Betterment buys Canadian robo’s U.S. book of business

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Canadian robo advisor Wealthsimple is calling it quits in the U.S.

The company, which raised $87 million in October to accelerate growth toward an initial public offering, has sold its U.S. advisory business to rival robo Betterment. Wealthsimple manages roughly $190 million across 17,000 accounts in the U.S., says Betterment vice president of communications Joe Ziemer.

Betterment manages $18 billion across 660,000 accounts, according to its SEC filing.

Terms of the deal were not disclosed. Wealthsimple did not respond to requests for comment.

Betterment CEO Sarah Levy

It is the first time Betterment has acquired another firm’s book of business, and marks the first deal under new CEO Sarah Levy, who took over when founder Jon Stein stepped down in December.

“We first took a look while Jon was still at the helm and Sarah was advising the company, but this was something that Sarah signed off on in her first few weeks as CEO,” Ziemer says in an email.

Like Wealthsimple, Levy has plans for a Betterment IPO, according to previous statements, and the acquisition is an efficient growth driver, Ziemer adds.

“We are excited to bring these customers on board and help them secure a better financial future,” Levy said in a statement. “This was an excellent opportunity for us to grow our customer base, and we’ll continue to be aggressive in opportunities that accelerate our business goals.”

Wealthsimple accounts will be transitioned to Betterment by June. The company alerted its users Thursday morning.

Wealthsimple co-founder and CEO Michael Katchen considered several potential buyers for the business, according to Business Insider. The Toronto-based company still manages about $8 billion ($10 billion in Canadian dollars) for Canadian clients.

Despite significant growth in Canada — Katchen boasts that during the first half of 2020, 18% of new brokerage accounts in Canada were opened at Wealthsimple — the firm has struggled to gain a foothold in the more competitive U.S. robo advice market, says David Goldstone, manager of research and analytics at Backend Benchmarking.

Wealthsimple co-founder and CEO Michael Katchen

“This stark difference in adoption between the two markets helps explain why Wealthsimple sold its U.S. assets and is focusing on the Canadian market,” Goldstone says in an email.

Betterment will not acquire any of Wealthsimple’s technology, employees or operations. Wealthsimple will continue to operate its Brooklyn office and reassign the majority of U.S. staff to the Canadian business, Business Insider reports.

Wealthsimple’s latest round of funding valued the company at $1 billion, according to Bloomberg. The investment will help the firm build out cash, checking, insurance and mortgage products to turn Wealthsimple into customers’ primary financial institution, Katchen said at the time.

Just not for U.S. customers.

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