Simple, low-fee investing for an online world
By Cheryl Long
Produced by Tom Cunningham
Looking to jump into the world of investing? Have 10 minutes to spare? If it all sounds a little too simple, well then you’re beginning to understand the premise behind one of the newest investment models in Canada.
Wealthsimple is just as it seems. Launched as a start-up in Toronto, the company has an uncomplicated mission: to make smart, simple, low-fee investing accessible to everyone, regardless of age, net worth or financial knowledge. Appealing to millennials, who in many cases don’t have the time, money or inclination to go the traditional investing route, Wealthsimple is taking the mystery out of growing your money and making the process attainable for a wide range of investors.
Michael Katchen is the Founder & CEO of Wealthsimple. No stranger to investing (he won his first investment challenge at age 12) or launching new businesses, the entrepreneur worked as a consultant for McKinsey & Company after graduating university, and then launched the online portal, 1000Memories, with friends in Silicon Valley. After spending a year at Ancestry.com, he shifted his focus to building Wealthsimple.
“One of the first things I did when I started the business was surround myself with icons of the industry,” Katchen said. “I told them what we wanted to build and many had been part of big transformations in the investment world in the past. To them it was obvious that this was the next major transformation.”
Financial gurus among company advisors
The company’s list of advisors is an impressive one, including Eric Kirzner, a professor at the Rotman School of Business and a member of the team that built the first Exchange Traded Fund (ETF) in 1989; Roger Martin, former dean at Rotman and third on the Thinkers50 list in 2013; and Joe Canavan, former chairman and CEO of Assante Wealth Management and the founder of GT Global, the fastest-growing mutual fund company in Canadian history.
Supported by an immeasurable amount of financial knowledge and expertise, Katchen proceeded to launch the next best thing to hit the investment world — automated online investing. He knew that traditional investment practices wouldn’t appeal to the younger generation. They didn’t want to sit across the table from a financial investor for hours, going over the pros and cons of different funds. But if you could offer them a simple, transparent service that could be managed from a mobile app or website, it just might pique their interest.
“We do all the investment work so that our clients don’t have to,” Katchen explained. “We work with you to figure out the right portfolio for your needs and goals and then we build it, we manage it and we maintain it. You’re able to live your life without questioning, ‘Am I doing the right thing with my money?’”
What makes the concept so appealing is its simplicity. Users are invited to answer six questions that assess risk tolerance and then take an additional 10 minutes to fill out personal details to complete the signup process. It’s the same information that any financial institution would require, but made easier by the online platform. Clients can select the type of investment account they’d like to open, whether it’s a TFSA, RRSP, RESP or non-registered account, among others. Funding the account is as easy as making an online payment or transferring over money from an existing investment account. In keeping with the simple, online model, Wealthsimple uses e-signatures to validate their documents and the process is completed.
“Our clients can basically put their investing on autopilot so they don’t have to worry about it. They get to check their performance on a mobile app whenever they want, and it simplifies their lives. It’s one less thing to worry about,” Katchen said.
Online content easy to understand
For those who want more insight into the company’s strategy, Wealthsimple’s website takes users through Investing 101, outlining the company’s investment approach, showing how they mix and match asset classes in portfolios, discussing risk, defining the different types of accounts, and then explaining how the company prices their services as part of their strict “no hidden fees” policy.
There’s no charge for investments up to $5,000, and no trading commissions or administration fees. Over $5,000, investors pay a management fee ranging from 0.35 to 0.5 percent based on the investment amount. The only other fees are for specific ETFs used in the portfolio. “So all in all, you’re looking at 60 to 75 basis points for a fully-managed portfolio and that compares to the average Canadian who’s paying 2.5 percent for a mutual fund,” Katchen said.
Though Wealthsimple is geared to all investors — their youngest is 18 and their oldest is 92 — there’s no question that their investment model is appealing to younger clients. About 90 percent of their investors are under the age of 50, which Katchen said is the opposite of the rest of the industry. Wealthsimple clients are more likely to be thinking about investing in a first home than choosing their retirement goals. Educating their clients is an important part of their service, evident in the content available on their website and blog topics that range from “What Drake can teach 50 Cent about his finances” to “Thinking inside the box: fallacies of condo investment”.
“We publish this stuff and it creates tremendous amounts of controversy but it’s totally useful information because these are the decisions our clients are facing at this times in their lives,” Katchen said. “It’s told in an interesting way and that’s the thing that we do. We make an otherwise stale topic (for a large portion of millennials), engaging and exciting. We’re constantly trying to create content that’s useful and actionable in our clients’ lives.”
They even offer opportunities for companies to book a Lunch & Learn session for their team. Members of the Wealthsimple team will arrive, “awesome lunch” in hand, ready to show employees how to make smart investment decisions in a 30-minute educational presentation. The topics don’t touch on Wealthsimple specifically unless employees request more information.
Your advisor is only a text away
But the service isn’t completely automated. Part of the company’s appeal is its on-demand advice, providing clients with a dedicated advisor who can be reached by phone if they have questions or concerns about their portfolio. Of course, for those who avoid the traditional phone, there’s always texting, online chats or video chats with advisors.
The focus for Wealthsimple over the next few years is similar to their current mandate: building a transformative company that puts the client first and helps Canadians achieve their best long-term financial outcomes, Katchen explained.
“We’re servicing thousands of clients today and this is just the beginning. We’d like to service hundreds of thousands of clients over the next three years and that’s what we’re gunning for … we’re growing fast but we can continue to grow even faster.”
To learn more about investing with Wealthsimple, visit www.wealthsimple.com.