Principal Financial Group Inc. PFG +2.32% will
buy RobustWealth, beefing up its digital capabilities at a time when retirement
savers are increasingly opting for robo advisers and index funds.
Des Moines, Iowa-based Principal, an insurance company with $673.8
billion in assets under management, is a big provider of 401(k) plans to
employees of small and midsize companies. RobustWealth is a financial
technology company based in Lambertville, N.J., that offers automated
rebalancing and an open menu of investment options, meaning investors and financial
advisers using the platform have access to products beyond proprietary funds
and annuities. RobustWealth has about $900 million in assets on its platform.
The companies didn’t disclose the terms of the deal in a news release
Wednesday. A spokeswoman said the deal is expected to close July 2.
Principal’s acquisition of RobustWealth is the latest example of
traditional firms trying to hang on to existing clients and tap new ones who
prefer low-fee digital wealth-management tools and funds that seek to match
index returns. Northwestern Mutual, another insurance company, bought LearnVest
a few years ago to boost its technology and recently relaunched the unit as a
digital resource for customers, for example.
Meanwhile, Wall Street banks such as Morgan Stanley and Wells Fargo& Co. have
recently launched automated offerings to attract younger investors and compete
with cheap robo advisers such as Betterment LLC and Schwab’s Intelligent
Portfolios offering. Betterment has about $14 billion in assets under
management, while Schwab’s robo adviser has about $30.6 billion.
The flow of clients and assets into robo advisory services will continue
at a fast clip, according to research firm Aite Group. Aite predicts the number
of robo advice clients will rise to 17 million by 2021, up from 1.8 million in
2016. U.S. digital assets under management, Aite estimates, will grow to $1
trillion by 2020 from about $223 billion in 2017.
“We are investing in technology at the rate and pace necessary to keep
up with customer preferences and buying behaviors,” said Tim Dunbar, chief investment
officer at Principal. He said that while the role of the human adviser remains
critical, “we must combine the best of people with the best of technology.”
Mike Kerins, RobustWealth’s chief executive, said his firm’s platform
will allow clients of the combined company to interact with RobustWealth
themselves as a robo adviser, picking their own investment options that
automatically rebalance. Clients can also work with a human adviser in
Principal Financial’s network who will have access to the RobustWealth platform
to more efficiently manage clients’ investments and scale their businesses.
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