Principal shuts down RobustWealth for advisers

RobustWealth Inc. is winding down operations for advisers as its parent company Principal Financial Group Inc. has decided to discontinue its support of the adviser technology platform. 

The decision comes on the heels of Principal acquiring full ownership of RobustWealth after completing its acquisition of the startup’s remaining shares on June 4, according to an email sent to RobustWealth clients last Wednesday seen by InvestmentNews.

RobustWealth’s platform — which includes digital advice, goal-based investment tools and client onboarding — will officially stop servicing advisers Sept. 6, according to the email. 

“As part of the transition, we’re no longer selling or supporting the adviser technology platform and are working closely with our clients impacted as we manage the wind-down,” a Principal spokesperson said in an email. RobustWealth managed $856 million in assets for 6,920 client accounts, according to the fintech’s latest form ADV filed in March. 

Chris Chen, a Boston-based financial planner with Insight Financial Strategists, said he had 13 client accounts with RobustWealth and was an early adopter of the platform during the robo-adviser craze that struck the industry around 2014. RobustWealth was launched in 2015 before Principal acquired the digital advice startup in 2018. 

“I first got on to RobustWealth during the robo craze when the propaganda was that robos were going to obsolete all humans,” Chen said. “It made sense at the time to develop a robo offering to see what all the robo hoopla was about, to handle smaller accounts more efficiently, and see about using technology to reduce costs.” 

However, the doomsday prediction that fully digital advice platforms would cause the demise of human advisers hasn’t panned out. While technology is still a path to reduce costs, RobustWealth’s “clunky user interface” and slow account onboarding caused clients to become frustrated, which, in turn, was never cost effective, Chen said. 

“The onboarding was never as smooth as it was intended to be, resulting in frustrations with clients,” he said. “Many of the features of the product were difficult to find, and apparently not documented.” 

Chen, for one, is already moving his client accounts from RobustWealth onto Altruist, he said. Altruist’s user interface has a more “simplistic design,” comparable to Microsoft, which makes it attractive, Chen said. 

Moreover, RobustWealth custodies with Apex Clearing, which is also a custodian for Altruist, Chen said. “I expect the transitions to be smooth,” he said. 

RobustWealth shutting down is reminiscent of Oranj, a fintech company built around the model marketplace model, shutting down entirely before being picked up by SEI. A similar situation occurred with Motif Investing when Charles Schwab announced it would purchase the technology and intellectual property a month after its closing in April 2020. 

Investment management firms have been acquiring online platforms in a bid to offer more robo-adviser-like services to traditional advisers. For example, when Invesco acquired JemStep after Blackrock acquired FutureAdvisor. 

“The strategy was seen as especially appealing for asset managers to reach RIAs, who are not as receptive to traditional wholesalers, and for whom ‘technology’ was seen as the pathway to reach the RIA market,” said Michael Kitces via Twitter. 

“And when the robo-for-advisers tools don't get adoption, their use as a model marketplace to facilitate distribution of the asset manager's funds doesn't work,” Kitces said. “In essence, asset managers treated robo tools as ‘if you build it, they will come.’ But RIA's didn't.”

RobustWealth had 0.19% of the market share for online portfolio management tools, a decline from 0.37% in the 2020, according to the T3 2021 Advisor Software survey. 

Since RobostWealth didn’t have enough penetration in the space, nor many assets, it seems as though Principal is deciding to shut it down and concentrate on other growth objectives, said Colin Falls, president of GeoWealth, a turnkey asset management platform based in Chicago. 

“Sub-scale TAMPs or other fintech providers for that matter, that aren’t gaining market share quickly enough, are similarly vulnerable if they don’t have sufficient differentiation or meaningful traction in the independent wealth channel,” Falls said. “We’re witnessing acquirers pursuing smaller fintech providers without critical mass, so the new owners are less concerned with the underlying business model and more concerned with the technology."

For those hanging a “for sale” sign, this is the latest reminder that once a strategic acquirer comes in, they’re able to shape the business however they want, Falls said.