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Super interesting. Wealthfront has approximately $27 billion USD in AUM according to this article [0]. Meanwhile the leading robo-advisor in Canada, WealthSimp

Super interesting. Wealthfront has approximately $27 billion USD in AUM according to this article [0]. Meanwhile the leading robo-advisor in Canada, WealthSimple recently raised funds at a $5 billion CAD valuation, on a $7.7 billion USD AUM [1]. I have felt for a while like the robo-advisory market is in roadrunner mode - has run past the edge of the cliff but hasn't quite yet fallen. Maybe this is the first sign that the party's ending. [0] https://www.roboadvisorpros.com/robo-advisors-with-most-aum-assets-under-management/ https://www.roboadvisorpros.com/robo-advisors-with-most-aum-... [1] https://financialpost.com/investing/wealthsimple-valuation-should-be-a-wake-up-call-for-big-banks-and-traditional-money-managers https://financialpost.com/investing/wealthsimple-valuation-s...

laluser 5y ago
It probably depends on what adjacent financial products they are selling and how good of a job they are doing at selling those to existing customers. Wealthfront is always suggesting different financial products, cards, etc. There is little money in managing your money since these are mostly served by large funds like Vanguard, but there is a lot of money in referrals selling you other products. It's possible Wealthsimple is doing much better?
- cbhl 5y ago
  For what it's worth, Wealthsimple exited the US market last year and transferred all their US customers to Betterment. They seem to still be adding new products in Canada though (like a Venmo-like cash transfer system.)
jmacd 5y ago
Wealthsimple now has in house advisors who email and call you to discuss your account. There is nothing 'robo' about the business model anymore and instead they are just focused on growing AUM by talking to people and convincing them to move more of their savings/TFSA/RRSP over to them.
- blobbers 5y ago
  Speaking of TFSA/RRSPs etc. is there a canadian version of bogleheads we should know about?
  - ryanluker 5y ago
    https://canadiancouchpotato.com/ https://canadiancouchpotato.com/ is my go to! They put out amazing content over the years and have a great set of model portfolios for those just getting into investing.
  - iamspoilt 5y ago
    We have quite a bit in line with this: https://www.canadianportfoliomanagerblog.com/blog/ https://www.canadianportfoliomanagerblog.com/blog/ https://community.rationalreminder.ca/ https://community.rationalreminder.ca/ https://www.finiki.org/wiki/Main_Page https://www.finiki.org/wiki/Main_Page https://www.financialwisdomforum.org/forum/index.php https://www.financialwisdomforum.org/forum/index.php https://canadiancouchpotato.com/ https://canadiancouchpotato.com/ Also, we have Ben Felix's podcasts - Rational Reminder
  - jmacd 5y ago
    Canadian Couch Potato is the closest.
vmception 5y ago
All about the revenue they make off of that AUM and a multiple of that revenue for the purchase price
myth_drannon 5y ago
Well it's not robo-advisor anymore. It's also crypto, stock trading (copying Robinhood) and tax preparation.
- dmix 5y ago
  And WealthSimple has a Venmo like Cash app (called Cash). They do way more than stocks.
  - parthdesai 5y ago
    do people even use Cash though? all my buddies just use interac
    - MisterSandman 5y ago
      They *just* launched, and they've been pushing a lot in University towns. I don't know how successful it'll be, but every single one of my friends has WS Cash, and if I ever had to send them cash I'd first ask if they'd use Cash since it's so much simpler than Interac. Unfortunately, most people say no right now since the WS Cash Card is really weak (so no point in using it) and it takes a couple of days for you to withdraw money from WS Cash to your bank account.
      - kyruzic 5y ago
        There is no way this catches up to e-transfer in popularity. Everyone in Canada knows about venmo and cashapp and the various other scam versions of e-transfers that people are forced to use in America and they laugh at them for it. E-transfers are literally the best part about Canadian banking.
        MisterSandman 5y ago
        They don't need to catch up to e-Transfers to be successful. I'm not sure what their numbers but if they manage to be the app of choice for university students and young adults alone, it would be a massive win for them. I know people who have started to pay their rent using WS Cash, and I'm sure when they graduate they'd like to continue doing so. There's also the Cash Card directly tied to this account, which they get transaction fees from, as well as associated WS Trade/Invest. I'm not trying to be a shill, I personally wouldn't invest in WS since I think they're incredibly overvalued. But E-Transfer is very dated and has a lot of problems, and there is potential for a competitor to come up and replace it.
anonu 5y ago
Robo-advisory was a dead business 5+ years ago. The game quickly had to expand to add services on top of the core robo offering. Now the big guys like Vanguard, Fidelity, Schwab all have their own robo-flavors. Its become table stakes. In that context, this deal makes sense. UBS has a $2.6tr+ wealth management division - they need the sexy fintech frontend.
paxys 5y ago
$27B and $8B AUM are both peanuts, and I imagine not a big factor in determining valuation for these robo-advisors. Corporations are likely more interested in the number of users, demographic breakdown (mostly well-off millennials), their financial data, credit profiles and upsell opportunities.
- short_sells_poo 5y ago
  This. The amount of money they manage is a mouse fart in a hurricane when it comes to such low fee business as robo advisory. That a robo advisor can get $5bln valuation on having $8 bln of assets speaks either to the silliness of the valuation or that the value is not in the assets managed (likely a combination of both factors).

