#343
One Billion Dollars
Published:
Jul 04, 2020
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After all the big headlines in the brokerage space recently (Charles Schwab buying TD Ameritrade for $26b, Morgan Stanley buying E-Trade for $13b), robo-advisors may finally be having their moment. The $1b price tag that Empower Retirement agreed to pay for Personal Capital is noteworthy considering it is the first “unicorn” exit in the space, but it also begs the question of what exit opportunities will look like going forward for the remaining cohort of robo 1.0 advisors.
Since the first generation of robo advisors got going in 2009/10, the maturation of the technology stack available to entrepreneurs has led to the emergence of a second wave of digital wealth management platforms. With wider adoption of new data sets (Quovo / Plaid) and more developed machine learning capabilities, the Robo 2.0 cohort is differentiating itself from the pioneers and the incumbents, and as a result, have their eye on exit valuations in the tens of billions.
For the traditional incumbents, there is now a fear of being left behind, and the focus has shifted from building to buying. Vanguard and Fidelity have chosen to go at it alone, but the Personal Capital news could be a sign of more consolidation in the industry. For standalone platforms, keeping CAC in check remains the main challenge to building a sustainable business. So an acquisition can be appealing, especially with fees elsewhere approaching zero.
As the U.S. heads into the holiday weekend to celebrate their own Brexit 244 years ago, will future entrepreneurs look back to this week as the date in history when robo wealth management became a thing?
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One Billion Dollars
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Online wealth management firm Personal Capital sells to Empower Retirement in deal worth up to $1b - The deal is a likely win for Personal Capital. According to Forbes, the firm was worth $660m around the time of its Series F round of funds, which it raised in February of 2019. Read more
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