As the percentage of household debt rises to near-record levels in the country, many Canadians owe far more money than they make. Despite that alarming fact, few take the time to better understand how to grow their savings.
That reticence, though, isn’t entirely their fault. For a long time, average Canadians have been barred from efficiently increasing their wealth because of limited investment capital. High-quality investments have traditionally been reserved for the very rich, with those sporting modest incomes shunned by advisers in favour of high-net-worth clients.
With the rise of financial-technology solutions, though, that’s starting to change. A number of platforms have begun to emerge across the country, targeting everyone from millennials with a few dollars in their pocket to families looking to boost their income. One of the first on the Canadian scene was Vancouver-based WealthBar.
“We wanted to democratize the way that the wealthy save money,” Tea Nicola, CEO and cofounder of the company, tells the Georgia Straight.
Prior to the establishment of companies like WealthBar, the average Canadian looking to invest would typically go into a bank and buy an expensive mutual fund. In Nicola’s view, the fees are so high that they eat considerably into any returns, and good quality funds require people to put in thousands of dollars as a minimum—which many don’t have.
“I said, ‘Let’s go out with a simple offer online,’ ” she continues. “[We can] reduce the overhead, reduce the fees, simplify the process, and put people in the right investment. The goal was to make sure that regardless of whether you had $1,000 or $1 million, it [investing] should work the same way. And I knew that this industry worked that way. It just required a little bit of innovation and creativity and marketing to make people aware that they could do it.”
WealthBar has been able to flourish because of its savvy use of technology, courtesy of its cofounders’ backgrounds. Both Tea Nicola and Chris Nicola—a husband-and-wife team—have extensive experience in both the tech-startup and finance worlds, and boast backing from John Nicola, father of Chris and chairman and CEO of Nicola Wealth Management: a company that handles assets and private investment for some of Canada’s most affluent families. Combining that know-how, WealthBar was one of the first companies in the country to automate setting up accounts online without requiring a face-to-face meeting. It also boasts a unique algorithm used to determine an individual’s tolerance for risk when picking investments, and it rebalances portfolios automatically.
As a result, WealthBar is able to offer some of the lowest fees in the investing game.
“The technology increases the efficiency of the adviser to the point where I can reduce the fees,” Tea Nicola says. “An average adviser at the calibre that my advisers are can effectively manage between 150 and 300 families, and that’s it. So in order to get advisers to grow their business, they have to move upmarket and sometimes leave smaller accounts behind them. So by giving them efficiencies in the process, and by building technologies that helps them do certain manual processes, we’re able to scale the advisers to 10 times. So WealthBar advisers manage 3,000 sales, not 300.”
In her view, the biggest mistake that Canadians make in failing to grow their money is assuming that the bank is the best place to do so.
“If you’re a consumer and you need to buy something, imagine going to The Bay for everything. The Bay is a great store, but it doesn’t have everything, and it doesn’t have the best of everything. You want to do your research first. Going to the bank is like that. They’re great, but they’re all one brand, so there’s definitely product bias at the bank—RBC is not going to sell you a CIBC fund.
“We can’t be influenced by marketing or commissions or anything like that,” she continues. “We have to be accountable directly to the client.”
Kate Wilson is the Technology Editor at the Georgia Straight. Follow her on Twitter @KateWilsonSays