laluser 5y ago

It probably depends on what adjacent financial products they are selling and how good of a job they are doing at selling those to existing customers. Wealthfront is always suggesting different financial products, cards, etc. There is little money in managing your money since these are mostly served by large funds like Vanguard, but there is a lot of money in referrals selling you other products. It's possible Wealthsimple is doing much better?

cbhl 5y ago
For what it's worth, Wealthsimple exited the US market last year and transferred all their US customers to Betterment. They seem to still be adding new products in Canada though (like a Venmo-like cash transfer system.)

jmacd 5y ago

Wealthsimple now has in house advisors who email and call you to discuss your account. There is nothing 'robo' about the business model anymore and instead they are just focused on growing AUM by talking to people and convincing them to move more of their savings/TFSA/RRSP over to them.

blobbers 5y ago
Speaking of TFSA/RRSPs etc. is there a canadian version of bogleheads we should know about?
- ryanluker 5y ago
  https://canadiancouchpotato.com/ https://canadiancouchpotato.com/ is my go to! They put out amazing content over the years and have a great set of model portfolios for those just getting into investing.
- iamspoilt 5y ago
  We have quite a bit in line with this: https://www.canadianportfoliomanagerblog.com/blog/ https://www.canadianportfoliomanagerblog.com/blog/ https://community.rationalreminder.ca/ https://community.rationalreminder.ca/ https://www.finiki.org/wiki/Main_Page https://www.finiki.org/wiki/Main_Page https://www.financialwisdomforum.org/forum/index.php https://www.financialwisdomforum.org/forum/index.php https://canadiancouchpotato.com/ https://canadiancouchpotato.com/ Also, we have Ben Felix's podcasts - Rational Reminder
- jmacd 5y ago
  Canadian Couch Potato is the closest.

vmception 5y ago

All about the revenue they make off of that AUM and a multiple of that revenue for the purchase price

myth_drannon 5y ago

Well it's not robo-advisor anymore. It's also crypto, stock trading (copying Robinhood) and tax preparation.

dmix 5y ago
And WealthSimple has a Venmo like Cash app (called Cash). They do way more than stocks.
- parthdesai 5y ago
  do people even use Cash though? all my buddies just use interac
  - MisterSandman 5y ago
    They *just* launched, and they've been pushing a lot in University towns. I don't know how successful it'll be, but every single one of my friends has WS Cash, and if I ever had to send them cash I'd first ask if they'd use Cash since it's so much simpler than Interac. Unfortunately, most people say no right now since the WS Cash Card is really weak (so no point in using it) and it takes a couple of days for you to withdraw money from WS Cash to your bank account.
    - kyruzic 5y ago
      There is no way this catches up to e-transfer in popularity. Everyone in Canada knows about venmo and cashapp and the various other scam versions of e-transfers that people are forced to use in America and they laugh at them for it. E-transfers are literally the best part about Canadian banking.
      - MisterSandman 5y ago
        They don't need to catch up to e-Transfers to be successful. I'm not sure what their numbers but if they manage to be the app of choice for university students and young adults alone, it would be a massive win for them. I know people who have started to pay their rent using WS Cash, and I'm sure when they graduate they'd like to continue doing so. There's also the Cash Card directly tied to this account, which they get transaction fees from, as well as associated WS Trade/Invest. I'm not trying to be a shill, I personally wouldn't invest in WS since I think they're incredibly overvalued. But E-Transfer is very dated and has a lot of problems, and there is potential for a competitor to come up and replace it.

anonu 5y ago

Robo-advisory was a dead business 5+ years ago. The game quickly had to expand to add services on top of the core robo offering. Now the big guys like Vanguard, Fidelity, Schwab all have their own robo-flavors. Its become table stakes. In that context, this deal makes sense. UBS has a $2.6tr+ wealth management division - they need the sexy fintech frontend.

paxys 5y ago

$27B and $8B AUM are both peanuts, and I imagine not a big factor in determining valuation for these robo-advisors. Corporations are likely more interested in the number of users, demographic breakdown (mostly well-off millennials), their financial data, credit profiles and upsell opportunities.

short_sells_poo 5y ago
This. The amount of money they manage is a mouse fart in a hurricane when it comes to such low fee business as robo advisory. That a robo advisor can get $5bln valuation on having $8 bln of assets speaks either to the silliness of the valuation or that the value is not in the assets managed (likely a combination of both factors).