Automated investing platform Betterment is buying Canada-based Wealthsimple’s U.S. book of business, according to an announcement. Wealthsimple, an automated investing platform valued at over $1 billion as recently as October, is exiting the U.S. market and expects to transition its accounts by June.
According to Wealthsimple's most recently filed June 2020 SEC Form ADV, Betterment will be acquiring at least $142 million in U.S. assets under management and over 14,000 clients. This will be added to Betterment's $28 billion in total assets across its multiple business lines, which includes its banking services offerings. The firm's SEC regulated assets, according to its latest Form ADV filed in January, stand at $18 billion in AUM spread across 660,000 accounts.
Betterment is buying only Wealthsimple’s book of business and will not be acquiring technology, employees or operations as a part of this deal, the terms of which were not disclosed.
The deal is the first major acquisition for Betterment’s new CEO, Sarah Levy, after she took over for Jon Stein in December.
"This was an excellent opportunity for us to grow our customer base,” she said in a statement. “We’ll continue to be aggressive in opportunities that accelerate our business goals."
IGM Financial Inc. and other companies controlled by Power Corp. of Canada owned roughly 62% of Wealthsimple, which has ambitions for an initial public offering, last fall. The Toronto-based company has about C$8.4 billion in assets under administration and 1.5 million users, mostly in Canada.
Customers have the option of opting out of the transition, according to the announcement.
Betterment Partners With Payroll/HR Provider Zenefits
In a separate announcement, Betterment for Business, the 401(k) provider arm of the investment firm, today made public its partnership with online payroll and HR provider Zenefits.
The many small and medium-sized businesses currently using Zenefits now have access to the Betterment platform and its employee financial wellness tools through a simple integration.
“It takes just two clicks to get signed up,” said Kristen Carlisle, general manager of Betterment for Business.
She said the Zenefits partnership and integration makes a total of 15 payroll/HR providers that have some level of integration with Betterment for Business, which also include ADP, Rippling, Paylocity and Workday, among others.
“Everyone needs payroll, and it can be an easier sell [to employers] if they can get bundled payroll, record keeping and retirement provider,” said Anastasia Krymkowski, a senior analyst and associate director of retirement research at Cerulli Associates.
While she could not go so far as to say that such partnerships represent a trend across the SMB 401(k) market, there has been little research to date looking at plan providers to this segment of the market, anything that helps streamline efficiency and cut costs is going to benefit growth.
“If Betterment for Business has the record keeper system and is plugging in to the payroll system the employer doesn’t need to work as a go between,” she said.
In August Betterment launched Advised 401(k)s, which is available to advisors using the Betterment for Advisors platform, allowing them to offer the product to their existing wealth management clients that are small-business owners.
Small and mid-size businesses have for years had difficulty gaining access to low-cost strong-performing retirement plans.
The need has driven the launch of several technology-driven retirement plan providers to the SMB market, including Betterment, Ubiquity and Guideline, among others.
Betterment's 401(k) business now has almost 700 plans with an undisclosed amount of AUM on the platform, according to Carlisle (the firm does not break out AUM for any of its lines of business).
Employee participants that use the Betterment 401(k) service and who also open a personal investment account are able to see a single view of all their assets held at the firm. The various offerings through the firm now include access human advice, managed accounts, goals-based investing portfolios, as well as no-fee checking.
