How to Invest Money without Having to Walk into a Bank

The investment industry has grown up favouring the rich. Without at least $100,000 in capital, white-glove advisors won’t give you the time of day, thus segregating a large portion of Canadians who might otherwise be prone to investing their money. That is, until technology began challenging the old ways.

Robo-advisors and online investment managers have swiftly crept into Canada, dispelling the convoluted and confusing process of investing, with products that are both time-effective and intuitive. For those who’d previously been overlooked by traditional financial advisors (namely Gen X and Millennials), now there’s a way to acquire wealth without walking into a bank branch, navigating a stack of paperwork and signing on a dotted line.

Wealthsimple is one such Canadian robo-advisor, which was founded by 28-year-old investment whiz kid Mike Katchen. Just over a year old, the Toronto-based company secured $30 million in funding from Power Financial Inc. back in April 2015, breaking records as the largest Series-A financing deal in all of Canadian fin-tech history.

Among the handful of enterprises in the space, Wealthsimple stacks up against two other major players in the market: WealthBar and Nest Wealth. The former is run by Christopher and Tea Nicola, the son and daughter-in-law of John Nicola, founder of Nicola Wealth Management in Vancouver, while the latter is operated by Randy Cass, an Ontario-based financial services and entrepreneurial vet, who has been in the industry for the last 15 years.

There’s also talk of Canada’s ‘Big Six’ banks following suit, after financial giants like Questrade Financial Group Inc. introduced Portfolio IQ, an automated advice platform, and Assante Wealth Management announced that it would be launching its own robo-advisor (only days after the Wealthsimple deal) in the hopes of garnering more clients who are early investors.

Yet within this field, Wealthsimple remains the market leader of robo-investment managers due to their content marketing savvy and poise in identifying with a younger demographic.

Katchen says that what he really wants to bring to Canada is a lifestyle product, and the strategy is overt when reading their blog, which features key lifestyle persona like Elizabeth Gilbert, author of bestselling book Eat, Pray, Love and headlines like, How to Take a Year Off in Berlin for a Grand Total of $17,000.

Gen X and Millennials have taken the bait: 90% of Wealthsimple’s 10,000 clients are under 45 years old. The company now manages $400 million in assets and continues to grow their clientele by 30% per month. “We’re used to Uber and Facebook – we’re not used to walking into a bank branch and having to sit down with an advisor for a two-hour meeting,” says Katchen. “Most of our clients are young professionals with an average account of roughly $50,000 – people who want really simple technology solutions.”


Courtesy Wealthsimple

Investing is easy – and completely mobile – with Wealthsimple’s app.

Not to say that Wealthsimple doesn’t work for clients with million-dollar portfolios: “The clients we have who have easy access to white-glove service love us because they don’t want to pay high fees and they value transparency,” clarifies Katchen.

Canadians pay the highest fees in the world (about 2.4%), which takes a large chunk out of the expected 8% average market return when one invests over the long term. Wealthsimple portfolios are made up of ETFs (exchange-traded funds), which are cheaper than mutual funds and also track market indexes nicely. A Wealthsimple portfolio made up of ETFs means that clients pay about 0.5% in fees. (To put this in perspective, if one has accumulated $800,000 at retirement, spending 2.4% on fees results in loss of $40,000 – the price of a new car – compared to a loss of $4,000 at 0.5%.)

“When you log into your account through the website or app, you see four numbers: how much money you’ve put into the account, how much you’ve made, what you’ve paid us in fees and the total value of your investment account today,” explains Katchen. “You’d be surprised at how difficult it is to find those numbers with most investment advisors.”

All you need is $500 to start and in 10 minutes you can create an entire investment account from start to finish using an online investment manager like Wealthsimple. The app can be downloaded on your phone or tablet, and you’ll be asked a series of questions – a risk assessment – that takes into account your age, income and knowledge of investing. Katchen says that it’s just like signing up for Facebook, “with a few more questions because it’s a regulated industry.”

At Wealthsimple, Katchen’s role as CEO is as much about providing investment education to the public as it is about leading the company. His best advice? “Start early, keep your costs low, diversify your portfolio, and think long term.”

How to Invest Money without Having to Walk into a Bank
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