Wealthsimple Aims to Quadruple Assets to $100 Billion in Five Years

As the online investment platform backed by Canada’s billionaire Desmarais family, Wealthsimple is setting its sights on a ambitious target: quadrupling assets to $100 billion in five years. This bet on the company’s ability to capture a significant share of younger investors who prefer digital channels over traditional money managers reflects the growing trend towards fintech solutions.

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A Rapid Rise in Assets

Since 2018, Wealthsimple has experienced rapid growth, with its assets increasing about tenfold to $25 billion. The company’s success can be attributed in part to its slick advertising campaigns and Hollywood star power, as celebrities such as Drake, Michael J. Fox, and Ryan Reynolds have invested minority stakes in the firm.

A Strong Financial Backing

IGM Financial Inc., controlled by Power Corp. of Canada (a Desmarais family holding), is the largest shareholder in Wealthsimple with a 24% interest. Other parts of the Desmarais empire also own stakes, as do venture firms like TCMI Inc. (TCV) and Greylock Partners.

The bulk of Power Corp.’s net asset value stems from its large ownership stakes in IGM, a seller of mutual funds and financial advisory services in Canada, and Great-West Lifeco Inc. This significant backing is crucial for Wealthsimple as it seeks to expand its offerings and reach more clients.

Targeting Millennials

Wealthsimple’s primary focus is on millennials who want to invest on their own or take straightforward investment advice through digital channels, often referred to as robo-advice. The company’s valuation briefly rose above $5 billion in 2021 but fell to about $2 billion due to the crash in fintech valuations.

Expanding Services

In addition to wealth-management services, Wealthsimple offers stock and crypto trading, banking, and tax filing to more than two million clients in Canada. Michael Katchen, Wealthsimple’s chief executive, stated that the company is now trying to help younger clients access venture, private credit, and private equity funds, which are typically reserved for high net worth or ultra-high net worth investors.

IGM’s Fintech Ambitions

IGM is also branching out into serving customers who prefer digital channels over human advisers. The firm is backing Nesto Inc., a Canadian mortgage company that arranges loans exclusively online. Damon Murchison, IG Wealth Management’s chief executive, stated that the company wants to extend its services to banking over time and potentially look at private banking.

Industry Challenges

The mutual fund industry is facing headwinds as investor habits change, with millions of Canadian households forced to allocate more income towards mortgage payments due to rising interest rates. Net flows as a percentage of average assets are declining for both the industry and IGM, according to National Bank of Canada analyst Jaeme Gloyn.

Conclusion

Wealthsimple’s ambitious target of quadrupling assets to $100 billion in five years reflects the growing demand for fintech solutions among younger investors. With its strong financial backing from IGM Financial Inc. and Power Corp. of Canada, Wealthsimple is well-positioned to capture a significant share of this market.

By expanding its services to include venture, private credit, and private equity funds, Wealthsimple is providing its clients with access to investment opportunities that were previously reserved for high net worth or ultra-high net worth investors.

The company’s focus on digital channels will also help it compete with traditional money managers who rely on human advisers. As the industry continues to evolve, Wealthsimple’s commitment to innovation and customer convenience makes it an attractive choice for millennials seeking financial services.

Key Statistics

Assets under management: $25 billion (as of 2023)
Client base: over two million in Canada
Valuation: briefly rose above $5 billion in 2021, fell to about $2 billion due to fintech valuations crash
Shareholders: IGM Financial Inc. (24% interest), Power Corp. of Canada, TCMI Inc. (TCV), and Greylock Partners

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