Rise of robo-advisors in mortgage business could have an impact

Montreal-based Power Financial Corp. is making a move into the emerging “robo-advisor” space, with an investment in startup Wealthsimple Inc.

The financial services holding company is to make an investment of up to $30 million in Toronto-based Wealthsimple, which launched in September 2014. The startup says that the partnership with Power will enable it to deliver its “simple, low-fee investing [model] to everyone in Canada.”

Power Financial (TSX:PWF) already has major stakes in the traditional investment business through its control of IGM Financial Inc. (TSX:IGM), which, in turn, owns Investors Group, Mackenzie and Investment Planning Counsel; along with its majority stake in Great-West Lifeco Inc. (TSX:GWO), which also owns Putnam Investments.

Wealthsimple is a startup in the so-called robo-advisor space that aims to compete with traditional advisory services with low fees and less substantial advice. It reports that, since it launched last year, it has attracted over 1,000 clients, and says that it is now managing “tens of millions of dollars”.

“With Power Financial as our new partner, we are poised to build a transformative company that makes smarter investing simple, accessible, and affordable for everyone in Canada,” Wealthsimple says in a blog posting announcing the deal. It says that the investment from Power will enable it to staff up, bolster its product line up, and develop new products and services.

Under the agreement, which is subject to regulatory approval, Power Financial will initially invest $10 million in the firm, and can invest up to $20 million into Wealthsimple over the next 12 months. It also has the option to make further investments over the next three years.

“Wealthsimple offers an innovative solution that complements the demographics serviced by our other financial services brands,” said St├ęphane Lemay, Power Financial vice president, in a release. “We believe in the value of financial advice for everyone and see the Wealthsimple model as a way to appeal to under-served segments of the Canadian population like millennials and those with more modest assets. Wealthsimple has been able to reach this market,” he added.