Robo-advising made Wealthsimple’s reputation, but COVID-19 day-trading helped make it a unicorn

Wealthsimple Commerce formally launched in Canada in March 2019, when the corporate had greater than 100,000 purchasers and over $4.three billion in belongings underneath administration. That’s in response to figures from Energy Corp. of Canada, entities of which maintain a controlling stake in Wealthsimple.

These numbers grew to greater than 250,000 Wealthsimple purchasers in Canada, the U.S. and the U.Okay., in addition to greater than $6.three billion in belongings on the finish of 2019. Shoppers then doubled to greater than 500,000 as of the top of June, with belongings capturing as much as over $8.Four billion.

The soar in prospects and belongings coincides with the COVID-19-related rise in retail buying and selling by buyers who watched shares collapse in February and March, after which determined to leap in amid the next rally. That buying and selling exercise has been enabled by zero-fee apps comparable to Robinhood within the U.S. — and apparently by Wealthsimple as properly.

Katchen mentioned the present atmosphere has helped its robo-advisory enterprise, as some purchasers should be leery of going right into a bodily financial institution department. Nevertheless, “large” demand at brokerages additionally lifted Wealthsimple, serving to it to seize the second-most variety of new buying and selling purchasers in Canada within the first half of 2020, behind solely Toronto-Dominion Financial institution, in response to Katchen.

“We’ve benefitted in a really outsized means,” he mentioned.

It’s a lane through which Wealthsimple may have comparatively little competitors. CIBC World Markets analyst Ian de Verteuil wrote in July that whereas brokerage commissions and costs have been falling in Canada, “there aren’t any actual ‘zero-commission’ choices in Canada” apart from Wealthsimple’s, and that which may be the case for a while.

Wealthsimple at present doesn’t supply riskier bets, comparable to buying and selling choices, and it solely expenses a foreign-exchange price for U.S. inventory trades. It does plan on launching premium options in some unspecified time in the future sooner or later that can carry charges, and goals to draw prospects to its different merchandise.

“Regardless that Wealthsimple is positioning itself as very aggressive on pricing, its advertising couldn’t be extra totally different than that of Robinhood,” de Verteuil mentioned in a word to purchasers. “The tagline ‘Get Wealthy Gradual’ hardly compares to the Robinhood strategy, which incorporates the potential for fractional shares and a ‘video-game like’ app.”