It also ditched U.S. expansion efforts after selling its U.S. book of business to Betterment in 2021, and sold its Wealthsimple for Advisors to Purpose Advisor Solutions as it focused in on Canadian consumers.
The company’s valuation is also down from its peak. Power Corp., which across several divisions together held a 55.1% undiluted equity interest as of June 30, said the fair value of its holding was $1.5 billion. That’s down from $2.1 billion in 2021.
But the company has still managed a steep climb in assets from growth across the board, whether it’s wealth management, trading and brokerage or its banking business, said Katchen.
It comes as Wealthsimple increasingly positions itself as a full-suite alternative to the big banks, including boosting its banking services last year, that has helped lead to a $20 billion boost to the bank’s net deposits.
“We’ve been pretty excited about a more complete product offering,” said Katchen.
Product expansion to include mortgages, credit and insurance
Wealthsimple, which also offers tax services after buying Simpletax in 2019, launched a mortgage offering earlier this year and plans more credit products ahead along with an expansion into insurance, he said.
It’s all part of the company’s effort to rival the big banks, by having more than a trillion dollars in assets under administration.
While Katchen had originally said he’d want to reach that goal within the first 15 years, he’s now aiming for a slightly less ambitious timeline of within 20 years of co-founding Wealthsimple.
In my opinion, the best thing about the evolution of the investment industry is a (slight) increase in transparency. There is a long way to go, and consumers are still disadvantaged in a lot of ways, but we are making progress.
I am also of the opinion that not everyone should be a self-directed investor. Sure, it can be relatively easy, but having worked directly with thousands of clients during my career, I can also say that does not matter to some people who would never think of pressing the buy and sell button themselves.
Investment professionals are better off working with clients who do not want to micromanage them. Conversely, investors who want to take control of their own portfolios have lots of tools at their disposal. I like to see everyone investing in the way most suited to their situation. Below, I explore two important innovations that have appeared over the past decade that can lower the cost of managing an investment portfolio for retail investors.
How ETFs changed the game
The first Canadian mutual fund was introduced in 1932, but it was not until the past 40 years that they became mainstream. The past 10 years have started to show a shift in demand from investors to exchange-traded funds (ETFs), but mutual fund assets still dwarf that of ETFs. In fact, though the ETF market is growing faster, the mutual fund market in Canada is still about five times bigger (about $2 trillion compared to about $400 billion).
An investor can build an ETF portfolio using individual components like a Canadian stock ETF, a U.S. stock ETF, a global stock ETF, and a bond ETF. They can buy ETFs that track stock market sectors and complement these ETFs with individual stocks.
There are over 1,100 ETFs in Canada with 40 fund sponsors and easy access to thousands of U.S.-listed ETFs as well.
The selection is enough to make your head spin and almost necessitates the use of an advisor to wade through the options. More and more advisors are using ETFs throughout their client portfolios, but a new class of ETFs may be better suited to self-directed investors.
How to invest using all-in-one ETFs
Enter stage left the all-in-one exchange-traded fund, also known as asset-allocation or one-click ETF. The idea is simple: choose a single ETF that gives you access to all the asset classes an investor might need in a single product.
Dividends are after-tax profits a company distributes among its shareholders, typically every quarter, and can be paid in cash or a form of reinvestment.
Heath said a company that pays a high dividend reinvests less of its profit into growth, potentially losing out on opportunities to up its market value. In Canada, stocks with high dividends come from a narrow slice of the stock market—banks, telecoms and utilities.
“Ideally, an investor should consider a combination of stocks with high and low dividends to have a well-diversified portfolio,” he said.
Contribute to RRSP, save on taxes
“There’s a lot of taxpayers, investment advisers and accountants who really promote the concept of putting as much into your (registered retirement savings plan) as you absolutely can,” said Heath.
As a financial planner, he thinks the contrary. Heath says using RRSP contributions to get the biggest tax refund possible is not necessarily the best approach for people in low tax brackets and can hurt them in the long run when they withdraw those savings at a higher tax bracket in retirement.
“Sometimes, it’s OK to pay a little bit of tax, as long as you’re paying at a low tax rate,” he said.
It can be wise to use the low tax bracket by taking RRSP withdrawals early in retirement, even though it might feel good to withdraw only from your TFSA or non-registered savings and keep your taxable income low.
17. 2011: Google released Google Wallet in the U.S., three years before Apple Pay even popped up on our iPhones. Over the next decade, Google tested many versions of the app—and even launched a second one, named Google Pay (which was intended to replace Google Wallet). In February 2024, the company said it would end Google Pay in the U.S.—and replace it with Google Wallet. In its current iteration, Google Wallet serves as a comprehensive digital wallet that can store payment and loyalty cards, transit and event tickets, proof of COVID vaccination and even digital car keys.
