Our Journey to Becoming a Wealth Automation Leader

February 26, 2021

Mako Fintech: How a Niche Transfer Agency Became a Leader in Canadian Wealth Automation

Taking manual out of wealth management, Mako Fintech was built on untapped technology and pent-up market demand. What began as a compliant, online transfer agency platform has today morphed into automation architecture that can be configured for almost anyone working in wealth management.

Raphael Bouskila, the founder and president of Mako Fintech, “has always been a tech guy.” He didn’t start his career in finance though. He initially studied physics and electrical engineering at the University of Toronto, and then took up a Ph.D. at McGill University in laser engineering, wanting to make a difference in the world. Now onto his second successful startup, he’s doing just that.

After leaving academia, Raphael began working at a VC firm as a technology specialist, doing technical due diligence on various “green” startups. This was his first exposure to entrepreneurship and business management. From his position in the company, he gained invaluable experience seeing many different business plans, understanding which ones seeded, which ones didn’t, and why. A new idea started to form.

Building Technology for Impact Investments

At that time, there was an obvious gap in deployment financing in the existing cleantech space. A colleague of Raphael at the VC firm had identified the same opportunity he did, and they both felt it was just too compelling not to do it. They left and started CoPower, a social impact investment firm. CoPower is where the technology for Mako Fintech was born.

Inspired by the crowdfunding movement, the CoPower vision was to bring green investments to everyone. In reality that meant building green investment products and selling these online. Because CoPower was a registered dealer and manufacturer of securities, it had a large regulatory burden to comply with. With Raphael’s technology background, he saw how much of these processes could be automated. Everything from filings, and forms, to taking clients through the onboarding process. Automating investment processes online, in a cloud-first way, hadn’t been done yet at that time, and there were no systems like Mako’s present-day solution on the market that they could license. This was all taking place in the mid-2010s, and at the same time, new standards were emerging amongst global finance regulators. E-signatures had just become acceptable, and in Canada, FINTRAC had very recently published regulations on completing identity verification remotely. These new guidelines had the potential to release asset and wealth managers from their unhealthy dependence on paper and created a right-place-right-time opportunity for CoPower to build this technology.

CoPower was the first in Canada to market retail-targeted securities, using one of the new crowdfunding exemptions directly online, in a compliant way. Outside of the investment space, the technology CoPower was developing to support all of their processes wasn’t unheard of, but to be applied in that context was quite new. Just over five years later, CoPower was acquired by a major financial institution.

Repurposing and Rebuilding to Meet Market Demands

Even though Raph thought he’d left CoPower behind him, it just kept coming up. Investors who worked with CoPower back when Raph was running the company, often wanted to white label and license the technology platform. At the time, the answer was no because it was designed particularly for CoPower’s impact investing. But the more other wealth and investment managers brought up CoPower’s technology after the fact, the more it made sense to rebuild and repurpose it under a new name. Mako Fintech was born, and it had clients committed to the product before it was even incorporated.

Initially, the company was a registered transfer agent. From Raphael’s days at CoPower, he’d been involved with unitholder record keeping, and at first, this is what Mako was positioned to do. Raphael felt he could do a better job at servicing this market; however, it was pretty clear that more integrations into the recordkeeping system were needed. Investment managers wanted a system where the client (the investor) could complete an onboarding (KYC) form, then subscribe for an investment and have everything work automatically, including issuing the investment and updating the books of record. What was needed was an integrated system where everything could work together.

With only 3 employees at the time in a small office close to Raphael’s home, Mako set out to build this KYC feature. What they created turned out to be much more than that. The platform they’d built and its form manipulation features were so agile that the team was able to address a much larger market opportunity — wealth automation. Suddenly Mako was in a unique position, being able to automate and digitize all types of wealth management workflows and forms compliantly, and to offer this at a fraction of the cost of enterprise players who were developing similar solutions for financial institutions. Made possible by modular architecture and innovation, this position in the market was groundbreaking. New customers understood the value immediately.

