Northwestern Mutual is shutting down digital financial planning startup LearnVest just three years after the insurance company paid $250 million for it.
In a statement posted to the Northwestern Mutual website, the company announced that it is discontinuing LearnVest's financial planning offering for consumers and the LearnVest@Work program for businesses. Northwestern Mutual will relaunch LearnVest later this year as a digital resource portal focused on financial education for consumers. In an email sent to LearnVest clients, founder Alexa Von Tobel said the financial planning service will shut down June 5.
Until then, clients will be able to access their accounts and download any documents they have uploaded, including a copy of their financial plan. After June 5, all accounts will be automatically closed and outside accounts synced with LearnVest will be disconnected.
Clients can work with their human LearnVest financial planner until May 15. Subscribers will be refunded three months of monthly charges.
Northwestern Mutual said LearnVest's team accelerated the insurance company's own digital client experience, and the decision was made to accommodate consumer demand for an "end-to-end experience" working with an adviser to create and execute on a financial plan.
"The companies are further integrating under the Northwestern Mutual umbrella," the firm said in the statement. "This move will allow us to focus resources and leverage Northwestern Mutual's established nationwide network of financial advisors, using the cutting-edge planning platform and digital tools that we've created together."
The companies did not respond to a request for additional comment.
According to LearnVest's most recent Form ADV, filed March 28, the company has 8,099 clients.
LearnVest's home page was replaced with a link to the support team's email, and a statement telling users that the company is "a work in progress."
"We're working on taking our content to the next level, but we'll be back soon to help you keep making progress on your money," the message reads.
Over the weekend, LearnVest clients took to Twitter to share their shock and disappointment with Northwestern Mutual's decision.
"Well, who's got a financial planner or service they like? I've been using @LearnVest for 3 years and have no idea what other options there are," tweeted Natalie Be'er.
"Same. Sigh. I'm both confused and bummed," responded Katie Davis.
The move by Northwestern Mutual indicates that the direct-consumer financial planning model was a poor fit for the insurance company, said Bill Winterberg, founder and president of consulting firm FPPad.
"I would guess that ever since the acquisition in 2015, LearnVest's startup-oriented culture clashed with the legacy, incumbent culture generally inherent in a company founded before the American Civil War," he said.
The company did not say what will happen to LearnVest's team of financial planners. Mr. Winterberg said he expects they will be recruited by other hybrid digital advice companies like Personal Capital, Edelman Financial Services (which will soon combine with Financial Engines), Vanguard Personal Advisor Services or Betterment. A few of them could even group together and start their own financial planning firm, Mr. Winterberg said.
Despite language from Northwestern Mutual about the value of advice, fee-only planner George Papadopoulos said he knew from the time of the announcement how the acquisition would end. He said he was shocked that it lasted as long as it did.
"Northwestern Mutual is a product, sales-focused company first and foremost," Mr. Papadopoulos said. "I feel for all the Learnvest users who stuck with it."
Users like Ms. Be'er said she is genuinely sad to see LearnVest go, but wasn't suprised given how long it has been since the digital tools were updated.
Pinnacle AdvisoryGroup partner and director of research Michael Kitces predicted Northwestern Mutual's endgame with Learnvest in 2015. On his "Nerd's Eye View" blog, Mr. Kitces said the moment of truth will come "when we see whether Northwestern continues its commitment to LearnVest as a subsidiary planning firm, or instead chooses to wind down LearnVest as a planning firm and 'just' continue to use its PFM and planning software for the core business instead."
The problem may highlight the trouble of only charging a flat fee for financial planning and not offering to manage money for an AUM fee, according to Kate Magaram, a wealth management consultant who helped TIAA develop its direct-to-consumer strategy. While LearnVest correctly identified a need for planning and a willingness to pay for it, the investors they targeted were mostly content with free tools.
Mr. Magaram believes Northwestern Mutual could still find value from its purchase in LearnVest's ability to produce digital content and tools that resonate with younger, less-affluent clients. LearnVest is one of the few in wealth management with an authentic message that resonates with millennials, and this could be important for an incumbent institution, she said.
"Digital tools and content, you need to get this right but they're still just table stakes and aren't going to make money on their own," Ms. Magaram said. "It only make sense in a partnership with or owned by a financial institution as a loss leader, waiting until the target demographic acquires a higher level of assets and needs a grown-up adviser."