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Personal Capital scores $75M boost despite escalating competition

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Personal Capital announced it will receive $75 million in Series E funding from a Canadian conglomerate, defying industry predictions that independent retail digital advice is dying and no money remains for startup platforms.

The funding — it will receive $50 million now and the remaining $25 million next year — entirely flows from IGM Financial, which is part of Montreal-based Power Corporation of Canada.

“IGM Financial is the ideal investor,” said Bill Harris, CEO of Personal Capital, in a statement. “We will benefit from IGM Financial’s expertise in financial advice and asset management, coupled with deep understanding of its clients’ wealth management needs."

As part of the investment, Jeff Carney, CEO of IGM Financial, will be joining Personal Capital's board of directors.

The cash infusion comes at a critical moment for the industry's third-largest independent digital wealth management platform, which last reported over $2.1 billion in AUM and nearly 17,000 registered accounts.

Competitors have largely pivoted from chasing retail assets to developing platforms for big financial firms, such as UBS's recently announced deal with San Francisco-based SigFig to create a digital toolkit for its more than 7,000 advisers.

That shift was largely spurred by the entry of industry giants into the digital wealth management space. Vanguard's Personal Advisor Services, which has been described by analysts as a replica of Personal Capital's hybrid robo platform, boasts over $20 billion in AUM in just a year of service.
Also pressuring retail digital wealth management platforms is the uphill battle to profitability — Riskalyze CEO Aaron Klein estimated general robo CAC was $825 for a customer averaging $63 in annual revenue.

"While there is lively debate about the future of stand-alone robos, there remains little doubt in my mind that tech-enabled national wealth management is still a big idea — with few marketplace peers," says Rob Foregger, current co-founder of platform provider NextCapital and formerly co-founder of Personal Capital.

The new funding bolsters the Redwood City, Calif.-based digital wealth management firm, around which speculation swirled in December about a potential sale. At that time Personal Capital enlisted investment bank Evercore as a financial adviser in its fundraising efforts.

It then watched Betterment, the industry's largest independent robo advice platform, leapfrog its fundraising efforts when Jon Stein's firm announced it raised $100 million in its own Series E round of venture capital funding in March.

Harris, former PayPal and Intuit head, says an IPO is not in the near future for Personal Capital. "Personal Capital was founded with the intent to build a sustainable, scalable independent company. We are not looking to go public at this time."

Personal Capital previously raised $112 million since 2009. The new round of funding puts the company's valuation at approximately $500 million, the firm says, double the valuation of its last round.

IGM Financial was the sole investor this round — previous investors include BlackRock and BBVA Ventures, the investment arm of BBVA Compass. (BBVA is now a client of BlackRock's own digital wealth platform, FutureAdvisor, which it acquired last year.)

"Previous investors wanted to be involved this round, but IGM wanted the whole round," Harris said in an emailed response. "Other investors were happy to allow that because of their commitment to what we are doing at Personal Capital."

The new funding bolsters Personal Capital, which endured speculation about a potential sale in December.

The investment is the first fintech play for IGM Financial. Its parent, Power Corporation, has ownership of a number of financial firms, including Boston-based Putnam Investments.

In his emailed response, Harris says "to date this is purely an investment relationship and we are excited about working together, but we have no imminent plans with any group within Power Financial."

The Canadian firm, however, sees the investment as "the opportunity to participate in the emerging digital wealth management industry in the United States."

It follows a trend of foreign investment into the U.S. digital wealth management space. In addition to Zurich-based UBS taking an equity stake in SigFig, $65 million of Betterment's latest round of funding came from Swedish investment giant Kinnevik.

"The U.S. financial services industry is typically several years ahead of other markets in terms of technology offerings and new consumer trends," says Sean McDermott, senior analyst in consulting services at Corporate Insight.

"Firms based overseas are likely observing the strong inflows into passive investments and the new technology advancements that digital advice providers have introduced to clients and advisers alike and are attempting to get ahead of the curve through strategic investments in fintech firms."

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