Toronto-based Wealthsimple announced this morning the acquisition of Canadian automated investment manager ShareOwner. Terms of the acquisition were not disclosed (which is subject to regulatory approvals), but Wealthsimple noted that ShareOwner will continue to operate under the leadership of CEO Bruce Seago.
The acquisition comes just 14 months into the tenure of the young FinTech company, an indication of its quick growth following a massive $30 million Series A round, but also a new trend of Canadian early-stage startups buying older, more established competitors. By gobbling up one of the 14 discount brokerages in Canada, the move also positions Wealthsimple next to RBC and BMO while setting it apart: the company says it is now the only end-to-end investment service in Canada, managing over $400 million for 10,000 clients.
“This is less about becoming a big fish. It’s more about capabilities.”
Wealthsimple CEO Michael Katchen was quick to explain, however, that his company was more focused on innovation than playing into any narrative of FinTech startups disrupting incumbent players.
“This is less about becoming a big fish (though $400 Million in 14 months is nothing to sneeze at),” Katchen said. “It’s more about capabilities. There are only a small handful of companies with end-to-end ownership over the client experience and mostly include the banks. To truly innovate in this space, we think this is a prerequisite. It positions us to drive massive change over the next 12 months in a way that we could not before we handled our own transactions, trading, etc.”
When asked why Wealthsimple chose ShareOwner in specific, Katchen spoke to a commonality of ideals and operations that led the company to pull the trigger.
“ShareOwner stands out as pretty unique among discount brokers,” he said. “Most brokers make money by encouraging clients to take out debt to trade, and to trade in options and derivatives. All of those things are bad for investors. ShareOwner does none of them. They are a very simple broker that advocates long-term, smart investing… which is a lot like us.”
I pressed Katchen on whether the acquisition would leave Wealthsimple hungry for more or if the company had plugged all service gaps. He remained noncommittal, saying that “this is a lot for a 14-month-old company to digest,” while suggesting he’ll be “open minded and opportunistic” in the future. Whatever the next step, it’s clear Wealthsimple will move fast to get what it wants.