In a move that has captured the attention of many in the industry, Toronto-based online-advisor Wealthsimple Inc. is seeking regulatory approval of a “no-call” or “robo-advisor” model when onboarding new clients.
As we have previously discussed, while the U.S. has seen a rise in robo-advisors, or web-based “no call” investment services that use electronic questionnaires to gather know-your-client (KYC) information online and then use algorithmic software to match clients to a model portfolio, Canadian online advisors are generally considered “hybrid” models. These hybrid models still use registered individuals who interact with clients to answer questions and confirm know-your-client (KYC) information as they would in a face-to-face model. Canadian regulators have been clear that online advisors who don’t initiate contact with clients and operate under the U.S. “no call” model may be subject to terms and conditions and/or have registration limited to a restricted category.
In particular, the CSA outlined regulatory expectations for how the online advice industry should grow in CSA Staff Notice 31-342: Guidance for Portfolio Managers Regarding Online Advice (CSA Notice 31- 342), and clarified that online brokers that want to be exempted from having personal contact with each prospective client must have a satisfactory system in place for identifying circumstances when personal contact would be required. It further established that such brokers may also be restricted to offering more basic investment products such as low-cost mutual funds and other redeemable investment funds, and unleveraged exchange-traded funds.