The first quarter of 2015 has been a record-breaking flurry of merger and acquisition activity in the world of financial advisors, not just amongst advisory firms buying each other, but with acquisitions of the technology companies that serve advisors. In fact, 2015 continues to shape up as a breakout year for advisor FinTech.
The latest news is this week’s announcement that “robo-advisor” LearnVest is being acquired by traditional insurance company Northwestern Mutual for an undisclosed sum. Yet for all the buzz about the robo-advisor movement, the reality is that LearnVest’s business model was actually built around human advisors – it was not a true robo-advisor – and the Northwestern Mutual purchase may have actually been focused more on the software tools that LearnVest built for itself, in particular its integrated Personal Financial Management (PFM) and financial planning software, not the core LearnVest Planning business model.
In fact, with details emerging that LearnVest may have only had a few million dollars of revenue and been far from profitability (or even scaling to profitability) after 6 years of growth, its free PFM app for consumers and supporting integrated planning software for its advisors had a whopping 1.5 million users, giving Northwestern Mutual both a powerful technology tool to leverage across its existing advisor base, and a treasure trove of data on 1.5 million prospective clients to which it can cross-sell financial services products in the future. Which means in the end, LearnVest may simply finish as an example of a company that started out to disrupt the financial services with a unique business model, raised too much capital and created expectations that couldn't be fulfilled, and ended up being sold (out?) as a technology solution pivoted to serve the financial services establishment and its traditional manufacturing and distribution of financial products instead. And now the only questions are: how long will Northwestern keep LearnVest planners in place, and which advisor FinTech solution – PFM or otherwise – will be bought out next?