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Empower to Buy Personal Capital in $1B Deal

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A retirement plan provider has bought a robo-advisor. (Image: Thinkstock)

Empower Retirement says it is acquiring Personal Capital in a transaction that values the robo-advisor at $1 billion. The buyer will pay $825 million at closing and up to $175 million for planned growth.

The deal aims to unite Empower Retirement’s back office with the client-facing platform of Personal Capital. It is expected to close later this year.

Blogger Michael Kitces tweeted early Monday, “Woa, huge FinTech news. $1B is a stunning ‘premium’ for Personal Capital relative to its (strong but not THAT strong) $12B AUM base as an RIA. Real story is that Empower is trying with PC to do what Financial Engines is doing with Edelman — human advisors in 401k channel.”

Kyle Van Pelt, a fintech watcher, agreed and explained on Twitter: “Killer acquisition for a relatively cheap price. With 652bn in AUA and 9.7 million participants, rolling this out to their entire base will pay for PC in no time.”

Personal Capital has some 2.5 million clients with about $12 billion in assets, while Empower works with 40,000 retirement plans, as well as some $13 billion in individual retirement and brokerage accounts.

“Companies like Empower have traditionally been stellar at the back office services, but lacked greatly on the front end. This is where Personal Capital is a great buy,” Van Pelt tweeted.

More Thoughts on the Deal

According to Empower President & CEO Edmund F. Murphy: “The acquisition of Personal Capital and the integration of their tools and capabilities into the Empower offering is designed to create a best-of-breed platform — powered by digital and human advice.”

Plus, “the retirement plan sponsors and advisors we serve will be able to offer their plan participants a more powerful retirement benefit that is highly valuable in a competitive market,” he added.

Personal Capital founder Bill Harris says the firm’s scope is broader than is commonly acknowledged.

“(One) Personal Capital is not a robo — we’ve got the best PFM [or personal financial management] in the world, the best planning software, hundreds of advisors and an average relationship size that’s 10 to 20 times the robos,” he explained via LinkedIn on Monday.

“(Two) We’ve got the best fintech team in the investing world, lead by CEO Jay Shah,” Harris added, in his response to a post by Gavin Spitzner, president of Wealth Consulting Partners.

The Empower-Personal Capital deal is yet another sign of accelerating M&A action, says Tim Welsh, head of the consultancy Nexus Strategy.

“For Personal Capital’s investors, 10 years is a long time to wait to get liquidity, so [this deal] shows that for venture-capital backed enterprises, they need to sell eventually. Look for more robo deals to come as they sell to legacy players,” Welsh said via an email to ThinkAdvisor.

In addition, Welsh explained, the deal is a “very synergistic deal in that it combines old school retirement plans with a digital wealth management platform that can cross sell into a large base of plan participants.”

In other words, it “gives Empower a toehold in wealth and Personal Capital a large partner to continue to drive innovation,” he concluded.


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