Wealthsimple is one of the biggest names in the booming industry of financial technology. However, according to CEO and founder Mike Katchen, Wealthsimple is really in a different, but highly related, business — the business of trust. As a company, Wealthsimple’s goal is to help its customers manage and invest their money so that it will grow over time, assisting them in navigating the daunting tasks that come with the territory.
“I think one of the differentiators about Wealthsimple is we have always approached these services as a wealth management company first, not a trading company,” Katchen says. “Even in the height of meme stocks, when other players around the world maybe were trying to make it easier for people to bet on AMC and GME, we decided to actually surface these warnings in the app, where it’s like, you go to buy GME, we’re going to tell you, ‘Hey, are you really sure you want to buy it? This is a highly volatile stock, it’s got a lot of risk, make sure you know what you’re doing before you place this trade.’”
Wealthsimple didn’t see this as investment advice. While other brokerages might be happy enough just to accommodate the action, Wealthsimple saw this as an opportunity to provide useful knowledge and education to its customers, so that it could nurture informed behavior and help them grow as investors.
“There’s nothing wrong with wanting to invest or participate in the things that you believe in.” – Mike Katchen
“Right? It’s just always, how does it fit into a thoughtful long-term view of how to invest and how to be an investor, and wanting to make sure we provide the guardrails that enable people to do what they want.”
To understand how Katchen and Wealthsimple arrived at this philosophy — one that is both contrary to most of the fintech sector and essential to understanding Wealthsimple’s differentiating place in it — one must go back to the beginning. Katchen first started investing at the tender age of 12, when his sister entered him into a stock-picking contest for charity… which he happened to win. The top prize was a ski vacation to Whistler in British Columbia, which meant that, before he was a teenager, Katchen was able to take his dad skiing for a week.
“I thought I was the coolest kid in the world, and I fell in love with investing,” Katchen says.
This experience became surprisingly relevant when, in his 20s, he moved from Toronto to San Francisco to join a startup that he and his collaborators ended up selling. With that sale came, for the first time in their lives, money that they could invest however they wanted. And knowing his surprisingly long history with investing — a skill that he had continued to hone in the years since his first success — everyone turned to Katchen to point them in the right direction.
“I believed at the time that it should be super easy to manage your own money – that you should never hire someone to do it for you.” – Mike Katchen
“I built a spreadsheet that showed how to build a portfolio and gave it to these friends. And their feedback was, ‘Mike, we love this approach. But we’re lazy. Please just do it for us.’ And that inspired Wealthsimple.”
Katchen started Wealthsimple in 2014, entering a Canadian marketplace in which most young people recognized the importance of being smart with their money, but had no idea how to use the few “complicated, expensive, and overwhelming” tools that were available to them. He and his team utilized startup principles, especially top-tier tech and design, and they put them to work in the Canadian financial-services industry, a sector in which Katchen believed no one else was thinking in the same way. Instead, five banks controlled the overwhelming majority of the market.
“When I came back and said, ‘I want to build an investment management company that’s going to be simple and accessible and radically change the way people invest,’ everyone said, ‘Hey, that’s cute. But the banks have a monopoly on trust, so good luck to you, but you’ll never get anywhere,’” Katchen says. “We did it anyway. And here we are as one of the most trusted financial institutions in Canada, almost a decade later, serving more than one in five Canadians under the age of 45 years old, which is pretty wild.”
Trust wasn’t built overnight. Wealthsimple’s thoughtful approach to building and innovating in Canada’s highly regulated environment has been a key contributor.
In 2019, Wealthsimple launched Canada’s first commission-free trading platform. A year later, tapping into its expertise as a registered securities dealer and innovator, the company launched the first regulated crypto platform in Canada.
Wealthsimple also became one of the first securities dealers to earn membership into Payments Canada, which provides an extra layer of assurance around fulfilling, clearing, and settling payments. Membership in Payments Canada was also a factor in their next milestone: becoming the first non-bank to be granted a direct settlement account with the Bank of Canada, which gave them access to Canada’s pending payment system, the Real-Time-Rail (RTR). As Katchen put it in a LinkedIn post, he believes the RTR will let Wealthsimple “compete on a level playing field and have control over how we innovate and build, rather than be beholden to our competitors for access.”
It accomplished all of these firsts without becoming a bank.
“With all the things that have happened in the crypto industry, our clients’ assets were safe because of how we’ve built our business. To clients we can represent, we wanted to do this the right way from day one, to regulators we can represent, we wanted to do this the right way from day one,” Katchen says. “And when you think about building long-term trust with a brand and with stakeholders, that’s a really, really important proof point of what the company stands for.”
