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As Personal Capital Seeks More Funding, Outsiders Ask: Is it for Sale?

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Personal Capital, the third biggest independent robo advisor by assets, has hired a private equity firm to evaluate its financial options, sparking speculation the firm may be seeking a suitor.

Launched by former PayPal and Intuit head Bill Harris, Personal Capital has amassed $1.8 billion in AUM with a hybrid robo approach that until very recently targeted a wealthier client than its digital brethren Betterment or Wealthfront.

Personal Capital acknowledged it has hired New York-based private equity firm Evercore to help them with their Series E fund-raising efforts. It has raised $112 million since 2009.

"Any references to valuation or potential sale of the company are speculative," said company spokeswoman Jennifer Parson. The firm would not comment on how much additional financing it would seek. 

News of Personal Capital's move surprised industry observers.

"Wow," said Chip Roame, managing partner at industry research firm Tiburon Strategic Partners. "I have repetitively said that the ranks of robo advisors will thin rapidly. … I would have bet that Personal Capital would be one of the survivors.” He mused in an email that if the firm is “for sale, many others must be as well!"

Tiburon last month released a report that predicted a great extinction among independent, venture capital-backed digital advice providers, as digital offerings from incumbent wealth management firms swallow up assets.

  • Read more: Why Robo Upstarts Won't Win Digital Advice Race

Many different suitors could pursue the San Francisco-based digital RIA, Roame said: discount brokerage firms, retail franchisees, ETF firms, foreign financial firms seeking a U.S. foothold, or even Google.
"I expect the winners in the robo advice business to primarily be the large discount brokerage firms like Schwab and mutual fund companies like Vanguard," Roame said.


Sean McDermott, who heads fintech research at Corporate Insight, noted Personal Capital's recent decision to slash its account minimums to $25,000 from $100,000.

"It points to a struggle to onboard new clients," McDermott said. "They likely have not been acquiring new clients at a quick enough rate."

There are several factors that could be contributing to the thinking of Personal Capital's executives, McDermott said.

The biggest challenge to Personal Capital's high-touch, hybrid model, he says, was the arrival of Vanguard's Personal Advisor Services, which has rocketed in growth since its pilot launch in 2013, and now stands at $20 billion in AUM.

"It's an exact replica of the Personal Capital model, and it's had tremendous growth and success, McDermott says. "It's difficult not to connect the dots there."

Additionally, VC attitudes may have shifted with the advent of incumbent financial firms entering the digital space with their own offerings. Personal Capital's hybrid model, which employs advisors, is more costly to run than other pure robo platforms, he added.
"This doesn’t spell doom for all robo advisors," he adds, noting that Betterment, the leading independent robo advisor, was managing to diversify its revenue streams with an institutional offering and an employer plan set to launch next year. "I’d have to imagine [Betterment] is feeling very comfortable right now."


Still, all robos will have to go through the tough process of examining  their business and determining if they can grow fast enough, says Alois Pirker, research director for Aite Group's wealth management practice.

"Looking at the valuations of the leading startups (+500m), it becomes very hard for them to find an acquirer, as building [a robo platform] will be a lot cheaper," he wrote in an email. "Sustaining the growth longer term for those startups, however, requires investments in marketing and a continuous investment in their platform. 

"Personal Capital is at a crossroad," Pirker added. "Either they find an acquirer now (or very soon) or they will have to go it alone through organic growth, which requires strategic investors that take the long view and want to be holding the investment for 10+ years."

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