Canadian robo-adviser expands to U.S.

Toronto-based Wealthsimple Financial Inc. has expanded into the U.S., offering its robo-adviser services in all 50 states — marking its first expansion outside of Canada.

The Toronto-based fintech is launching its low-fee basic investing service targeting millennials and its new Wealthsimple Black aimed at high net worth individuals south of the border on Tuesday, said its chief executive Michael Katchen.

After getting traction in Canada with 20,000 users and $750-million in assets, it was the right time to push into the U.S., he said.

It’s also a major opportunity for growth, given the size of the U.S. market.

“For us, in the U.S. that is still a massive, massive market,” Katchen said. “While there has been a lot of hype and growth and excitement around the robo-space, it’s still such a tiny percentage of the investable assets in the U.S. that we see it as wide open.”

Wealthsimple is going up against incumbent robo-advisers, including New Yorkbased Betterment, which manages more than $6.5 billion in assets for more than 200,000 customers.

Wealthsimple, which launched roughly two years ago, already had two of its three co-founders based in New York, he said. But in preparation for Tuesday’s launch the fintech built up its office in recent months to 10 people. It got approval from the U.S. Securities and Exchange Commission last October and is now a registered corporation and licensed entity in the U.S., said Katchen.

There are some regulatory differences in the U.S., including one Wealthsimple is currently pushing for in Canada: the sign-up process can be completed without a phone call as part of a suitability assessment. That’s the model they’re launching with in the U.S., although users can speak to a live person if they need to, Katchen said.

While most of Wealthsimple’s staff will be based out of Canada, the financial aspects of the U.S. operation will be handled south of the border.

Wealthsimple has a partnership with the Power Financial group of companies, whose initial deal was an investment of $10-million, with an option to increase investment to $30-million. Mr. Katchen said it did exercise the option for the additional $20-million late last year for both continued domestic expansion and exploring new markets, such as the U.S.

Wealthsimple now has 75 staff globally, up from roughly 25 people at the beginning of last year, he said. He is expecting the firm to grow at a similar pace in 2017.

While there are a few Canadian fintechs that have expanded into the U.S., such as Toronto-based peer-to-peer lender Financeit, Katchen believes Wealthsimple is the first robo-adviser to do so.

Within the last month, Wealthsimple has also opened an office in London. Katchen said a push into the European market is “possible” as its “ambitions are global,” but right now the Canadian and U.S. markets are “a lot to chew.”

It is a far cry from the company’s early days: Katchen said he was “laughed out of the boardroom” for laying out a global vision for Wealthsimple at a time when they had just $1.9-million in funding and 20 users.

“It’s a very personal mission of mine since I moved back from California, to inspire more Canadian companies to think big and to think internationally about the businesses that they’re building,” he said.