NEW YORK (Reuters) - Wealthsimple, a Toronto-based online wealth management startup, has raised $51 million (36.58 million pounds) in funding from Power Financial Corp, as it seeks to compete in the increasingly crowded digital investment advice market.

Wealthsimple, which is among the group of digital investment managers known as robo-advisers, will use the round of funding to add features to its service and expand to offer other financial products, it said.

The company last year became the first foreign robo-adviser startup to enter the U.S. market and later in 2017 opened in the UK.

It currently manages $1.45 billion for more than 65,000 clients in the three markets it operates in.

Wealthsimple and other robo-advisers are seeking to upend the traditional financial advice market by using automation to capture clients who were previously seen as too expensive to service.

They target a younger generation of investors who are more comfortable with digital services. Robo-advisers generally use computer algorithms to create and manage portfolios of low-cost exchange traded funds for clients with as little as hundreds of dollars to invest.

Wealthsimple charges a 0.5 percent fee for investments up to $100,000.

Robo advice startups have prompted established firms including Charles Schwab Co and Morgan Stanley to launch competing services. The moves from larger firms have raised questions as to whether independent robo-advisers can grow at a sufficient scale to become profitable and survive.

Wealthsimple's CEO Michael Katchen said the advantage of having received backing from a strategic investor who owns businesses in the asset management space is that "they understand the industry and the time horizon it is going to take to build the business."

The latest round of funding brings the total investment of Power Financial, a Canadian company that owns financial services businesses, in Wealthsimple to $131 million.

One of the challenges robo-advisers face in attracting clients is getting users comfortable enough to entrust them with their savings, despite not having any physical retail presence. This has led some robo-advisers to opt for a "hybrid" model, combining digital and human advice.

Katchen said providing access to human advisers helps some clients trust the service more. "Not everyone is ready to trust an algorithm completely," Katchen said.

(Reporting by Anna Irrera; Editing by Cynthia Osterman)

By Anna Irrera

Stocks treated in this article : Morgan Stanley, Power Financial Corp, Charles Schwab