Northwestern Mutual and LearnVest: Still trying to work it out

After LearnVest shuttered its doors in June, experts talked about a slow decline for digital planning tools and a tough road ahead for independent robos.

But Northwestern Mutual CEO John Schlifske, whose firm bought LearnVest in 2015 for more than $250 million, said the closure was a strategic decision that made better business sense for both firms. It could also illuminate a path forward for partnerships between massive incumbents and nimble digital startups.

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“It was really to acquire talent and capabilities,” Schlifske told a packed room at The Economist’s Finance Disrupted conference in New York. “They were so far ahead of us,” he said, adding that the acquisition allowed his firm to “leapfrog” what they could do on their own. “It’s like going from a paper map to get where you want to go to a virtual planning experience like Google maps,” Schlifske said. “That’s what LearnVest allowed us to do.”

LearnVest CEO Alexa Von Tobel was promoted to chief innovation officer and senior vice president a month after the shutdown. While the robo platform no longer exists, LearnVest relaunched its website as a financial education and budgeting tool. At the time of the acquisition, The New York-based firm touted about 1.5 million users on its digital personal financial management tool, and close to 10,000 premium clients who had upgraded to the paid planning service.

While the closure seemed ominous for upstart independents, the move was more of a rebranding, Schlifske added, saying the platforms were “mirror images of each other.”

LearnVest technologies are still available to Northwestern Mutual clients. While the platforms may provide similar functions, the closure was still a blow to advocates of digital planning tools that lauded the creation of an inexpensive platform that could be accessed by everyone and designed specifically for financial planning. Even Von Tobel had said nothing would change about her platform when the acquisition was announced, according to Bloomberg.

The Milwaukee-based insurance firm, which operates the No. 5 independent broker-dealer, credits LearnVest for transforming its client experience.

Other longtime independent robos have called it quits earlier this year. Hedgeable an independent platform focused on the needs of high-net-worth clients, stopped taking on new assets in August. The firm managed $80 million in client assets.

Ultimately, the closure could signal a new movement toward partnershpis that bridge the scale of the incumbents with new fintech technology. “More and more, there is a partnership,” said Avid Modjtabai, a senior executive vice president at Wells Fargo. “Fintechs love our scale. They’re partnering with us and suddenly they’re servicing 17 million customers.”

Notably, Fifth Third Bancorp's securities unit teamed up with Fidelity to offer automated advice in June. Citizens Bank partnered with SigFig to unroll its robo advisor SpeciFi in under eight months, according to Peter Fishman, director of digital investment solutions at Citizens Bank. UBS and Wells Fargo have similar partnerships.

For Schlifske, the road ahead for robo advisors will shift from “information sharing” to actual financial advice akin to what traditional advisors provide. “When it comes to a trusted advisor, you’re not paying for alpha,” Schlifske said. “You’re paying for advice, empathy and an understanding of your needs.”