Canada’s Answer to Robinhood Warns Traders But Won’t Halt Stocks

Wealthsimple Inc., a commission-free Canadian online brokerage with more than 350,000 clients, is warning traders about the risks of investing in certain highly speculative stocks, but isn’t planning to halt trading in those shares.

Wealthsimple, whose motto is “get rich slow,” doesn’t offer riskier investment choices such as options trading or margin accounts, and has sent clients emails reminding them about the dangers of speculation, Chief Executive Officer Mike Katchen said in an interview with BNN Bloomberg Television Friday. It also embedded in-app notifications for users looking at certain stocks.

The firm doesn’t plan to restrict trading on those shares the way Robinhood Markets Inc. and other brokerages have done in recent days, Katchen said.

“If people are taking calculated risks and want to join in on the fun, but are doing it in a responsible way with an amount of their portfolio that they can effectively lose if and when these stock prices do come down, that’s OK,” Katchen said. “But we want to make sure that people are being responsible, and we’re trying to be as proactive as we can about that messaging.”

The recent frenzy of retail trading has spurred a surge in interest even in the tamer platform of Wealthsimple, which touts passive investing in ETFs and is building out cash, checking, insurance and mortgage products. The company, owned by Power Corp. of Canada financial conglomerate, saw sign-ups increase more than 50% from a week earlier and daily volume more than double, Katchen said.

That surge in interest could be a good thing if handled properly, he said.

‘Fine Line’

“We have to walk that fine line of using this opportunity to bring more and more people into the capital markets and into the opportunity of investing,” he said. “But let’s also remember that investment carries risks, and it does require thoughtfulness and long-term thinking.”

Katchen would like to see investors use individual stock-picking and cryptocurrencies such as Bitcoin, which his firm does allow trading in, as part of a “play money” account on the margins of their larger, core, long-term investing strategy. He also doesn’t see options and margin accounts as inherently wrong, but said they can be dangerous when used by new investors who don’t understand them.

“The gamification of these highly risky tools is problematic and could result in some very bad outcomes for people, and we don’t want to be a part of that,” Katchen said.

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