21 January 2020

Insurer Principal Financial To Buy Fintech Firm

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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.

Click here for the original article from The Wall Street Journal.

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