Future growth opportunities for financial technology (fintech) companies, such as robo-advisors, lie not just with gaining retail clients, but in business-to-business partnerships either within or outside the financial services sector, according to a panel discussion at the 2016 Cantech Investment Conference in Toronto on Tuesday.
“With time, we’re seeing [at a global level] that the integration of the innovator and incumbent is happening,” said Dean Nicolacakis, principal, co-leader of Fintech Practice at PriceWaterhouseCoopers LLP in San Francisco, during the panel discussion.
Although Randy Cass, CEO of Toronto-based Nest Wealth Asset Management, takes issue with many aspects of Canada’s financial services sector, such as high management fees, he still sees room for new technologies to work with traditional models. “There is a vast opportunity for companies like ours to find relationships, partnerships and strategic relationships,” Cass at the panel discussion.
In fact, some Canadian robo-advisors have already made significant deals with financial services firms. Montreal-based Power Financial Corp., for example, invested $30 million in Toronto-based Wealthsimple Financial Inc. in April 2015. Furthermore, Vancouver-based WealthBar Financial Services Inc. struck a deal with Nicola Wealth Management Ltd., also of Vancouver and a stakeholder in the West Coast robo-advisor, in which investors can now access a suite of pooled funds from Nicola.
Deals are not the only way some of Canada’s largest financial services institutions are entering the robo-advisor space. Toronto-based Bank of Montreal, for instance, became the first Canadian bank to offer a robo-advisor this month with the launch of SmartFolio, a proprietary platform.
See: Robo-advisor platform will give BMO advisors a chance to grow their businesses
BMO is unlikely to be the last financial institution to make a foray into the automated investing space whether it’s through a proprietary launch or an investment, as in the case of Power and Wealthsimple.
Yet, future partnerships with robo-advisors will not be limited necessarily to traditional financial services firms, Cass said: “The evolution of this industry just isn’t that we’re going to move things online. It’s also [companies] that have a history and experience of doing things with technology better are going to see this as an opportunity to service their clients in a way that they haven’t been able to before.”
Fintech can’t even be called disruptive until a large non-financial technology-based company, such as Apple Inc. or Google Inc., either creates its own service offering or partners with one of these start-ups, Cass argued: “That’s when people are going to know that the industry has woken up and true disruption has happened.”
That disruption won’t just happen in the U.S. Cass also expects Canadian companies outside of the financial services sector to pay closer attention to fintech companies, including robo-advice. Indeed, Mississauga, Ont.-based Metroland Media Group Ltd. invested $1.5 million in Nest Wealth in August 2015. As part of the deal, Cass writes a regular column that is published in a number of Metroland community news websites.