Wealthsimple: Next Generation Portfolio Management

March 11, 2015 Leena Thampan

We’re back to our regularly scheduled programming of shining a spotlight on another awesome customer. This week we’re looking at Wealthsimple, described by their founder, Michael Katchen “as the really boring, long-term way to accumulate wealth.

Forget Gordon Gekko or the Wolf of Wall Street. Wealthsimple isn’t about becoming obscenely rich, taking risky financial bets or cutting a fat check to a fund manager for their “services.”

After working as a VP for 1000Memories, a Y Combinator-backed, San Francisco-based startup acquired by Ancestery.com, Michael returned to Canada in 2013 hoping to invest his hard earned Silicon Valley money.

Despite Canada being one of the most advanced and safest investment environments in the world, the average consumer can’t easily or cheaply invest their money, even with the big banks.

In an interview, Michael said that he found “the cost of investing is among the highest in the developed world (a whopping 2.42%!).” Not only that, but “high-quality advice is typically only available to those who have a lot of money, which is out of reach for the majority Canadians”, he said.

Clearly, this was a problem for Michael.

He was looking at a consumer market worth $1.5 trillion; a market that excludes most customers with trust issues and financial barriers; a market that is being challenged by others in this space in the US. What else could a lifelong entrepreneur do, except start a company, of course?

Next Generation Portfolio Management

Wealthsimple doesn’t expect people to get rich using their approach. “Anyone who tells you they’re going to shoot the lights out and get you ridiculous returns over the long run is lying to you,” Michael said in a Globe & Mail interview. “What we try to do is match the market: 6 to 8 per cent over the long term, and try to be thoughtful about managing risk.”

Like anyone schooled in the language of startups, Michael is working hard to create a make a product and service that is simple, transparent and jargon free.

The financial sector works hard to cloak investments in complex language. Wealthsimple ensures everything they create is easy to understand for the average consumer, who just need to know their money is safe.

Managing risk, simply, is a big part of what makes Wealthsimple different.

benefits of using wealthsimple

Putting Your Money to Work

Accounts can be opened with as little as $5000, and as well as stocks, bonds, and currencies, clients can invest in RRSPs and TFSAs. Portfolios are monitored daily, automatically adjusting different each portfolio according to pre-agreed risk thresholds.

Professor Eric Kirzner of the Rotman School of Management created the portfolios, which are designed to ensure safe and steady returns.

wealthsimple portfolio

Once you are ready to invest, getting started with the use of this portfolio management tool is easy. You just sign up for an account and fill out a short questionnaire. In another interview Michael said that “you don’t have to go out and print off 40 pages of paperwork when you open an account, and fax it in or mail it in with a photocopy of a cheque and a passport. It can all be done online now.”

Again, keeping  things simple, which means Wealthsimple can charge between 0.5% and 0.35% of client’s funds ($5000 – $1,000,000+), instead of the industry average of 2.42%.

This is much more affordable for young professionals who would prefer to have investment advice, rather than attempt a DIY solution.

wealthsimple cost comparison

I asked how they were attracting first-time young professional customers.

“I believe what’s working is the fact that we do have that personal contact with our clients,” he said. “Before they can invest their money, we pair them with a dedicated Wealth Concierge to discuss their results and get a better understanding of their past investing experiences and current financial situation.”

These Aren’t The Droids You Are Looking For

Whenever a customer has a question or needs advice they can call, email or text their Wealth Concierge. That in itself is reassuring since some new wealth management firms have acquired the nickname of “Robo-advisers”, which is unfortunate from a branding perspective.

But soulless robots managing your portfolio is not what people get with Wealthsimple.

Like other founders, Michael has worked hard to recruit great talent. He approached an industry icon, which helped them recruit other big names in the financial industry. He took the same approach with his team, actively “hiring people that are way smarter and more capable [then] getting out of their way, and giving them all the support they need to be successful.”

His team takes ownership of the product, the customer experience and risk management, which means his customer’s portfolios are in safe human hands, not soulless financial droids.

Future Plans

Currently, Wealthsimple is only available in Ontario, British Columbia, Alberta, Manitoba, and Quebec. They are very close to expanding into the rest of Canada. Michael said that their “ultimate dream is to optimize the world’s life savings and make Wealthsimple the best investment service in the world.”

If you have money to invest, then we highly recommend Wealthsimple!

Wagepoint makes it possible for entrepreneurs like Michael Katchen to focus on bringing innovative payroll service solutions to market by making payroll a pain-free process. In his words, “Just sign up to Wagepoint, tick payroll off your to-do list once and for all!” So, don’t spend another minute on payroll, start your 30-day free trial with Wagepoint today!

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