LearnVest founder Alexa von Tobel has always been crystal clear about the vision that drives her: She wants to provide every household in America with a financial plan. The 31 year-old took a big step toward that goal Wednesday with the announcement that she will sell her six-year-old company to 160 year-old insurance and financial planning giant Northwestern Mutual.
Less clear are the financial terms of the deal, which both sides declined to disclose. There is, however, reason to believe this acquisition could be among the largest ever in the booming financial technology space.
“This propels the vision,” said von Tobel in an interview. “They have tremendous scale. We are going to take the innovative technology that has made LearnVest so special and we are going to be able to help scale it rapidly to another 4.2 million households. Not overnight but very quickly.”
She also pointed out that
In a July 2014 cover story FORBES estimated that LearnVest's latest round of funding valued it at more than $250 million (and put von Tobel’s personal stake in the tens of millions). Prior to that estimate and the acquisition LearnVest raised $75 million in venture capital funding. Northwestern Mutual led its most recent $28 million round which closed in April 2014. According to CB Insights, more than $1 billion in VC money has been sunk into tech-driven personal finance companies in recent years.
On the acquisition front, Intuit has been one of the biggest buyers in the broad space (if not the single largest) scooping up bill pay app Check for $360 million last May and budgeting platform Mint.com for $170 million back in 2009. Last February Spanish bank BBVA snagged online only Simple bank for $117 million. More recently Capital One bought budgeting app Level for an undisclosed – though likely smaller – sum.
The LearnVest deal, however, is likely to raise some eyebrows. While fintech is hot right now, von Tobel’s model centers on using technology to connect clients to human financial planners. This is arguably more ambitious than the fully automated offerings sweeping the investment advisory industry but certainly more expensive to maintain. Also working against LearnVest is the fact that only a small percentage of Americans have ever paid directly for broad based financial planning like what LearnVest offers; even rarer is paying for a monthly subscription. LearnVest has reworked its pricing model several times since launching its paid product in January 2012, most recently settling on an upfront fee of $299 (which can be paid in installments) plus $19 a month for ongoing access to your planner.
Until Wednesday LearnVest had declined to share a customer count, leading to questions about how well the company was really doing. But von Tobel swears she did not need to sell and newly released client figures suggest a somewhat rosier picture than previously seen. LearnVest currently has about 1.5 million users including its free budgeting platform. Over 25,000 people receive the service through LearnVest at Work and about 10,000 pay for planning services directly. (The most recent SEC filing available is from 2012 and shows just 3,700 paying clients.)
Even so the deal will increase LearnVest’s reach massively. It will continue to operate independently and von Tobel will stay on as CEO and chairman. The New York based company will maintain its current 150 person staff and existing customers’ experience will not change, the company says. The two companies have already begun working together to expand the consumer offering – they will soon roll out a feature that will model the future impact of current financial decisions – and to build a platform for Northwestern Mutual’s 16,000 financial advisors to use with its 4.2 million customers.
“LearnVest is really a key part of this notion of bringing simplicity to this whole process,” said Northwestern Mutual CEO John Schlifske in an interview. “Alexa says this all the time and now I am starting to say it: technology is simply a tool to help you get something. […]Ultimately that creates efficiencies not just for the client but for the financial professional who is helping the client navigate this space. Together with LearnVest we are going to create a customer experience that is unique in the industry, that is very engaging and that ultimately gets people to the point where they actually want to be involved in their financial future.”
Through its private equity arm Northwestern Mutual has invested in other financial tech companies including automated investment advisor Betterment. Northwestern Mutual Capital first invested in Betterment in April 2014 – within days of its initial LearnVest play – and also participated in the company’s recent $60 million funding round.
Schlifske is adamant that the purchase of LearnVest should not be taken as a signal his company will begin scooping up tech startups. This is Northwestern Mutual's first acquisition since he became CEO in 2010, though he did oversee the sale of Russell Investments to the London Stock Exchange Group for $2.7 billion last year. Schlifske describes the Russell transaction -- Northwestern Mutual acquired Russell in 1999 for $1.2 billion -- as a financial investment. He calls LearnVest a strategic one. “We are not a company that goes around trying to buy up stuff we need. This was very clearly a match made in heaven.”
