Robo-Advisor Personal Capital Bought by Empower for $1 Billion
Image courtesy of Personal Capital.

Robo-Advisor Personal Capital Bought by Empower for $1 Billion

The hybrid human-robo advisor gets a $1 billion price tag

Empower Retirement, a Colorado-based insurance company specialized in retirement plans, went full ahead in acquiring Personal Capital. As a FinTech company based in San Francisco, Personal Capital uses a robo advisory service alongside dedicated human advisors for their clients.

Personal Capital Goes Beyond Robo Advisors

Founded by former Intuit CEO Bill Harris in 2009, Personal Capital has grown substantially and still maintains its 2019 valuation of $950 million despite the coronavirus culling. Currently lead by CEO Jay Shah, Personal Capital takes the load off investing by automating it for all clients who have registered as RIAs – registered investment advisors – alongside retail investors.

Unlike other robo advisor platforms, Personal Capital takes the first moniker seriously – all clients have access to a human financial advisor whenever they feel the need. According to their report from June 22, 2020, Personal Capital secured the confidence of 22,661 clients and accrued $12.2 billion worth of assets. Like other such platforms, Personal Capital drives profit via fees, ranging from 0.49% – 0.89% of asset value.

Thanks to these fees, Personal Capital’s revenue is enough to break even, not exceeding $100 million per year, as they are still in the growth & attraction phase. Moreover, Personal Capital caters to a more affluent client base. For example, Betterment’s average client holds $34,000 in assets, at an average fee of 0.32%.

This is meager compared to Personal Capital’s average client who holds $538,000 in assets. No wonder Personal Capital was named the premier robo advisor for high net worth investors.

Empower Retirement as the Perfect Match

Although Empower Retirement is based in Denver, Colorado, it is a subsidiary of the Canadian insurance behemoth Great-West Lifeco., the largest Canadian insurer. Not to focus only on their business, they recently received the highest rating on CDP’s 2019 Climate Change Questionnaire.

On its own, Empower Retirement is the second-largest retirement insurer in America. They are buying Personal Capital for the total clean sum of $1 billion, divided into:

  • $825 million upfront.
  • $175 million contingent on Personal Capital achieving growth goals in the next two years.

Having been on the selling market for the last year, waiting for just the right one to see the value of robo advisors, Personal Capital seems to have found the match they were looking for. Not only does Empower Retirement cater to the same affluent client base, and not only did they buy them for their approximate 2019 valuation of $950 million, but they also plan to leave Personal Capital to function as an independent entity, for the time being.

Combining auto-investing with retirement plans nicely rounds the needs of the prudent elderly. Are you planning to access the same kind of services for your own retirement? Let us know in the comments below.

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