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Wealthsimple's national roll-out will make the Toronto-based
firm the first foreign robo-adviser startup to enter that
market, according to an industry analyst.
Robo-advisers give automated financial advice or portfolio
management using technology, and do not use a human financial
planner. Their online service is touted as a low-cost,
convenient alternative to traditional outfits.
But increasing competition from large, established firms like
Charles Schwab and Vanguard have raised questions about the
ability of startups to gain enough traction to become
profitable.
Founder and chief executive Mike Katchen said it was too soon to
set U.S. targets and declined to specify what amount of assets
under management the company would need to become profitable.
"People are absolutely right ... This business is absolutely
about scale," he said in an interview.
Katchen said Power Financial's long-term backing gives it an
edge. Power and its subsidiaries have put in a total of C$50
million in Wealthsimple since first investing in 2015.
"When Vanguard or Schwab launch a product, that's not a question
people have," said Katchen, who is 29.Wealthsimple said 20,000
customers in Canada have signed up since its launch a little
over two years ago, investing more than C$750 million in
exchange traded funds. It expects to cross the C$1 billion
threshold soon.
Wealthsimple, which caters to young and first-time investors, is
charging a 0.5 percent fee for investments up to $100,000. Above
that, the fee is 0.4 percent. There is no account minimum, and
the first $5,000 is free.
"The U.S. is such a competitive market and Wealthsimple will
have to drop fees in order to get any play," William Trout, a
senior analyst with research firm Celent and robo-advisory
expert, said in an email, noting that existing U.S. competitors
charge lower fees.
Wealthsimple's website also lists a London office "opening in
2017," which a spokeswoman said was still "exploratory." Trout
said the UK environment is also crowded.
Wealthsimple, which offers a socially responsible investment
option, said real advisers can also provide financial planning
advice to clients.
It also has a platform for financial advisers in Canada, but
said it has no immediate plans to launch the service in the
United States.
(Editing by Matthew Lewis)
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