18. 2014: Scotiabank renamed ING Direct Canada, which it acquired two years earlier, as Tangerine. ING Direct was Canada’s first branchless bank and one of the first institutions to offer a no-fee high-interest savings account (HISA). Today, under its new name, Canada’s first online-only bank continues to offer favourable rates and low fees.
19. 2014: ShareOwner Investments was the first robo-advisor to operate in Canada—by a matter of months. At the start, the portfolio management platform allowed Canadian investors to pick one of five model portfolios or to create their own from a list of around 50 ETFs. Over the next few years, robo-advisors gained popularity among investors, as more startups cropped up, Wealthsimple acquired ShareOwner Investments, and BMO became the first major Canadian bank with its own robo service, SmartFolio.
20. 2015: Following devastating floods in Alberta, home insurance providers Aviva Canada, The Co-operators, RSA Canada and 13 others offered overland flood insurance, which never existed before. Previously, insurers generally only offered sewer backup coverage, which protects against another type of water damage.
Image by Freepik
21. 2016: BMO was the first bank to offer biometric identification for corporate credit card users. With this technology, customers could complete online payments with a “selfie” or fingerprint check. On the mobile banking side, a new version of the Tangerine app incorporated biometric technologies like EyeVerify (for eyeprint ID technology) and VocalPassword (for voice authentication).
22. 2017: Toronto-based PayBright was the first company to offer a buy now, pay later option to Canadians. The service, offered at online check-outs, allows shoppers to pay for routine purchases—everything from clothing and makeup to flights—through installments. Many similar companies now operate in Canada, including Affirm (which acquired PayBright in 2021), Sezzle and Afterpay. Some large banks have also created installment payment products and credit card features, including CIBC (with Pace It) and Scotiabank (with SelectPay).
23. 2019: RBC made NOMI Budgets available through the RBC mobile banking app. NOMI Budgets, which the bank described as the first of its kind in Canada, uses artificial intelligence (AI) to proactively analyze a customer’s spending history, make budget recommendations and send timely updates.
24. 2022: OpenAI released ChatGPT, a generative AI chatbot. Within two months, it had an estimated 100 million monthly active users, making it the fastest-growing consumer application in history. The new tech has myriad potential applications in finance, including performance measurement and forecasting, data analytics, customer service, and real-time calculations and advice.
While saving for retirement is a top priority for half of employed Canadians, many of us (44%) did not actually set aside money for it in the past year, according to the Canadian Retirement Survey from the Healthcare of Ontario Pension Plan (HOOPP). And, nearly half of Canadians (47%) haven’t made or are not planning to make any contributions to their retirement investments, either, a TD retirement survey says.
Younger Canadians especially struggle with this dilemma. Despite nearly 70% of Canadians under 35 worrying about the cost of living, whether their income will keep up with inflation (67%) and housing affordability (65%), we still place a high value on saving for retirement. The HOOPP survey found that half of Canadians (51%) under 35 would give up a higher salary to get a better pension.
How much does the average young Canadian have saved for retirement?
If you’re wondering how your savings stack up, as of 2019, the average Canadian under 35 had $9,905 in RRSPs, locked-in retirement accounts (LIRAs) and other retirement savings plans combined, and $8,395 in tax-free savings accounts (TFSAs), according to Statistics Canada.
It’s important to know the difference between “saving” for retirement and “investing” for retirement. If you simply deposit money into an interest-paying registered account like a TFSA or an RRSP, it will typically earn about 3% to 4% interest. But you can also hold investments in these accounts, if you set them up that way. Investments can increase in value over time, whereas with a savings account, you can benefit from compound interest. A key caveat here is the risk/return trade-off: stocks have higher potential returns, but also higher risk compared to, say, a bond or a guaranteed investment certificate (GIC). So, it’s important to understand your risk tolerance before you start investing.
If you’re just getting started, or your savings are less than the average above, you can still make a plan and catch up. To help you, and myself, I spoke to a few money experts about the best ways to save for retirement in Canada during challenging economic times.
Ask yourself: How much am I able to save for retirement?
If you’re paying off student loan debt or working in your first job after graduation, you might wonder whether it’s worth it to start building your retirement savings while you’re still getting your financial footing.
Seun Adeyemi, Certified Financial Planner at True Wealth Advisors in Toronto, says that you should start saving for retirement as soon as possible—preferably, as soon as you have an income. “That makes the journey to retirement a lot easier, because your money has more time to grow,” he says. He does recommend, though, to prioritize paying off any debt besides mortgage debt first—especially if you have high-interest debt like credit cards.
“On credit cards, you’re paying 19% to 24% [interest] on your debt, and even if you have an amazing [investment] portfolio that’s generating 10% to 15% returns, you’re still underwater because you’re paying a higher interest on your credit card,” Adeyemi says. People can usually save for retirement while managing mortgage debt, he says, as long as they are on top of their payments and don’t get further into debt.
