Online investing platform Wealthsimple Inc. is set to expand into the United States with $20-million in fresh funding from Power Financial Corp.
The Toronto-based firm will again target young and inexperienced investors seeking easy-to-use digital services as it rolls out portfolio management offerings south of the border, as well as providing advice.
Wealthsimple is pushing into the U.S. wealth management market against a tide of new entrants and financial stalwarts looking to cater to a new generation of savers and investors.
"Despite the fact that this space has grown so rapidly, the reality is the market is wide open," said Michael Katchen, co-founder and chief executive officer of Wealthsimple. "If you think about the problem we're addressing, that people are intimidated about their money and they don't know what to do with it … that hasn't really been impacted even with the emergence of the robo-advisory space in the U.S."
Wealthsimple has now received $50-million in investments from Power Financial, the parent company of asset manager IGM Financial Inc. and insurer Great-West Lifeco Inc. that is controlled by Canada's Desmarais family. These deep-pocketed backers have been building out their investment in financial services technology, including creating venture capital funding groups and taking stakes in other startups such as health-insurance business League Inc. and online lender Borrowell Inc. Power now owns just over 50 per cent of Wealthsimple.
Wealthsimple intends to approach the United States with the same marketing campaigns, product offerings and approach to competition that it used to take on banks and asset managers in Canada.
"By focusing on a segment of the market, as opposed to the whole market, we think we can do really well," Mr. Katchen said. In Canada, the company began targeting millennials with smaller sums to invest. It later launched Wealthsimple Black, which offers lower fees to customers who have more than $100,000 invested through the company. "I think we'll take those learnings to the U.S. market as well," he said.
Mr. Katchen said that his ambition to expand Wealthsimple internationally dates back to its time as a startup with just a few handfuls of clients and $2-million in financial backing.
"Our board at the time basically laughed me out of the room – they said it's a great idea but you're super naive and that's never going to happen," he said. "But it's always been a big part of the mission. We believe that this problem exists around the world, where people don't make sense of their money, they find it overwhelming and intimidating."
Since launching in Canada two years ago, Wealthsimple has amassed $750-million in assets under management for 20,000 clients.
Mr. Katchen declined to reveal financial growth targets for the U.S. business. The New York office has fewer than 10 people, but will likely add marketing, customer service and financial adviser staff in the coming months. Wealthsimple plans to do as much technology and product development from Canada as possible.
Wealthsimple has a global mission and plans to expand into other countries – a move that could happen within the next year.
Mr. Katchen wants Wealthsimple's U.S. expansion to serve as a beacon of encouragement for other startups. "We hope it inspires other Canadian companies to think big – we have all the ingredients in this county to produce global champions in technology," he said.