Operating Under Rapid Changes and Getting Rapid Results

What began as a compliant, online transfer agency platform had morphed into automation architecture that could be configured for almost anyone working in wealth management. From there, things moved fast. When it comes to starting a company from the ground up, “the second time around is much easier,” says Raphael. “I knew exactly what I was doing, so I just did it.” Since the first day of operation in 2019, it’s been non-stop. After pivoting the product in year one, the company moved to Montreal’s first fintech hub, officially called FinTech Station. It took on a comprehensive System and Organization Controls (SOC) audit in 2020 with Deloitte. Then the pandemic hit, making Mako a remote-first company as hiring and growth exploded.

Currently, the company is focused on execution, continuously improving Mako’s product, and maintaining strong relationships with its clients and partners across Canada. What customers love most is that Mako’s team designs automation solutions around their current wealth management processes, and not the other way around. Raphael hopes that in five years Mako is at least a small part of the tremendous opportunity to bring finance out of the paper-driven dark ages. He wants to create a significant dent in making wealth management a modern, cloud-based experience, and not just here in Canada.

While automation solutions often feel like magic, Raphael says the team has been successful by focusing on client experience and product excellence. “Above all, we’re committed to delivering the best experience possible to everyone that works with us. We’re not in it for the short term, we’re not in it to make a buck, we’re really in it to bring joy to our client’s lives and allow them to have the best experience possible at their job.”

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Feature Image: Unplash/ Paul Calescu

Technology and Efficiency in Wealth Management

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So in my view an appropriately diversified portfolio should have enough exposure to different asset classes, that its able to withstand a wide range of market disruptions. Usually, it’s some kind of negative or positive event… they’ll affect different asset classes differently. So by having your eggs in different baskets you’ll be well insulated from major risk. For example, there’s some kind of change in the housing market… both by having some exposure to it, you won’t miss out on the opportunity to make money. But if it’s something negative, you’re also not going to lose all your money if all of it were in the housing market for example. So at a high level, a properly diversified portfolio should grow in a growing market and yet not be at risk of major losses in a declining market.
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You asked also about an efficiently diversified portfolio, and I would say that that’s a portfolio that achieves those goals with a minimum of different positions. There’s a lot of good reasons to have fewer positions in your portfolio. Being less complex means a portfolio is easier to rebalance and administer. Every time part of your portfolio goes up or down, you're going to need to rebalance it a little to make sure that it stays with the right allocations and the fewer positions you have, the easier it is to do that..the less trading fees you incur doing that.
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There is a tradeoff between being completely diversified and being efficiently diversified. If you were completely diversified then you’d have a proportional segment of absolutely everything you could invest in under the sun, like shares of palm oil futures or something like that. I don’t think everyone should have palm oil futures in their portfolio but I’m not a wealth manager. I think it comes down to your portfolio and how large it is (probably the Canada Pension Plan has a proportion of palm oil futures in it). You’re going to have to talk to your advisor and choose a degree of complexity that’s right for your portfolio.
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CN: Let’s just take a step back - what does a typical portfolio look like and has that changed over time?
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RB: Yeah, so I'm not entirely sure what a typical portfolio looks like these days because it's actually changed quite a lot over time. I think common wisdom used to be that the classic balanced portfolio was 60% public stocks and 40% bonds. These days that's ancient history. Most would say that the bond allocation should be a lot lower these days in this age of unprecedented low-interest rates. These days it’s the stock portfolio that’s been driving a lot of the growth. I think a well-diversified portfolio in the modern era should absolutely include exposure to all kinds of alternative assets (that aren't even really that alternative but still kind of fall out of that traditional bucket). So you know I mentioned real estate, private companies, maybe for example commodities or other types of investments. So I think that there are a lot of things that you can invest in and your advisor can guide you on what’s appropriate for you.
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CN: Yeah that makes a lot of sense. Talking about alternative investments, we’ve heard a lot this year about ESGs, impact investing, alternative investments… do you think there’s more of an appetite today for these types of investments than in the last ten years?
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RB: Yeah that’s a topic that’s close to my heart having previously started an impact investment company. It’s definitely been a gigantic increase in interest. I think when I started my previous company we were speaking to large wealth managers and having them say “we’re barely getting a grip on early ideas.” Like not including gun manufacturers or tobacco companies, and now these same companies are launching impact portfolios and marketing this aggressively. So there’s definitely been a seat change, it’s a real industry, and there’s a lot of studies out there and data showing that ESG or impact investing can equal or outperform non-impact investments. So I think it’s a huge part of the market these days. That said, one of the things that’s driving it is people’s interest in it. I think that one of the stories of the investment industry has been the personalization of it. People’s portfolios are being tailored to their own needs and circumstances. Impact investing is definitely a piece of that. People are environmentalists, but an institution is not an environmentalist. It doesn’t live and breathe the impact on the environment the way an individual does. The person who is active in the David Suzuki Foundation for example is going to be active as an impact investor and it’s appropriate for them to be.

