Thawing Market: The Growth of Robo Advice in Canada

by William Trout, May 19, 2016
Industry Trends
North America

Abstract

Automated investment advice in Canada has come a long way since WealthSimple, Nest Wealth, and others launched in 2014, a point in time that might be defined as Zero Hour for the Canadian robo advisory business. The accelerating pace of change reflects the natural evolution of the robo learning curve as well as the unique economic, regulatory, and demographic characteristics of the Canadian market.

In the report Thawing Market: The Growth of Robo Advice in Canada, Celent explores the degree to which robo advice is disrupting the bank-dominated wealth management business in Canada. 

Once skeptical, banks and other wealth management incumbents are waking up to the threat posed by online advisors offering low costs and fee transparency to investors. The entrance of BMO to the robo space is an initial response to this incursion, one that puts pressure on these startups to broaden their offers beyond the commoditized portfolio management function.

Other incumbents will follow the example of BMO and enter the business as well, as demographic and regulatory tailwinds have made robo advice an attractive proposition for banks, asset managers, and insurers alike. These incumbents have an opportunity to capture the market for automated advice, if they can overcome internal obstacles and reconcile the delivery of this advice with existing service channels.

The go slow approach taken by most banks and other large incumbents to date is rooted in their fat profit margins and dominant market positions. This dominance is by no means guaranteed.

“Canadian investors are tired of overpaying for investment advice, and robo advice speaks to the digital zeitgeist. The question is not whether a wealth management market frozen in time will thaw, but how quickly,” says William Trout, senior analyst and author of the report.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

 

Robo 1.0 Redux

2

 

Observations to Date

4

Market Overview

5

 

The Retirement Challenge

5

Ecosystem and Actors

6

 

First Movers

6

Role of the Incumbents

8

 

Enter BMO

8

 

The Case of ATB Financial

9

 

Measuring Success in the Bank Space

10

The Outlook

11

 

Banks

11

 

Insurers

12

 

Asset Managers

12

 

Final Thoughts

12

Leveraging Celent’s Expertise

13

 

Support for Financial Institutions

13

 

Support for Vendors

13

Related Celent Research

14

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