Will the LearnVest-Northwestern Mutual deal lead to a culture clash?

Will the LearnVest-Northwestern Mutual deal lead to a culture clash?
Learnvest-Northwestern deal bodes well for fin tech firms, robos, but it's uncertain whether the financial planning service can maintain its indie culture.
MAR 25, 2015
Northwestern Mutual's decision to snap up LearnVest is a win for the insurer's tech capabilities, but whether the cultures of two very different financial institutions will successfully mesh is anyone's guess. The 160-year-old insurance company announced Wednesday its acquisition of LearnVest, an online advice platform that gives clients access to one-on-one financial counseling through financial planners. Northwestern Mutual stands to gain 1.5 million users of LearnVest's services and 25,000 clients through LearnVest at Work, a workplace financial wellness program that LearnVest brought directly to employers. In addition, LearnVest is bringing 10,000 premium clients and 150 employees in New York and Arizona. The deal raised plenty of eyebrows in the financial planning community, as observers blanched at the idea of product-free LearnVest moving under the wing of an insurance company. But Tim Schaefer, executive vice president of operations and technology at Northwestern Mutual, said LearnVest is expected to continue providing its unbiased planning services. “From their standpoint, being unbiased in their work is important to their business model,” he said. “[The deal] is not to make them Northwestern Mutual advisers or agents, but to allow them to operate their model.” What this deal does demonstrate, however, is the lengths to which large financial services firms will go to acquire new technologies from startups that will allow them to improve client experiences. Some experts predict more of these deals in the future. VALUE TO TRADITIONAL FIRMS The Northwestern Mutual-LearnVest matchup, as well as the Fidelity and eMoney pairing a month ago show that traditional firms value the technological advances startups bring. Why build your own client-facing technology if you can buy it? “These firms have built something unique, and larger players aren't able to put it together on their own in a reasonable time frame,” said Sophie Schmitt, a senior analyst with Aite Group. “Traditional firms are really behind on client-facing digital technology; they're in a race to upgrade that.” “It's easy to start a tech-based wealth management firm these days, so rather than waiting and developing your own, acquire something that's already been built,” she added. But could one financial services firm acquire another and do so without fostering competition between two different sales forces? That's a matter that can come down to the offerings and cultures of both the buyer and seller. Ms. Schmitt believes that other buyers of robo-advisers could include retirement plan service providers, but others say insurance companies would be logical purchasers, too. INSURANCE COMPANIES AS SUITORS “LearnVest's personal financial planning tool is different because it focuses on cash flow and budgeting,” said Michael Kitces, director of planning research at Pinnacle Advisory. “That fits well in the context of insurance companies,” he added. “They have a history of doing cash-flow centric financial planning and serve a lot of the middle market, where you can't recommend a product until you figure where the client can allocate $100 to $200 to something.”

Source: CrunchBase

The acquisition is really a win for human-hybrid tech firms that combine client-facing technology with human financial planners or advisers, Mr. Kitces noted. Matthew Eschmann, an analyst at Corporate Insight, said that because LearnVest isn't offering investment advice, the reps working at Northwestern Mutual likely won't feel threatened by them — thus they can coexist peacefully. “Insurance providers have an easier time with this purchase,” he said, noting that LearnVest isn't a traditional robo-adviser to begin with. “LearnVest isn't offering specific investment advice, so the advisers won't compete with the service they're acquiring and they can be parallel and use the technology.” Such a deal might not go peacefully if the acquirer were a brokerage firm, however. For one thing, it'll raise concerns about competition among advisers at both entities, Mr. Eschmann said. And there's always the possibility that the robo-adviser is targeting clients who just don't have assets necessary to make the relationship with a brokerage or wealth management firm work. Consider LPL Financial's decision to launch and then eventually shutter NestWise, which targeted clients with less than $100,000 in assets. BUSINESS MODEL CHANGES? Northwestern Mutual said the company will retain its own identity and continue to operate as usual with unbiased financial planning. The insurer's spokeswoman Jean Towell also confirmed that LearnVest is investing in its LearnVest at Work program and will continue to grow that channel. But will planners at LearnVest stay put and work within their own culture in the future? That's still up in the air. “'Will this approach work?' is the million-dollar question,” said Grant Easterbrook, a financial tech analyst who is founding his own startup. “There's a difference in the culture and business model, and there are a lot of questions. But if they're keeping [LearnVest] separate, it's a good way to start.”

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.