It’s a crushing piece. And the facts might be a tough to read for many on the ‘other side’ of that article. These are some tough pills to swallow. In the Globe this Saturday February 8th, Clare O’Hara and Tim Kaladze simply suggest that Canadian Robo Advisor Wealthsimple is a flop.
From that article …
It’s now clear the robo-revolution has been a flop. And Mr. Katchen is nowhere near as cocky as he once was. Wealthsimple executives declined to comment for this story, as did Paul Desmarais III, the scion of the Desmarais family who has bet heavily on the company and is also its board chair.Globe & Mail
Flop. Their word not mine.
The Robo revolution has certainly not gained more than a footing. The fintech marvel has not reached expectations on both sides of the border.
In 2015 industry experts predicted that the Robo’s would reach $2.2 trillion in assets by 2020. Well 2020 called to report that you’re only 1/10 of the way there. And US investors are known for embracing lower fee investing. There is now more assets in ETFs compared to mutual funds, south of the border.
No ROI – return on investment.
While the growth rate for Wealthsimple has been terrific, there is no return on investment.
I have noted this for quite some time. It does not take an MBA type to realize the aggressive marketing is not paying off. The theme of the Globe article is no surprise to anyone at Wealthsimple or the other Robo Advisors. They can also do basic math.
Pushing on string.
With respect to advertising and marketing spend, it’s like pushing on string. It does not matter how hard you push. The Canadian consumer will only embrace this new upstart technology at a certain pace. It appears that you can’t turn up the dial. It does not matter how hard you push.
I was an investment advisor and trainer at Tangerine Investments. For my money they were the first Canadian Robo Advisor. Tangerine offers a digital on-boarding process and simple index-based, couch potato portfolios. It can be a complete digitial experience from end to end. And yet when I asked readers and followers if Tangerine was a Robo Advisor, the answer came back as NO.
Results without the advertising dollars.
All said from 2015 to 2019 Tangerine increased assets from the $1 billion range to over $4 billion. And they did that with (essentially) no marketing spend. Now I think that was a missed opportunity. Canadians might be more included to trust an offering from a well-known and well-liked ‘bank’. I think it would have worked. It would have delivered an ROI.
Here’s my review of Tangerine Investments.
The point is of course, the growth rate might be similar enough, and Tangerine did not push on that string. They simply let the clients arrive on their own terms, and at their own pace. Tangerine Investments is profitable.
Money well spent in my books.
All said, I am more than happy to see Power Financial spend that money. It’s not my money. I am not a shareholder. My wife holds a wee bit by way of Vanguard’s VDY ETF. Not a big deal, they pay a nice big juicy dividend even though their mutual fund companies such as IG face a slow bleed.
Wealthsimple is Canada’s most famous Robo Advisor.
I truly appreciate the massive spotlight that they shine on lower-fee index-based investing. Wealthsimple’s Robo ‘competitors’ are happy to share in that glow as well.
Ironically, I posted on how Questrade and Wealthsimple are winning the ad wars this RRSP season. That allowed me to scratch that former ad guy itch.
Robo Advisor Wealthsimple is out again with some wonderful televisions ads that will be re-purposed for online viewing. They have a comprehensive branding and communication strategy that goes well beyond tv advertising.
Questrade continues to beat up advisers and their high fees.
Message delivered, loud and soft.
This RRSP season the message of lower fee investing and financial empowerment rules. This will move the needle even more. But perhaps just not fast enough. The good news is that we are at that tipping point. As per my 2019 review of Canadian ETF assets, ETFs are attracting significantly more funds compared to mutual funds.
Canadians are getting the message. And I do think that the Robo’s will get their fair share, eventually. I think or know that ‘Robo’ is the right avenue for the vast majority of Canadians. The investments are low fee, employ wonderful asset allocation, advice is available.
What is a flop is how most Canadians are currently invested, and how they’re treated.
I had previously penned on all of this asking why Canadians give the Robo the cold shoulder? That was a co-production with Josh Book of Parameter Insights.
On to Weekend Reads.
On the ETF front Horizons continues to launch new offerings. The new funds attracted the greatest initial seed money in Canadian ETF history. There are some composite ETFs, and a savings offering that is likely to be very successful. The Horizons cash maximizer ETF will earn at a rate of 2.25%. It’s also a tax efficient total return offering. There is no distribution.
In MoneySense Jason Heath offers some advice for those who may have too much in one stock thanks to company share offerings.
Mark Seek of My Own Advisor offers weekend reads with a host of great links.
GenYMoney reviews poor Charlie Munger’s book. Of course Charlie is not poor, he is second in command at Berkshire Hathaway, after Mr. Warren Buffett. GenY gives that book the thumbs up. 96-year-old Charlie may take over one day if Warren grows tired.
On SavvyNewCanadians Enoch reviews Passiv, an investment app that helps you rebalance your portfolio.
Boomer and Echo offers 4 rip-offs to avoid.
A Wealth of Common Sense asks if the financial media is too negative?
Again, that WOCS post contains a great podcast and many links to US focused content. They also cover the Zero Hedge lifetime ban from Twitter.
milliondollarjourey offers their 2020 Canadian discount brokerage comparisons.
On findependencehub, good news, we’re in a high interest savings war.
And I have to thank Credit Canada for including Cut The Crap Investing on the list of Top 15 personal finance blogs. It’s such a thrill to make some of these lists. You’ll find some great blogs in there of course.
On Seeking Alpha I wrote on rebalancing the stock portfolio for greater gains.
I also penned on Vanguard’s new global one ticket bond offering.
Canada’s top-ranked discount brokerage.
Cut The Crap Investing readers can sign up with Questrade (Canada’s top-ranked discount brokerage) through this partnership link.
You can buy ETFs for free, including the wonderful one ticket asset allocation ETFs.
While I do not accept monies for feature blogs please click here on the mission and ‘how I might get paid’ disclosures.
Thanks for reading my post on the Robo industry and Canadian Robo Advisor Wealthsimple.