Personal Capital, a Robo Hybrid, to Be Sold for Up to $1 Billion


June 29, 2020

Personal Capital, a highly digitalized registered investment advisory firm that manages more than $12.2 billion of client assets, agreed to be sold for $825 million to Empower Retirement, a large retirement plan administrator owned by Canada’s Great West Lifeco.

The deal, which is expected to close by yearend, includes an earnout incentive that can bring the purchase price to $1 billion in cash if Personal Capital hits certain targets, the companies said on Monday.

In combining an RIA with an asset-management retirement plan giant (Great-West Lifeco owns Putnam Investments and says it is the second-largest defined contribution plan recordkeeper), the deal continues a trend in which wealth firms expect to gain inside advantages in sourcing future customers from plan participants while asset management firms hope to leverage tech-savvy advisory firms’ appeal to young investors.

Morgan Stanley last year bought stock-plan administrator Solium Capital for $900 million, and Goldman Sachs’ asset management division is in the process of purchasing FolioFn, which offers robo-advisory services to retail investors.

Founded in July 2009 by former Intuit Chief Executive Bill Harris, former Fidelity Investments trust executive Rob Foregger and fintech entrepreneur Louie Gasparini, Personal Capital offers robo-like investment services delivered through advisers in call centers to about 22,500 investors, according to its June Form-ADV. It has 419 employees, a spokeswoman said, all of whom are expected to remain with Personal Capital.

“[Fidelity Investments founder] Ned Johnson connected the 401(k) business to retail through its [discount broker business], creating monster-scale feeder systems,” said Foregger, who is now CEO of NextCapital, an advisory platform for retirement plan managers and has equity in Personal Capital.  “Empower sees the same opportunity to use its scale as a 401(k) recordkeeper to drive retail growth.”

Personal Capital, one of the first wealth firms to offer investors an aggregation tool to view all their assets and help advisors pull the held-away money into the firm, says it tracks over $771 billion of household assets. Its board includes a Who’s Who of wealth management entrepreneurs and Canadian brokerage veterans, including AssetMark and former Schwab custody executive Charles Goldman, Harris, former Mackenzie Financial and current IGM Financial CEO Jeff Carney, representatives of private equity investors Venrock,  Corsair Capital and Venture Capital Group, and Power Corp. executive Paul Desmarais III.

The Desmarais family runs Power Corp., which controls Denver-based Empower’s parent Great Western Life, and in recent years accumulated significant stakes in Personal Capital. Officials at Empower and Personal Capital did not return calls for comment as to whether the private equity firms will retain any stakes in the RIA.

Sources said that Moelis & Co. has been shopping Personal Capital for several months. Empower’s financial advisors on the deal are Morgan Stanley and Rockefeller Capital Management, the companies said. Rockefeller CEO Greg Fleming is the former head of Morgan Stanley’s wealth management division and a former financial institution investment banker at Merrill Lynch.

Empower Retirement was formed in 2014 as a three-part merger of the retirement arms of Great West Financial, Putnam and J.P. Morgan Retirement Plan Services. It administered $656 billion in assets for more than 9.7 million retirement plan participants in 135,000 accounts as of May 31, 2020, positioning it as the second-largest retirement plan recordkeeper by total participants, the companies said. It also offers IRA and investment accounts to individuals.

After the close, Personal Capital CEO Jay Shah will become its president, reporting to Empower CEO Edmund F. Murphy III, the companies said.

Personal Capital’s advisors and staff are based largely at offices in Redwood Shores, Calif., Denver, Atlanta and Dallas (though they are currently working remotely because of Covid-19).

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