Wealthsimple and Allianz- Allies?
In the four months I’ve been paying attention to Wealthsimple, no one has done more than me to refocus the company on the bundling opportunity in Canada. The only person who might have done more is Mike Katchen. I think the banking product they launched this week is the best everyday bank account in the country and I expect to move there as the features are launched.
I think the main reason you need a “real” bank account now is to send a large international wire or something similar. Or if you don’t have a place to live and want to spend a few nights in the lobby of an ATM.
I can see how Wealthsimple can lock in an entire generation of users, who will never form a bank habit, not unlike an entire generation never formed a newspaper habit. Now, let me poke some more holes in the international story, so that they may focus even more on services for Canadians.
My prediction that they will leave the UK market still stands (I am less sure about the fate of the US market because two co-founders are based in New York). Just looking at the number of job openings would show that the US and UK are pretty stable.
I think they’re hiring more of a technical team in the UK rather than a client team. If they double down in the UK, it would only be because they don’t like me. There are several fintechs with millions of users in Europe.
There are now a few credible robo-advisors in the US who offer their services for free. Online lender SoFi, which has raised USD $2.3 billion in funding alone is one. Wealthsimple’s only chance is to use a strategy called “Fortress Canada,” which is all about bundling. Everything else just gets in the way.
Let’s figure out what it means that Allianz led a $100 million financing around the middle of last year. CEO Mike Katchens said it was “a big vote of confidence in our company and growth path.” Chairman Paul Desmarais III said: “Bringing Allianz into this investment is a landmark transaction in Canadian Fintech. Naturally, the media was impressed and repeated these lines. I was also impressed, but I’m going to be a Debbie Downer and say the following:
-It was clear that the real investor was Allianz X, the company’s corporate venture capital arm. If you know about the history of corporate venture capital arms, you know that they start and end in a random way. (Look at the different VC arms of Google or BCE Ventures.)
Wealthsimple tried to find a big international partner by casting a global net, and Katchen was said to be traveling the world for this purpose. No matter how you look at it, getting tens of millions of dollars is a big deal. But now, big robo-advisors with partners like Blackrock and Goldman Sachs are available in the UK. Even though Allianz is a big company, I don’t think its brand is as strong in the UK and US as those two.
-There’s a UK robo-advisor called Moneyfarm. Allianz Global Investors put money into Moneyfarm on its own. Allianz offers the Moneyfarm service to its own UK employees. Allianz also formed an exclusive partnership with Moneyfarm to launch in Germany.
Allianz Global Investors manages 500 billion euros. In contrast, Allianz X, the VC arm, deploys about 1 billion euros. Because of this, Allianz’s partnership with Moneyfarm in Europe is much stronger than its partnership with Wealthsimple.
So if I was in the UK (and if I was research-inclined), I would see that the real player that Allianz has endorsed is Moneyfarm, not Wealthsimple. Incidentally, Wealthsimple is fully licensed to operate anywhere in the EU.
It has a fancy Luxembourg structure and a German license through the Grenzüberschreitender Dienstleister regime. I’ll be honest: I don’t know what that means either. So, Allianz could have teamed up with Wealthsimple in Germany, but it chose to work with Moneyfarm instead. (Or Wealthsimple might have turned down the chance.)
To be clear, I think Wealthsimple has much better chances than Moneyfarm because it is strong in Canada. I’m just pointing out that its global goals don’t amount to much; they’re more like Kim Jong-un stirring up trouble around the world for his own people to watch.
Allianz was supposed to put someone on the board of Wealthsimple as part of the deal. In August, they did name Joseph Engelhart, who is the CIO of Allianz X, as a director. But it looks like they forgot to update the federal business registry:
Read more work here.
