Personal Capital, the hybrid online wealth manager with $2.5 billion in assets, will offer its services to more than 200 community banks through a new partnership with Alliance Partners, the company announced on Tuesday.
Alliance Partners manages BancAlliance, a network of community banks across 40 states, which will now provide clients with access to Personal Capital's online tools, such as spending and goals trackers, and its investment management services. Banks who work with Personal Capital will co-brand these services on their websites.
"We never really worked with financial institutions because, for the most part, they have their own wealth management capabilities, but in the case of community banks, they do not," said Mark Goines, vice chairman of Personal Capital.
The partnership is a big win for the digital wealth platform, which pairs about 130 human advisers with its automated investment services, as well as the network. Personal finance tools will be free for bank clients, as they are for anyone who signs up on Personal Capital's website. For accounts derived from this partnership, Personal Capital will share its revenue with the bank and network.
Other financial institutions and larger banks are jumping into digital advice — for example, Ally Financial, an online bank,
acquired TradeKing Group in April and
BBVA partnered with FutureAdvisor in January. But small banks are in a strong position to work with a robo-adviser, partly because they don't run the risk of cannibalizing an existing wealth management unit. Boston-based Cambridge Savings Bank announced in April it was
working with SigFig to integrate investment services onto its platform for clients.
Personal Capital will use this alliance, the first one it has in the banking sector, to reach more households and gain more of the market share in the financial services industry. The company also partners with employers such as Sequoia Consulting Group, a human resources firm with 500 employers.
"We achieved reasonable scale, but in the genre we're tiny," Mr. Goines said.
There are 110 million households that have some form of assets that need management, Mr. Goines said. Partnerships with financial institutions and employers help the company go beyond its reach by direct marketing alone.
The hybrid digital wealth platform can become more competitive in the digital advice market with a partnership like this, but its $25,000 account minimum may hinder some potential customer sign ups, said Sean McDermott, an analyst at Corporate Insight. Partnering with BancAlliance gets them to the audience who needs help with financial advice, but who may not have enough liquid assets to transfer to an investment portfolio.
"The average American outside their 401(k) may not have $25,000 to start off investing," Mr. McDermott said. "That account minimum is high when you consider types of customers they will get in front of."
Aside from co-branding tools, BancAlliance member banks and Personal Capital will work together to consolidate various banking accounts so clients can see their overall financial picture at the bank. The two will also identify other financial needs of the client, such as a mortgage, to expand banks' relationships with current customers.
