Regional “robo-advisors” are expanding across Canada, as demand from investors picks up for these newly available services that use online, automated tools to standardize and streamline financial advisory services. At the same time, some of the these firms are exploring the potential for developing robo-advisor tools that are designed specifically to help traditional financial advisors serve their clients better.
Vancouver-based WealthBar Financial Services Inc. announced in early January that its robo-advisory services, initially available only in Alberta, British Columbia and Ontario, now are available to investors across the country. And, apparently, none too soon for some clients.
“We actually had people who were signed up on our website from the Maritime provinces prior to registration [in the Maritimes],” says Tea Nicola, CEO and co-founder of WealthBar. “They were on a waiting list.”
Although robo- advisors are a relatively recent development that has some traditional advisors concerned about gaining and keeping clients, robo-advisor services nevertheless are here to stay.
Investor demand for these low-cost and easy-to-use services is driving the speed of the expansion trend. WealthBar was only one of several robo-advisors to launch last year. The draw of robo-advisors is easy to understand: low-cost, easy to use, automated portfolio construction and rebalancing with fees of 0.35%-0.6% of the portfolio or a flat fee. In a “best of both worlds” scenario, they also offer access to registered financial advisors.
Toronto-based Wealthsimple Financial Inc. is another regional robo-advisory firm that is going through a growth spurt. In December 2014, Wealthsimple announced that its services are now available in Alberta, Manitoba and Quebec, in addition to existing businesses in Ontario and B.C.
Like WealthBar, demand for Wealthsimple’s services has been strong. “We’ve seen a tremendous amount of response,” says Michael Katchen, Wealthsimple’s founder and CEO, who adds that his company also had long waiting lists before expanding to the newly added provinces. Later this year, Wealthsimple’s services will be available in every province. “We have the approval to go nationwide,” he says, “and we’re in the process of filing applications.”
These firms not only are expanding geographically; they are also in the initial phases of developing a form of their services created specially for financial advisors. Wealthsimple’s advisor platform, for one, is in the testing and pilot phase. While the company does not have any advisor-based firms lined up as partners outside of its current areas of operation, says Katchen, Wealthsimple has seen some interest in the program from individual advisors, and any regional expansion would include this offering.
WealthBar is also talking to advisors about potential partnerships, says Nicola, but has no specific plans yet.
Toronto-based Nest Wealth Asset Management Inc. also plans to offer a platform designed for advisors. Although the company still is in conversation with advisory firms about using the platform, Randy Cass, founder and CEO of Nest Wealth, says his firm intends to launch its advisor platform in 2015: “Anywhere we end up being able to serve retail clients directly, we’d also be able to assist advisors.”
For the moment, Nest Wealth is registered only in Ontario. However, Cass says, the company plans to be available nationwide by the end of the year. However, the expansion of Nest Wealth’s services across Canada is likely to happen slowly over the coming months rather than all at once.
“We want to make sure, first and foremost, that every client that gets ‘on-boarded’ onto Nest Wealth gets the appropriate attention,” Cass says. “And we feel a gradual rollout accomplishes that.” (The firm has not yet finalized which province it will expand into next.)
Beyond more provinces and adding advisors to the mix, these firms are looking to diversify the type of investors they serve.
“Our youngest client is 19 and our oldest client is now 92, so we really do cover a wide spectrum of age groups,” Katchen says. So far, though, the vast majority of Wealthsimple’s clients are young professionals under the age of 45.
WealthBar has two main types of clients, Nicola says. The first is around 30 years of age and just starting their financial planning. The second group is in the pre-retirement age group of 55 to 65 years. Most clients in this older group want help calculating their potential retirement income from a variety of sources.
“In Canada, a normal person can have six or seven sources of income in retirement,” says Nicola, “and it takes a little bit of finagling to synchronize all that.”
Rather than serving a specific demographic, Cass says, Nest Wealth is targeted at the “forgotten middle” – people who have started to accumulate some assets but don’t necessarily meet the client criteria that a full-service advisor would have.
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