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What ex-LPL CEO Casady sees in Edelman’s trailblazing deal

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Harnessing the vast wealth stashed away in retirement plans with the financial advisory needs of a population that's living longer may well be the lasting legacy of the blockbuster Edelman-Financial Engines deal.

"The key here is the combination of a retail-oriented firm with a company/retirement-plan focus," says Mark Casady, the former CEO of LPL, who is now general partner of the fintech venture capital firm Vestigo Ventures. "This transaction may create more interest in a retail RIA adding a retirement-focused set of advisors."

As the advisory business is increasingly driven to add scale and enhance the customer experience, Casady notes, "This deal is a classic combination to drive both."

The $3.02 billion Edelman-Financial Engines deal will also put strategic pressure on both robo advisors and traditional RIAs.
"The robo advisors are adding people to the mix and in some cases they are adding retirement fund coverage as well," Casady says. "I believe they will continue this focus in order to find asset growth, which they very much need to find. A conventional RIA will likely be able to move faster to implement digital choices than a digital firm will be able to add human advice components."

Casady doesn't think the deal will spark another wave of M&A and partnerships such as the industry saw when incumbents UBS and BlackRock decided they wanted to build a digital platform of their own, and bought SigFig and FutureAdvisor respectively.

"I don’t see this transaction pushing a robo advice platform into the arms of an established RIA," he says. "Those firms can rent this capability quite easily and cheaply."

Firms who want to compete with a reconstituted Edelman will, however, have to find and execute strategies for growth and cost reduction, Casady argues.

"The bigger implication is the continued drumbeat of digital solutions," he says. "This combination creates a major player to exploit the best of both companies to deliver a better digital experience. I suspect it will allow them to invest in more solutions like artificial intelligence and data analysis that can drive their costs even lower. Using today’s tools to redefine your business is the message this transaction sends from a fintech perspective."

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