Principal Financial acquires digital advice startup RobustWealth
The deal improves Principal's technology offering and opens a distribution channel to independent advisers.
Principal Financial Group is acquiring financial technology startup RobustWealth to improve its own technology offering and expand distribution capabilities among the banking, broker-dealer and registered investment adviser channels.
Principal also sees the RobustWealth’s platform — which includes digital advice, goal-based investment tools and client onboarding — as providing the foundation for a direct-to-consumer robo-adviser in the future.
The companies began a partnership in August 2017, but RobustWealth CEO Mike Kerins said this deal provides benefits they couldn’t realize otherwise, such as the ability to integrate with Principal’s record-keeping platform. This will allow RobustWealth to include annuities, retirement accounts and protection products alongside investments in its robo.
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Principal advisers will get access to a single technology suite that provides automated rebalancing, billing, document vaults, electronic account opening, and goals-and-risk based investment portfolios.
RobustWealth will remain open architecture, offering investment products from other providers to advisers outside Principal. Mr. Kerins said the company is still actively looking to add more custodians to the platform.
When asked why Principal is taking this approach instead of making RobustWealth proprietary, executive vice president and chief investment officer Tim Dunbar said the company realized an opportunity to invest in a relatively early-stage company and develop a unique product.
RobustWealth also provides Principal an inroad to the RIA, IBD and community banks market, which the company said manages a combined $8.9 trillion.
“We would hope to provide a lot of our investment solutions,” Mr. Dunbar said. “We really want to continue to help advisers grow, and that’s part of it.”
“More than anything we share a common vision for where we think digital advice should go,”he added.
Current clients won’t experience a change in the investment vehicles they are using or in their fee structure, Mr. Kerins said. RobustWealth will operate independently under a management committee within Principal.
The investment from Principal will provide resources necessary for RobustWealth to accelerate its product roadmap. Advisers using the technology can look forward to improvements in the platform’s financial planning tools, onboarding capabilities and customization.
Mr. Kerins said he wants to take direct security buying, such as direct indexing, “to the next level.”
Terms of the acquisition were not disclosed.
Neal Quon, co-founder of tech consulting firm QuonWarrene, called the acquisition “pretty remarkable” and compared it to Invesco’s acquisition of Jemstep. Advisers didn’t traditionally come to Principal for technology, and acquiring RobustWealth shows how seriously product providers are now thinking about the end client’s technology experience.
“Investors want to be able to have access to their financial information in a more useable, palatable format that doesn’t look like rocket science,” Mr. Quon said. “Now product companies are trying to have a more direct-to-consumer, or more consumer-friendly, product.”
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