By Josh Book

The splendid Clare O’Hara who covers wealth management for the Globe and Mail published an article today which highlights a few important developments. (No, not the AUM growth. Asset accumulation for digitally-led wealth advice is a long game and the dollars will come flooding over time. It’s just not time to evaluate success based on the AUM measure as yet we don’t think)

Namely, we are seeing developments in the planning components of wealth management coming into the digital channel. Firms like Planswell in Canada and Pefin in the US have built technology and an offer that leads with planning while recently NestWealth has acquired digitally enabled planning software provider Razor Logic. This, from our perspective is the first supplier to attempt a move beyond more simplistic “goals based planning” capabilities to an integrated holistic financial planning capability with digitally led portfolio management. If executed right we are in for a step change improvement in what mass affluent consumers (and other segments) have ever before had available to them.

Some of ParameterInsights’ latest research reveals that 51.9% of Americans and 54% of Canadians are not following any kind of financial plan. While only 8.4% of Americans and 7.1% of Canadians report to be following a plan “very closely”. Needless to say, this represents a huge opportunity for consumers as digital wealth offers work to incorporate planning capabilities to their wealth offers.

Here’s a link to the article and excerpts below: https://www.theglobeandmail.com/business/article-robo-advisers-plot-more-growth-in-canadian-market/

Robo-advisers are gaining momentum in Canada, with the digital investment managers now surpassing $5-billion in assets under management.

The largest, Wealthsimple, said last week it had $4.3-billion in assets under administration as of March 31, 2019, up from $3.4-billion at the end of 2018. The company – which is largely owned by financial behemoth Power Financial Corp. – first launched in 2014. It has more than 100,000 clients in Canada, the United States and Britain.

Wealthsimple chief executive Michael Katchen announced last year he aims to hit $1-trillion in AUM in 15 years. It’s a goal he admits is “ambitious” but one he believes his company has a “really good shot at achieving.”

…..Once seen as a threat to traditional wealth-management companies, the technology is being implemented by many institutions in-house. CI Financial is the latest investment company to jump into the digital advice industry after acquiring a 75-per-cent equity interest in Wealthbar Financial Services Inc. in January. The Vancouver-based robo-adviser, which also launched in 2014, has seen much slower growth in the market. But following the CI acquisition its assets jumped to $350-million, up from $275-million at the end of 2018.

…..Over the years, several robo-advisers have launched business-to-business platforms – allowing financial advisers to access their portfolio-management tools for a discounted price.

…..Last week, online portfolio manager Nest Wealth boosted its B2B capabilities through the acquisition of Alberta-based Razor Logic Systems, the developer of financial-planning software Razorplan.

Razor Logic offers a digital financial planning tool that is currently used by several large wealth-management firms in Canada, including Raymond James, Hub Financial and IDC Worldsource.

Nest Wealth’s assets under management have not been disclosed, as well as the financial terms of the deal.

The tool will allow investors to link a comprehensive financial plan directly to their investment portfolio and monitor its progress online. In a recent user survey, Nest Wealth found that more than 53 per cent of its clients have never had a financial plan, and 42 per cent would be willing to pay additional fees to access one.

“Moving the planning component to the digital advice channel represents a significant opportunity for [robo-advisers] as the consumer can be engaged with more specifically and beneficially with a digitally integrated financial plan and investment portfolio,” said Josh Book, CEO and founder of Parameter Insights Inc.