Technology has changed just about everything in the world. The way we do things has changed dramatically. It has changed the way we consume news, the way we communicate with one another, and has even changed the way we bank. Among other fintech innovations, robo-advisors changed the way many Canadians invest.
Robo-advisors are nothing complicated. They are nothing more than online investment services that ask you a few questions and attribute you an ETF portfolio that fits your risk profile. These have only been around since 2012 in Canada, but they are becoming quite popular recently.
Recently, the National Bank has made headlines for their $6 million investment in a Toronto-based robo-advisor called Nest Wealth, which was founded back in 2013.
While the online investing industry has been around for quite a few years and is growing exponentially right now, this is a major step as a big bank is finally making strategic investments in a Canadian financial technology company like Nest Wealth.
Ever since Wealthsimple launched way back in 2012, many different robo-advisors in Canada have begun popping up, and now, there are more than a dozen around the country. A few different banks and financial companies in the country have even launched their own robo-advisors, which shows they are privy to the many benefits they may bring. You have BMO and their creation Smartfolio, Questrade and Portfolio IQ and even the National Bank and their Investcube.
Dominating the robo-advisors market
Despite the heavy investments of those financial institutions, the robo-advisor market is still dominated by fintech startups. Wealthsimple, with more than $750 millions dollars of assets under management, is dominating the space in the country. And WealthBar, with more than $100 millions, seems to be the runner up.
According to Martin Gagnon, co-CEO of National Bank Financial, Nest Wealth will be used to “augment and complement our present platforms, thereby equipping our advisors with an additional working tool that will that will take our investment offer to the next level”. Basically, the National Bank will use Nest Wealth as a digital platform to help advise clients more successfully.
So the burning question is: why? Why are banks moving to these robo-advisors and investing in them to help people with their financial needs? The answer is actually quite simple, and it has to do with what is most important to clients.
In recent years, it is becoming more clear that customers want to pay less fees and have online options when it comes to investing, to avoid dealing with a human advisor on the phone or in person. As a result, having robo-advisors that are generally lower in fees than standard financial advisors and are available online makes a ton of sense. With the industry still in its infancy, it will be very interesting to see what the future holds.