Only two weeks into 2016, and industry wheeling and dealing for robo advisors has produced its newest deal.
Invesco said today it acquired Jemstep, a robo solution for advisors, for an undisclosed sum.
It's the latest in a line of digital advice moves from asset management giants, which began in earnest last year with the launch of robo platforms from Vanguard and Schwab, the announcement of a pilot launch from Fidelity and BlackRock's $150M acquisition of FutureAdvisor.
Industry observers say the Invesco acquisition is an early kickoff for what will be another year of deals.
"Many asset managers are looking for fintech partnerships to jumpstart their technology platforms and improve their product distribution," says James McGovern, vice president of consulting services for Corporate Insight.
"BlackRock's acquisition of FutureAdvisor, Vanguard's success in launching the Personal Advisor Service and Fidelity's plans for Fidelity Go surely influenced Invesco's decision to acquire Jemstep, one of the better known digital advice platforms."
The firm however denies that they were prompted by peer action.
"Building a new platform is not a defensive move regarding BlackRock's acquisition," says Peter Intraligi, head of Invesco North American Distribution. "It's an extension of our present business."
Intraligi says the acquisition will allow the company to provide customized portfolios with high conviction and factor-based strategies, instead of market-cap-weighted ETFs to its customers. Invesco sees the move as part of a strategy to enhance its partnerships with advisors, which it has desired.
"We will deploy our industry-leading home office and field sales support in the U.S. to ensure that advisors realize the value of incorporating a digital solution into their practices," Intraligi says.
The strategy to acquire a robo advisor seems logical, given the quick success of Vanguard and Schwab's digital offerings and the direction of assets on the lower end of the market toward digital advice platforms, says Alois Pirker, research director for Aite Group's Wealth Management practice.
But Pirker cautions that as more asset managers acquire robo platforms, some advisors may begin questioning their benefits, especially if the platforms are simply wedded to the asset manager's proprietary offerings.
"I can understand the motivation among asset managers to build a better mousetrap and create an asset funnel," he says. "But the advisor that is independent and wants to use a good client engagement tool, they are going to want one that goes across the market to get the best they can for their clients. That might mean taking Jemstep out of the equation."
