WealthBar: Stress-free Online Investment

WealthBar is a financial robo-advisor and online portfolio-management service that brings together technology, financial advice, and expert portfolio management to make online investing simpler, easier, and cheaper than the alternatives. The company is devoted to providing financial advice and diversified portfolios designed to maximize performance without a premium price tag.

I had the pleasure of speaking to the co-founder and CTO of WealthBar, Chris Nicola. During our interview, he shared how his company has been able to grow exponentially by making diversified portfolio investment accessible to the general public.

Chris Nicola studied communication theory, coding, and data compression at Queen’s University and graduated with a degree in applied math. Chris started his career in IT and systems administration and moved on to building software for wealth managers and insurance organizations.

Working with a number of start-ups as a software developer led to founding WealthBar. Tea Nicola, his wife, took on the role of CEO. Launching in 2012, according to Chris, “was very early days for robo advisors anywhere. In the US, Wealthfront and Betterment had only just launched. And at the time, we hadn’t actually heard of them.”

Why is WealthBar different?

As the son of a financial services industry veteran, John Nicola, Chris had the chance to observe and work for multiple businesses in the industry. He realized that most financial institutions, including his father’s Nicola Wealth Management, were more inclined to cater to wealthy investors than to everyday Canadian investors WealthBar aimed to change that by providing ordinary investors with access to pension-style asset allocations. By combining ETFs and private asset classes, WealthBar wanted to offer diversified portfolios with low fees and low-risk exposure.

The company went against the common wisdom that robo advice is a “millennial thing:” “These days, our parents, and in some cases, grandparents, already use Facebook, online banking, and other online services. There is no reason they would not invest online.”

Before choosing WealthBar, the average client has invested money with a bank or online brokers, and has limited experience with financial advisors. Current investors come from all walks of life and range from their late 30s all the way to retirement, where they are looking to work less, earn more, and pay less commission.

Back when the term “robo advice” was introduced, the technology was criticized for lacking a human touch. With their life earnings on the line, customers wanted personal reassurance regarding their finances. During our discussion, Chris explained:

“These kinds of companies are focused on being very automated and at a distance, with very little human participation, whereas it was always our intention to have a lot of human involvement, both through online chat and over the phone.”

To date, the company has thousands of clients who, on average, hold considerably more assets than the average robo advisor. According to Chris, this is because WealthBar offers more high-touch advice and sophisticated investment products which appeals to people who are a little closer to retirement and have a larger nest egg to invest.

Portfolio allocation and investment decisions

WealthBar’s clients are evaluated with a Know Your Client (KYC) algorithmic approach to determine their investment knowledge, risk tolerance, and current financial situation. KYC forms protect clients and allow the investment advisor to provide an appropriate portfolio. As the customer’s needs evolve, the portfolio adapts accordingly.

Statistical analysis is performed on portfolio components to ensure they maintain their outlined investment objective when market conditions change. Algorithms are run automatically to invest new cash going into an account and trade to sell when the client requests a withdrawal to keep their investment balanced. Decisions made to keep the accounts balanced during inflows and outflows are managed and optimized with thresholds. Rebalancing is done automatically to ensure that all accounts are rebalanced fairly and equally.

WealthBar supports all account types that an individual can open in Canada. Besides managing traditional Canadian savings accounts and retirement savings plans, the company offers one-on-one financial goal-based planning to clients. Furthermore, WealthBar has tools built into their site to assist with complicated questions like “How much money should go into my RESP or RSP to be tax-efficient?” Clients can use these tools to obtain projections that demonstrate just how much of an impact their decisions might have on their portfolio over time.

Security

WealthBar is a registered portfolio manager. The securities commission has certified the company as meeting the highest standards of privacy and security. Measures such as advanced login, encryption, and security testing are used to ensure the safety of clients’ data and funds. Assets managed by WealthBar are held with custodian members of the Canadian Investor Protection Fund, which provides limited protection for customers’ accounts in case of the custodians’ insolvency for up to $1 million per account type category.

What do clients pay for?

The average fee for WealthBar investors is just below 50 basis points, which is standard for the Canadian market but higher than in the US. Besides differences in regulatory regimes and economies of scale, Chris mentions that the premium comes from a higher industry level of service in Canada.

Some people still tend to think that robo-advisors just rebalance accounts and underestimate the amount of work and effort that is happening out of sight. Compliance, regulatory, reporting, and tax issues are dealt with behind the scenes on an ongoing basis. Considering that industry fees in Canada used to be closer to 2%, the current situation is a massive improvement for clients who are paying a quarter of that price to get considerably better reporting and noticeably better transparency.