This trust has been essential in differentiating Wealthsimple not only from other fintech companies, but also from the startup industry as a whole. This differentiation becomes even more important when it comes to investment management, as there’s a core philosophy driving many startups that is probably not the best way to think of handling peoples’ hard-earned wealth.
“With fintech in particular, I dislike it when people use the phrase ‘let’s move fast and break things,’” TCV Partner David Zhang says, referencing an oft-used term that is ingrained in Silicon Valley conventional wisdom.
“This is an industry in which we are stewards of customers’ trust and their savings and their money. Value creation in fintech is not about moving fast and breaking things. It’s about building a flywheel of trust, which is at the heart of what Wealthsimple is about.”
This trust is ultimately what drew the interest of TCV, which saw the opportunity to expand on the basis of the relationships Wealthsimple had formed with its customers. Unlike many other players in the fintech sector, Wealthsimple wasn’t focused on gamifying investing, or bringing market speculation to a wider cohort, as was the case during so much of the meme-stock and crypto activity. Instead, even in the bull market of 2020 and 2021 — which is when TCV first invested — Wealthsimple sought to prioritize the long-term relationship with the customer rather than the individual transaction.
“The root of how it all came to be for us was, we had an internal thesis, or at least an insight, that the consumer relationship writ large with wealth and finance around the world was changing,” Zhang says. “We scoured the globe to find folks who were building products and businesses that were driving that transformation. It was much larger than just investing and wealth. It was about the individual’s fundamental relationship with money.”
For Zhang, Wealthsimple had three core qualities that he believed made it stand out as a potential driver of this phenomenon. The first was that it provided a great product, underpinned by robust underlying technology. The second was that it had tremendous brand awareness — to the point that one in five Canadians under 45 years of age use it. And the third was that he believed Katchen possessed the types of visionary and leadership qualities that were core attributes of some of the best CEOs that TCV had backed across multiple industries over many years.
And for Katchen, the relationship with TCV was essential in helping Wealthsimple to navigate the last year, which has been a particularly difficult one for the fintech industry and banking as a whole. Even as some banks have failed and others have been under extreme pressure, TCV has remained supportive and worked with Katchen and Wealthsimple as the company focused on the long-term.
“David’s the one who calls me and says, ‘How do we take advantage of this opportunity in the market? Yes, it’s tough. Let’s be smart about what we need to do in the short term, but we’re building something that’s meant to be a heck of a lot bigger than what it is now. Let’s put our heads together. How can we help? What introductions can I make? What companies do you want to meet?’” Katchen says. “All of that has been enormously helpful, because you want a partner who is in it for the right reasons, and for the long term, I think TCV has shown its ability to show up for us in both good times and in challenging times.”
These recent events, like the collapse of Silicon Valley Bank, also demonstrated the enormous importance of the trust that Wealthsimple had spent the last decade working to build. If Wealthsimple had waited until a point of crisis to build that trust, it would’ve been too late. Instead, it was able to lean on its longtime ethos of “keep calm and carry on” to reassure customers and get them through the first bear market in the lifetime of the company, not to mention most of its clients.
“There have been lots of scares, drops, crises in the last 10 years, and whenever they happen, we send out a very consistent message to the clients, which is, here’s what’s happened, here’s how it fits within the broader market environment, and here’s why it is important that investors play the long game, as this is all a long-term journey,” Katchen says.
“We’ve not only done that when things are challenging, but we’ve also done it when things get frothy and exciting. Remembering meme stocks, we sent our ‘keep calm and carry on’ note then as well. I think if you build consistency with your communication, that’s how you really start to build credibility with your customers and build trust for when these things happen. You have something to go back to: just keep calm and carry on. You can tell them why you’re different.”
Wealthsimple even decided to expand this messaging into its own media arm, the weekly newsletter TLDR, which now boasts over 3 million digital subscribers and is the most-read financial newsletter in Canada — further cementing the company’s reputation as a port in the storm of finance and a voice that people can trust in an increasingly fractured news industry. And it further allows Wealthsimple to capitalize not only on its core business of trust, but on the waves of young investors who have flooded the market since the pandemic.
After all, the goal isn’t just to reel in these new clients — it’s to become the most important financial relationship that they have, both in the investment landscape and in the larger sphere of financial services. In a world in which the erosion of trust has become one of, if not the, single most important problem facing society today, what Wealthsimple aims to provide is at a premium.
“Once you have customer relationships that are deeply rooted in trust, that opens up doors to new opportunities. New products and ways to delight your customers. Trust is the Holy Grail.” – David Zhang
This opens up the door to any number of moves in the future, as long as they preserve and expand on this central relationship of trust. In Katchen’s mind, this trust provides Wealthsimple with the opportunity not only to influence how people spend their money — he envisions the company shaping the industry from the inside out.