Canadian Imperial Bank of Commerce is in talks with Wealthsimple to strike a partnership that could see the bank refer some customers to the growing online robo-adviser.
Sources with knowledge of continuing discussions confirmed that Canada's fifth-largest bank and Wealthsimple are considering joining forces through a referral agreement, although there is no certainty a deal will result.
Toronto-based Wealthsimple has emerged as one of the most visible new competitors among a growing number of online-portfiolio advisers showing signs of gaining traction in Canada. Its success with set-it-and-forget-it investing accounts has drawn interest from established financial services players looking for cost-effective ways to explore developing technologies and tap a more youthful customer base.
Despite the firm's early success, acquiring new customers remains a costly challenge for most emerging financial technology firms, or "fintechs." Access to CIBC's large and loyal customer base could provide a major pipeline to attract new business.
Through a spokesperson, CIBC declined to comment. Neither Wealthsimple chief executive Michael Katchen nor a company spokesperson immediately responded to requests for comment.
CIBC's evolving digital-banking strategy already includes partnerships to offer products "powered by" online lenders Thinking Capital Inc. and Borrowell Inc. For example, CIBC offers small-business loans called "Rapid Financing," for which it refers small business owners to Thinking Capital, "an independent company, known for its innovative financing solutions," according to CIBC's website. Typically, a bank would pay a flat fee per user or arrange to share revenue from referrals in such a partnership.
CIBC has regular contact with a range of fintechs and has partnered with other banks abroad, including National Australia Bank (NAB). On Wednesday, CIBC also launched a low-cost banking brand, Simplii Financial, with about two-million customers over whom it took custody after the bank's recent split with President's Choice Financial, which had been run jointly with Loblaw Cos. Ltd.
Wealthsimple's primary backer is investment giant Power Financial Corp., which has pumped three rounds of funding totalling $100-million into the robo-adviser to date. Paul Desmarais III, a senior vice-president at Power Financial, serves as Wealthsimple's chairman.
The company primarily targets younger, millennial investors with ad campaigns featuring slogans like "Investing for Humans" and "Investing on Autopilot," but has been gaining more business among older investors, including baby boomers, who are looking for lower-cost alternatives.
Wealthsimple charges a 0.5-per-cent fee on a client's first $100,000 invested, whereas traditional wealth managers often charge anywhere from 1 per cent to 2.5 per cent, depending on the size of the account.