Superior user experience with personal support

For many of WealthBar’s clients, it is their first time investing. Helping customers by walking them through the process makes it easier for them to understand things like what kind of account to open, how much to put in it, and what type of portfolio to invest in. The company has integrated customer support and financial advisor teams to determine the most common issues with the platform and how the reporting, interfaces, and onboard experience can be improved.

Presenting complex financial data even with the best user experience is a challenge. The company are doing their best to make sure that clients can reach out to a human consultant at any time, in order to build the trust even further. Chris explains this as follows:

“No matter how hard we try, there will be a point when people are going to get stuck or anxious because it is their money. People are trusting us with thousands of dollars, and we have got to build that trust.”

WealthBar’s Development Process

WealthBar utilizes the Kanban approach for the product-development flow and work-tracking systems. Limited work in progress, a principle of Kanban, is applied to avoid creating a large backlog of work that does not get completed on time. The team focuses on top priorities, meaning that only when the first task is finished do they move onto the next. By building different queues for different areas of the product, the company does not just focus on one aspect of development improvement but improves other internal processes as well.

“The interesting thing about being a start-up is that your product-management approach evolves quickly as the team dynamic changes.”

Chris’s enthusiasm towards lean manufacturing led to these principles being applied in the company’s software development. Together with Tea, Chris tried to create a culture of continuous improvement for the product team in which they can constantly see, observe, and measure themselves so as to get better with each process cycle.

As the founder, Chris wants to make sure that development and deployment processes are fully integrated. He wants it to be as easy as possible for his software developers to deploy new code or new services for testing and staging, as well as to make it easy for his design team to see things that are about to be implemented, verify them, and provide feedback.

Evolution of platform architecture

Initial versions of the WealthBar platform were closer to monolithic architecture. The team started with a Rails project and used Angular 1 when it was relatively new. The tightly coupled nature of Rails made the team reconsider the monolithic approach. A lot of the company’s new architecture has been extracted into a service-based architecture with very small single-function classes and objects.

The development team has a useful mechanism for dependency injection and rolling up modules. The team tends to build independent features rather than developing things monolithically. Instead of following Rails development leads, center around a particular table in the database, and adding features around that, WealthBar experts develop around a specific feature or functionality that they want to deliver through the API. This becomes a new module, and is often entirely independent from other elements.

The team is exploring new options, with fully functional business services developed using a cross-platform JavaScript known as Node. Having evaluated and abandoned Angular 2, new front-end work has been done in Vue.js along with Angular 1 code. When I asked why they decided to go for Vue.js and not React, Chris’s reasoning was as follows:

“Vue.js was a bit easier to use and understand. One thing that leaned us a little bit more towards Vue.js rather than React is [that it has some] parallels between Vue.js and Angular 1 structurally.”

The company is moving towards a service-based architecture as the project becomes more complex, because the monolith has increasing overhead for each additional feature used to extend it.

Educating the team

WealthBar has a mandatory savings account set up for every employee that the company funds as part of the employees’ compensation. The account is a flexible group or a retirement-savings plan. In addition to compensation, the aim of the program is to put them in the shoes of the company’s clients by making them use the platform they work on. Through their own experience, it becomes easier to understand how saving money and investing money into a portfolio works. And what’s more, they get a real sense of what it is they do for their clients.

Software developers, when working on a feature, know who the stakeholder is. It is usually somebody from the finance team who has a deep understanding of the topic. They can go and ask this person questions or clarify things they do not understand. By explaining how the math and the code that calculates the rate of return work, developers gain an even deeper understanding.

There are a lot of opportunities to share and build domain knowledge at WealthBar. According to Chris, cross-pollination and a very high degree of communication within the company has tremendously benefited their growth.

Outlook and challenges

Chris is optimistic about the growing impact of technology on wealth management. He expects technological advances to complement good portfolio managers and financial advisers instead of replacing them. New developments will allow the B2B side of the WealthTech industry to grow, and improve the standards of financial professionals in the sector—be it in the form of better reporting or slicker communication.

Running a successful startup comes with many challenges. For Chris, at this stage as CTO, the greatest obstacle is prioritization:

“There are so many things we can work on to improve our software. The questions I ask myself are what to work on first, how to determine what is working, and what is the next big thing we can do for our clients or to improve our internal processes? It is all about understanding the problems that we can solve, and then prioritizing which ones to solve first.”

Another issue is scaling. Chris believes that this will be the hardest thing for any robo-advisor to deal with. Traditional financial advisors and wealth managers deal with a small number of large clients, whereas WealthBar gets hundreds of new smaller clients every month. Prioritizing which technology development to scale is an important part of future-proofing the company.

WealthTech Club takeaways

WealthBar’s cofounders, Chris and Tea, have managed to use their expertise to successfully challenge and subsequently improve the Canadian wealth-management industry. Thousands of clients trust the company with their life savings as a result of the personal service WealthBar provides.