Robo-ad­vi­sors are fo­cus­ing on spe­cific mar­kets to set them­selves apart.

Some of these emerg­ing fin­tech firms now fo­cus on serv­ing spe­cific mar­kets in an ef­fort to stand out from their peers

Investment Executive - - FRONT PAGE - BY FIONA COL­LIE

more than a dozen roboad­vi­sor firms now op­er­ate i n Canada. As a re­sult, some of these fi­nan­cial tech­nol­ogy (fin­tech) star­tups are fo­cus­ing on spe­cific ar­eas of ex­per­tise in an ef­fort to dif­fer­en­ti­ate them­selves in what’s quickly be­com­ing a crowded mar­ket­place.

Case in point: Toronto-based Smart Money Cap­i­tal Man­age­ment Inc., Van­cou­ver-based WealthBar Fi­nan­cial Ser­vices Inc. and Toronto-based Just­wealth Fi­nan­cial Inc. are turn­ing their at­ten­tion to­ward par­tic­u­lar niche mar­kets — from busi­nessto-busi­ness (B2B) plat­forms to spe­cific de­mo­graph­ics.

Smart Money, for ex­am­ple, has de­cided to fo­cus ex­clu­sively on the B2B mar­ket, a fact em­pha­sized by its re­cently an­nounced part­ner­ship with Burling­ton, Ont.-based Man­dev­ille Pri­vate Client Inc., a tra­di­tional fi­nan­cial ad­vi­sory com­pany. The robo- ad­vi­sor’s de­ci­sion to fo­cus on B2B part­ner­ships was driven largely by the high cost and in­creas­ing com­pet­i­tive­ness of the di­rect-to­con­sumer (DTC) mar­ket.

“Client ac­qui­si­tion cost was only go­ing one way, and that was up,” says Nau­vzer Babul, CEO and founder of Smart Money. “And so, for me, work­ing with these part­ners just seemed like a bet­ter fit for us rather than com­pet­ing with them.”

Cur­rently, roughly half of Smart Money’s client base comes from such part­ner­ships while the other half con­sists of in­di­vid­u­als who be­came Smart Money clients di­rectly. At the mo­ment, clients re­ferred by fi­nan­cial ad­vi­sors are man­aged solely by Smart Money — al­though the ad­vi­sor may choose to re­main in con­tact with the client to dis­cuss fi­nan­cial plan­ning needs beyond in­vest­ments. Smart Money has plans to launch a white-la­bel plat­form next year that will al­low tra­di­tional firms to li­cense Smart Money’s tech­nol­ogy and keep their clients’ as­sets in-house.

Al­though the de­ci­sion to fo­cus on the B2B mar­ket rather than DTC may prove cost-ef­fec­tive for Smart Money, the B2B mar­ket is not without its chal­lenges. Namely, Babul notes, es­tab­lish­ing trust with ad­vi­sors can take time.

“The way robo-ad­vice has tra­di­tion­ally been pegged in the mar­ket­place is as a com­peti­tor to ad­vi­sors,” he says.

As a re­sult, even though Smart Money works with in­di­vid­ual ad­vi­sors, the firm gen­er­ally seeks to build a re­la­tion­ship with an en­tire firm be­cause do­ing so can help bridge the gap be­tween the fin­tech and ad­vi­sors.

“The first chal­lenge is work­ing with the com­pany so that its ad­vi­sors re­al­ize we’re not there to com­pete with them,” says Babul. “We’re ac­tu­ally there to com­ple­ment their busi­nesses.”

Smart Money has com­pe­ti­tion in the B2B mar­ket. Toronto-based Glide­path Port­fo­lio Ser­vices Inc. works ex­clu­sively with fi­nan­cial plan­ners. As well, Nest Wealth As­set Man­age­ment Inc., Wealth­sim­ple Inc., both based in Toronto, and WealthBar all have B2B plat­forms avail­able to ad­vi­sors.

Fur­ther­more, Nest Wealth and WealthBar have an­nounced part­ner­ships with Mon­treal-based Na­tional Bank of Canada and the Toronto-based in­surance dis­tri­bu­tion firm PPI, re­spec­tively.

WealthBar, in ad­di­tion to grow­ing its B2B plat­form, hopes to ex­pand its DTC plat­form by ze­ro­ing in on Cana­di­ans ap­proach­ing re­tire­ment, says Tea Ni­cola, the firm’s CEO and co-founder: “We have a very unique value prop- os­i­tion for those in re­tire­ment tran­si­tion.”

For ex­am­ple, Ni­cola points to the robo-ad­vi­sor’s fi­nan­cial plan­ning of­fer­ing — which in­cludes: re­tire­ment in­come plan­ning; access to Van­cou­ver-based Ni­cola Wealth Man­age­ment Ltd.’s pri­vate pools (Ni­cola Wealth owns a stake in WealthBar); and a price point of 0.35%-0.6% — as reasons why WealthBar is well po­si­tioned to work with in­vestors who are in — or will soon be mak­ing the tran­si­tion into — re­tire­ment.

This em­pha­sis on re­tire­ment plan­ning is a nat­u­ral step for the three-year old firm, which has fo­cused con­sis­tently on full fi­nan­cial plan­ning for its clients in ad­di­tion to in­vest­ment plan­ning.

“We don’t have to change much. We’ve al­ready been do­ing these plans for this client seg­ment from the get-go,” says Ni­cola. “We’re now just telling peo­ple that we can do this and mak­ing a lit­tle bit more of a splash [about it].”

WealthBar cur­rently has just less than $200 mil­lion in as­sets un­der man­age­ment (AUM) and serves roughly 2,000 clients.

Just­wealth is an­other roboad­vi­sor firm that has be­come more fo­cused on serv­ing the needs of a spe­cific de­mo­graphic.

“Gen Xers are the big­gest seg­ment that we’re serv­ing and also our fastest-grow­ing,” says An­drew Kirk­land, pres­i­dent and co-founder of Just­wealth.

Specif­i­cally, about 43% of Just­wealth’s clients fall within the Gen X de­mo­graphic (in­di­vid­u­als who were born be­tween 1966 and 1980) while 41% of its AUM be­longs to clients in that same age group.

This growth was by de­sign, as Kirk­land and James Gau­thier, Just­wealth’s chief in­vest­ment of­fi­cer, be­gan to build out the fin­tech’s ser­vices.

“We were tar­get­ing peo­ple who were in their late 30s, early 40s, and maybe had be­gun to build some kind of nest egg,” says Kirk­land. “So, when we looked at de­vel­op­ing our port­fo­lio lineup, we took that into con­sid­er­a­tion.”

To that end, in ad­di­tion to craft­ing spe­cific port­fo­lios for reg­is­tered and non-reg­is­tered ac­counts, Just­wealth also of­fers its clients a target-date port­fo­lio suit­able for reg­is­tered ed­u­ca­tion sav­ings plans.

“We’re able to target to the ex­act year that a ben­e­fi­ciary is go­ing to be en­rolling in [post­sec­ondary] school,” says Kirk­land. “So, some­one in that age range — late 30s, early 40s, mid40s — would be some­body who would be most likely utiliz­ing a ser­vice like this [for their chil­dren].”

WealthBar is fo­cus­ing on re­tirees, while Just­wealth tar­gets Gen Xers

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