Strategic move: Drake (seated left) and son Adonis watch the Toronto Raptors in an NBA game in Toronto. Wealthsimple is betting that it can capture a significant share of the younger market with personalities like the Canadian musician and Hollywood actors. — AFP
TORONTO: Wealthsimple Financial Corp, the online investment platform backed by Canada’s billionaire Desmarais family, has set a target of quadrupling assets to C$100bil (US$74bil) in five years, betting that it can capture a significant share of younger investors who don’t want to use traditional money managers.
Toronto-based Wealthsimple has grown rapidly, with assets rising about 10-fold to C$25bil since 2018, thanks in part to slick advertising and some Hollywood star power: celebrities Drake, Michael J. Fox and Ryan Reynolds are among its minority investors.
The business has gained momentum recently, Wealthsimple chief executive officer Michael Katchen said on Tuesday.
“We’re adding about C$1bil dollars of net deposits a month right now,” Katchen told analysts at IGM Financial Inc’s investor conference.
IGM, which is controlled by the Desmarais’ Power Corp of Canada, is the largest shareholder in Wealthsimple with a 24% interest.
Other parts of the Desmarais empire also own stakes, as do venture firms such as TCMI Inc and Greylock Partners.
For the Desmarais clan, it’s one of many financial-technology bets that they hope can juice growth in a company dominated by established, slow-growing insurance and investment businesses.
The bulk of Power Corp’s net asset value stems from its large ownership stakes in IGM, a seller of mutual funds and financial advisory services in Canada, and Great-West Lifeco Inc.
Wealthsimple is targeting millennials who want to invest on their own or take straightforward investment advice through digital channels, sometimes called robo-advice.
The company’s valuation briefly rose above C$5bil in 2021, but the crash in financial technology valuations caused it to fall to about C$2bil, according to IGM’s financial statements.
Along with wealth management services, the firm offers stock and crypto trading, banking and tax filing to more than two million clients in Canada.
Katchen said it’s now “trying to help younger clients get some exposure to what typically are reserved for high-net worth or ultra-high-net worth investors” by giving them access to venture, private credit and private equity funds.
IGM is branching out into serving customers who are less inclined to use human advisers.
The firm is also backing Nesto Inc, a Canadian mortgage company that arranges loans exclusively online.
“We want to extend that to banking over time, and then potentially look at private banking,” IG Wealth Management chief executive officer Damon Murchison said at the conference.
The mutual fund industry is facing headwinds as investor habits change and millions of Canadian households are forced to put more of their income towards mortgage payments due to rising interest rates.
“Net flows as a percentage of average assets are declining for both the industry and IGM,” National Bank of Canada analyst Jaeme Gloyn said in a recent note to clients. — Bloomberg
