Ally Financial acquires robo-adviser TradeKing for $275 million

The online bank is expanding to include investment services through the brokerage company

Apr 5, 2016 @ 2:21 pm

By Alessandra Malito

Ally Financial, an online financial services firm for automotive financing, banking and insurance, has acquired TradeKing Group, a brokerage and direct-to-consumer robo-adviser, for approximately $275 million, the company announced on Tuesday.

TradeKing is a self-directed brokerage and offers TradeKing Advisors, an automated registered investment adviser for investors with about $12 million in assets under management, according to its latest ADV filing. The transaction is expected to close in the third quarter. TradeKing Group, which includes the RIA and the brokerage, has $4.5 billion in client assets, including approximately $1.1 billion of cash and cash investments and 260,000 funded accounts, according to the company.

"The trend toward digitally-based financial services continues to gain momentum with consumers in general, and we see even greater opportunities ahead as the millennial generation begins to require a broader selection of financial products, including wealth management," Jeffrey Brown, chief executive officer of Ally Financial, formerly known as GMAC, said in a statement.

The firm will use TradeKing to create a single customer platform for both banking and investment services. Ally Bank is also planning to offer credit-card and mortgage products.

Ally Financial, which has about $160 billion in assets as of December, drew out the possibility of expanding into the wealth management industry in its February 2016 8K filing. It first got its start in automotive finances, founded by General Motors, providing new and used vehicle financing, leasing, contracts, loans and insurance. Ally Bank, the firm's banking subsidiary, offers certificates of deposit, savings accounts, money market accounts and individual retirement accounts.

Banks are eyeing robo-advisers these days. In January, BBVA Compass partnered with FutureAdvisor. In December, US Bancorp said it was planning to offer its own robo in 2016, and last June, Capital One introduced a hybrid robo-model. Bank of America Merrill Lynch also has a robo in the works for this year.

Meanwhile, M&A activity in the robo-adviser market heated up significantly last year. The reason? Acquiring robos is a quick way for firms to assemble this technology for their clients, and it often comes with a more reasonable price tag than building such a platform from scratch.

TradeKing Advisors started two years ago, and began with a risk-based investing model. It now offers a goals-based approach for investors as well.

"This is great news for our clients and our teammates, as we will continue to bring innovation and outstanding value to the marketplace, only now with the power and breadth of services of the Ally brand in our corner," Don Montanaro, chief executive of TradeKing, said in a statement.


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