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Legg Mason Buys Big Stake in Robo-Advisor

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The M&A activity in the financial technology world continued on Thursday with asset manager Legg Mason (LM) announcing plans to buy an 82% interest in robo-advisor Financial Guard for an undisclosed amount.

The news came about a month after Morningstar said it bought InvestSoft Technology, which offers fixed income analytics. Also recently, UBS, Eaton Vance, New York Life and several other firms invested $40 million in SigFig, a wealth management tech firm that offers robo-advisory services and builds digital tools for mobile and other devices.

“We believe this investment in innovative technology and people is a valuable addition to Legg Mason’s distribution efforts over the long term, said Terence Johnson, global head of distribution for Legg Mason, in a statement.

“As an online technology platform that evaluates both active and passive funds, Financial Guard creates a complete digital solution for advisors and their clients. Together, we are well-positioned to help partner firms and their advisors by providing a simple and scalable platform coupled with compelling investment offerings,” Johnson explained.

Financial Guard is set to become part of Legg Mason’s alternative distribution strategies business.

According to the two firms, Financial Guard’s technology gives advisors the ability to “create a comprehensive picture of clients’ financial positions and recommend potential solutions to meet their clients’ investment objectives,” according to a press release, including portfolio analysis and recommendations for both passive and active funds.

“By making the technology available to advisors and their clients, Financial Guard and Legg Mason intend to help financial institutions grow their advisory business and be well-positioned to conform to the new Department of Labor fiduciary standard, set to be implemented in April 2017,” Legg Mason stated in the release.

A recent survey sponsored by Legg Mason finds that the DOL rules likely affect close to $850 billion in small IRA accounts of less than $25,000 administered or managed by wirehouses, independent broker-dealers and regional brokerage firms in the United States. “Legg Mason will offer the Financial Guard platform to firms who are looking for technology solutions to assist them in meeting expanded compliance requirements in a holistic, cost-efficient way,” according to the asset manager.

Baltimore-based Legg Mason, which owns Brandywine Global, has some $720 billion in assets under management and focuses on active management. It plans to use Financial Guard technology to help it distribute investment products from its nine independent investment managers, including multi-asset class solutions from QS Investors.

In the first quarter of 2016, venture funding in the U.S. fintech sector increased 70% from the prior period to $1.7 billion, according to a report by KPMG International and CB Insights.

“Q1’16 was a strong quarter for venture capital investment in the fintech sector, characterized by 13, $50+ million rounds to VC-backed companies globally, including Betterment and StoneEagle,” said Brian Hughes, co-Leader, KPMG Enterprise Innovative Startups Network, in a statement in May.

Corporate participation in deals to North American VC-backed fintech companies rose for the second straight quarter, hitting a five-quarter high of 26%.

“It seems clear that financial institutions may see fintech as an additional sales channel. In payments, they know they can’t match the speed and frictionless experience of the platforms, so financial institutions are looking to acquire or at least rethink their own internal processes, explained Fiona Grandi, Fintech leader for KPMG, in a press release.

— Check out Waddell & Reed Adds eMoney to Advisor Tech Platform on ThinkAdvisor.


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