Wealthsimple says it can compete in U.S. market

By Simon Doyle | January 31, 2017 | Last updated on January 31, 2017
3 min read

Wealthsimple has confirmed it is expanding to the United States.

The robo-advisor, which offers services through an app, website and by telephone, on Tuesday announced a full expansion into the U.S. market with fresh financing of $20 million from Power Financial Corp.

Although early U.S. users will likely be Canadians living south of the border, the company plans to fully compete in the U.S. market, Mike Katchen, founder of Wealthsimple, tells Advisor.ca. That market includes established online players like California-based Wealthfront, with more than US$4.5 billion in AUM, and New York-based Betterment, with more than US$5 billion.

There’s enough room for another player, argues Katchen, chief executive. He sees Wealthsimple’s competition not so much other robos, but as “people making poor decisions with their money today, because they feel overwhelmed. […] They’re keeping money in savings accounts or under the mattress,” he says. “That’s our market, and that’s very much true in the U.S., too.”

Read: SEC approves Wealthsimple for U.S. launch

The startup says it’s on track to surpass $1 billion in assets under management this year. It currently has about 20,000 clients (85% of whom are under the age of 45), it says, and over $750 million in AUM.

As Wealthsimple enters a market about 10 times the size of Canada’s, much of its startup expenses have been booked, such as app building and digital infrastructure. The company already has marketing and customer service teams in place in New York.

Katchen says the firm intends to increase its current roster of about 75 people, but declined to say by how much. Wealthsimple also has a small team in London, he acknowledges, and when asked if that suggests another expansion, he says the firm has nothing to announce. Its premium service, Wealthsimple Black, for clients with portfolios of more than $100,000, will also be available in the U.S.

The additional $20 million in financing brings the startup’s total funding from Power Financial to $50 million. Backing from a big player is important, Katchen says, for potential clients who want assurances their money will be safe.

Read: Is your client cheating on you?

The company’s strategy? To be more “human” and plain-spoken than other services. He argues his firm is “the most human robo-advisor,” suggesting that most financial advisors don’t speak plainly.

“Financial services [don’t] use human language. It’s almost become robotic,” Katchen says. “You leave the meeting more overwhelmed than when you started, with more questions. That’s a very common experience for people.”

Asked for an example of Wealthsimple’s language, the company points to its online Wealthsimple Magazine, which covers personal finance and money. Articles range from shopping tips to how to move your money from the U.S. back to Canada.

While he dislikes the term robo-advisor, he acknowledges he doesn’t have a good replacement for it. (The company uses the term “online investment manager” in a recent release.)

Management fees will remain slightly higher than other robos, at 0.5%, Katchen says, because the company offers more human assistance than lower-end competitors. Those fees, he says, help the company provide “that personal touch.”

Also read:

Artificial intelligence, overseen by humans, key to new robo

Simon Doyle