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That’s a great question. I think there's a lot of advantages and you gain a lot with an automated platform. For me, it's a lot easier to manage. I have some of my money in one of these platforms and I barely think about it. It's being rebalanced all the time. The costs are much lower in terms of expense ratio for the same kind of rebalancing. Again you're missing a lot with that, but on just the mechanical portfolio rebalancing you're getting a great deal there. I would say that two other advantages are up-to-the-minute reporting, so you always have that login where you can see your position, see how your portfolio is doing historically. And finally, this is an advantage for me and anyone who doesn't love doing taxes, but typically they’ll take care of your tax forms for you, and end up with much simpler tax forms, so it kind of works out what your cost basis was and how much you have to report.
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CN: So let's talk about the other side of the coin then...what are the risks of not having a seasoned professional managing your money?
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RB: I wouldn’t exactly phrase the question that way. You know it's more what’s the benefits of having a real wealth manager? Some of the clients of robo advisory firms may not even be aware that they're missing out. A wealth manager isn't just balancing your stocks and bonds, that's kind of the very lowest mechanical level of what you get out of the wealth manager. Really they're your advisor on your life. Intimately intertwined with you because you're thinking about retirement planning, on planning for college for your kids, when is the right time to buy a house, and when should you get life insurance, for example. An advisor can help you with all of those decisions and they can connect you with service providers like a mortgage broker when you may be in need of one. So I think that you get a lot of value out of having one of these advisers, particularly when you get to a stage in life when these kinds of services are more about the long-term and your life circumstances are far more critical.
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CN: There are clearly pros and cons and two sides of the story depending on who you're asking. Like you said, what stage of their life they’re in ...but do you think the platforms that we’re seeing emerging like to Qtrade, Wealthsimple, and all the rest will ever become status quo?
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RB: Yeah, I do actually. I think that similarly to how you know we’re using online platforms to automate everything for us (I can’t think of the last time I used to travel for example), everything you’re going to be trying to do with your money is going to be automated, and it’s going to be appropriate to be handled by one of these one of these platforms. In particular, for most people at an early stage in their lives that have few assets to manage, not a lot of complexity, not a very extended personal family circumstance, it’s gonna make a lot of sense to have a low fee robo worry about it. But at some point their life circumstances are going to get more complex and you’re gonna get married, or maybe you’re not, or you may have other objectives that you may want some advice on and at that point it may make sense to either supplement the robo advisory portion of your portfolio, or graduate to a more holistic wealth management view.
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CN: Thank you so much Raph, these answers were great. It’s always insightful chatting with you so thanks for sharing those answers with us today.
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RB: It’s my pleasure.

Author: Chandal Nolasco da Silva

Chandal is Mako's VP of Marketing & Communications. She is a dedicated leader who has spent a decade creating recognized B2B SaaS content marketing and SEO campaigns.

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