A previous profile on Digital Journal (“How to invest wisely in the digital age”), sets out how Wealthsimple works to make investing simple and accessible, especially for millennials. The platform focuses on consumers using a computer or smartphone, which allows investors to develop a strategy to meet their financial goals, provided they make the right choices. The company is an example of a growing number of automated investment fintechs.
Digital investment options meet digital advisors
What Wealthsimple offers is a type of investment service based on robo-advisers, a type of financial adviser designed to provide financial advice online. The software works by utilizing algorithms to automatically allocate, manage and optimize clients’ assets.
According to the New York Times Wealthsimple is the first robo-adviser startup from an outside country to enter the U.S. and U.K. markets. Currently the fintech startup manages $1.45 billion for some 65,000 clients in the Canadian, U.K. and U.S. markets.
Disruption and millennials
Companies like Wealthsimple are aiming to disrupt the traditional financial advice market. This is not only though technology but offering services to clients who are typically classed as too expensive or too risky to service. This means providing investment services to those with less available money, such as few hundred dollars rather than thousands. In addition to having lower minimums on investable assets, robo-advisors tend to charge lower fees, more often in then 0.2 percent to 0.5 percent range for the asset under management,
These typically excluded investors are more often from the younger generation. To tie back to the online access, these potential investors are also those who are more comfortable with digital services.
Robo-advisor worries
For other would-be or current investors, the service may not appeal since some clients may not be comfortable trusting their funds to a website or app where there is no direct human interaction. This perhaps narrows the scope of robo-advisers.
An alternative model, taking advantage of algorithms, which might be better at making wise investments than human fund manager, yet keeping the human touch, is a hybrid model. An example of this is Nutmeg, which is the U.K.’s largest robo platform.
