Director to shut down RobustWealth advisor-oriented technology
Financial Advisors using RobustWealth are now looking for a new technology provider.
Principal Financial Group, which acquired the digital consulting start-up in 2018, informed its clients that it had made “a strategic business decision” to shut down RobustWealth’s consulting business on September 6.
“This means that from that date we will no longer trade or rebalance your clients’ accounts on a discretionary basis,” according to an email obtained by Financial planning. Clients will remain invested and advisors will have access to the platform to make transitions until that date.
The decision was made after Principal finalized the acquisition of the remaining shares of RobustWealth on June 4, according to the post. âWe work with your custodian (Apex or TD Ameritrade, as applicable) to help you identify potential options for you and your accounts receivable. “
A RobustWealth spokesperson confirmed the letter and that several employees of the fintech company are being made redundant. The manager did not respond to several requests for comment.
RobustWealth was founded by Mike Kerins in 2015. The company provides many of the functions of other white label robotic advisors, including automated investing and rebalancing, digital account opening and billing, and a safe deposit box. box of digital documents and a customer portal. The company also offers direct indexing capabilities to advisors and in February addition of goal-based financial planning tools to its customer portal.
The acquisition of Principal in 2018 was part of a tendency for large companies to acquire digital consulting startups improve distribution capacities in RIA, IBD and community banking channels.
Principal also saw in the acquisition the foundation of a robotics consulting product directly to the consumer, according to InvestmentNews. However, then chief investment officer Tim Dunbar insisted that RobustWealth would remain an open architecture and seek to increase the number of custodians it supported.
Instead, RobustWealth follows the fate of Learnvest, which was closed by Northwestern Mutual three years after the insurer acquired fintech for $ 250 million.
âAdvisors are routinely sidelined by new fintech companies that can’t run an ice cream truck, let alone a business,â says Manish Khatta, president and chief investment officer of Potomac Fund Management. âOur industry is littered with fintech companies that have abandoned advisers like Oranj. “
Besides Betterment and Wealthfront, robotics consulting startups have struggled to stay independent. Motif Investing closed in April 2020, before selling pieces of his company to Charles Schwab, Folio Financial and Goldman Sachs Asset Management a month later (Goldman later acquired Folio Financial). Axos Financial bought WiseBanyan in 2019 and transformed it into Axos Invest, and Hedgeable, one of the robo-consulting pioneers, closed in 2018.
âTheir only goal is to increase the user base and get out of the exit stage,â says Khatta. âI would avoid any technology that doesn’t come from advising experience or doesn’t have investment skills. “
This is a trend that is likely to continue for B2B digital advisors, says Gavin Spitzner, president of Wealth Consulting Partners.
“There is too much supply and not enough demand, and through no fault of their own or due to a lack of technological prowess on the part of the robots, there has been almost no expected adoption,” Spitzner said in an email.
According to the firm last filed ADV form, RobustWealth has managed $ 856 million on nearly 7,000 accounts receivable. In 2019, 90 advisors were using the technology to service 1,600 client accounts, according to a Financial planning report. the Latest T3 Advisor Software Survey found that RobustWealth had 0.19% market share in online portfolio management tools, up from 0.37% in the 2020 survey.
“Unless you are a large incumbent with a large customer base that can be moved to a centralized hybrid digital consulting solution, it’s hard to drive adoption without big marketing spend and B2B players sit idly by.” , Spitzner said.