthsimple manages and an interest-rate bump to 4.5 per cent from the base rate of 4 per cent for cash holdings.

With mortgages, clients could expect a lower rate if they did substantial business with the company. Mr. Katchen said the idea is to differentiate Wealthsimple from traditional banks, where rate discounts for borrowers and bonuses for savers are frustratingly arbitrary.

Wealthsimple is today best known as an investing company where you can have someone manage your investments for you, or trade stocks on your own without paying commissions that can cost as much as $9.99 at some bank-owned online brokers. Investor Economics, a division of ISS Market Intelligence, says Wealthsimple captured 50 per cent of net new online/discount brokerage accounts in the third quarter of last year.

One of Wealthsimple’s strengths is a young client base with an average age in the mid-30s. While this demographic hasn’t reached its peak wealth years, it does have decades of investing, saving, banking and home ownership ahead.

A reflection of this young client base is the fact that Wealthsimple has about 30 per cent of the market for first home savings accounts. FHSAs were introduced by the federal government in April, but Wealthsimple was behind some others in not offering them until late summer.

The Wealthsimple brand was initially based on robo-advice – managing portfolios of exchange-traded funds for clients at a fraction of the cost of mutual funds. People don’t talk much about robos any more, and Mr. Katchen himself dislikes the term for being uninspiring and meaningless. But managing investments for clients remains a core part of the Wealthsimple offering.

“I think this will be the largest part of our business for decades to come,” he said. “We’re taking business from existing financial advisers that are maybe resting on their laurels or not offering the service people want.”

Wealthsimple also offers cryptocurrency trading and access to private equity and private debt. Private investments are financial exotica – used by the Canada Pension Plan Investment Board and its peers, but unnecessary for the average investor. These investments also seem to clash with the wholesomeness of a managed ETF portfolio.

“We’re not advocating people dump their money in these things,” Mr. Katchen said. “You’ve got to speak with an adviser, and you’ve got to have a reasonable allocation that makes sense for your risk-profile needs, [to] participate in it. But it’s certainly a new segment of clients.”

On the banking side, Wealthsimple last year introduced a no-cost digital version of what was once called a chequing account. Just load money onto a prepaid Mastercard and use it wherever credit cards are accepted. You can also pay bills, send-e-transfers and have your paycheque directly deposited.

Aside from Wealthsimple, the roster of notable alternative financial players includes EQ Bank, Questrade, Neo Financial and Koho. But Wealthsimple is the only one to compete using the big bank playbook of offering all the financial services people need. Mr. Katchen insists the strategy is working.

“We are much smaller than the banks in terms of our current size and scale,” he said. “But if you look at where Canadians are choosing to place their next dollar or open their next account, we are capturing an enormous share of the growth in that industry.”

In September, Wealthsimple will celebrate its first decade. The next 10 years will be crucial for both Wealthsimple and Canadian banking. If this upstart can’t bull its way into bank-like size and influence, no one can.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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