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The Rapid Emergence of the Online Investment Model

Discussing online investing with Wealthsimple Founder & CEO Michael Katchen

Mediaplanet Where did you first see the need for the online investment model?

Michael Katchen I came across a lot of Canadians who wanted to start investing but didn’t know how to get started. There were two options available at the time: do it yourself or hire an advisor. Doing it yourself took time and knowledge, and working with an advisor came at a high cost. There was an opportunity to make investing simple and accessible to all Canadians, regardless of their age or net worth.

MP What exactly can an online investment service offer?

MK Online investment platforms offer many perks that have previously been inaccessible to the average investor. They’re a fraction of the cost of a traditional advisor — Canadians pay the highest investment management fee in the world — and they typically have low account minimums.

Algorithms are built to manage your investments so you don’t have to, and all information is accessible across various platforms. And, there’s still a human aspect — there are portfolio managers who speak to clients when they need investment advice or financial planning.

MP Why are the investments put into an exchange traded fund (ETF)?

MK I believe in a passive, long-term approach to investing. An ETF combines the diversification of a mutual fund with the flexibility of a stock, all with much lower fees than mutual funds. Investing in low-cost index funds that track the market outperforms stock picking over the long term.

MP What is the importance of goal-based investing and how does it work?

MK Goal- based investing encourages our clients to invest regularly, a good investment behaviour, and also keeps them thinking long-term. It’s important to know what you’re saving for and how much money to put aside today, for a future purpose.

MP Is there competition with traditional investment services or only other online investment platforms?

MK The investment industry as a whole is going through a major change, and competition will develop among those who choose to react.

MP How has the online investment platform reduced financial stress with respect to investments and long-term growth?

MK People have typically associated investing with complexity, which results in putting off saving for future milestones. A lot of investors are choosing this option because it’s more transparent and the process of signing up is simple. You can invest your money, check on it as often as you would like, and make time for what really matters in your life.

MP Do you find low fees are important to young professionals and beginner to novice investors?

MK Of course — low-fees should be important to every investor! Most young professionals and novice investors start out with smaller amounts to invest. If a large portion of your money is being taken away and paid as a commission to the advisor, you’re not saving to your full potential.

MP Where do you see the investments industry trending in the next five years?

MK I think more regulations surrounding reporting will encourage greater transparency in the industry. There will be a broader range of options available to investors, not strictly targeted towards high net worth individuals. I also see a major shift in how people invest, and mobile will become a huge channel. It’s exciting to see what’s to come.

“Online investment platforms offer many perks that have been inaccessible to the average investor.” Michael Katchen Founder & CEO