LearnVest abruptly informed clients May 5 that their accounts would be discontinued in early June and that the firm will “relaunch later this year as a fresh, digital resource focused on educating consumers on how to meet their financial goals.”

What can we learn from the almost decade-long LearnVest experiment?

At the time of their acquisition by Northwestern Mutual for a reported $250 million in 2015, LearnVest touted about 1.5 million users of its digital personal financial management tool, and close to 10,000 premium clients who had upgraded to the paid planning service.

While the user numbers are a testament to the latent customer demand for superior digital tools, LearnVest’s sub-1% conversion rate of users to paid customers underscores a challenge facing many would-be disruptors in the wealth management space: generating revenue in a “freemium” model.

Planning has become more central to wealth management offers, providing consumers with attractive options for holistic services which combine investing and planning advice. Advisors have been increasingly promoting financial planning services to justify their fees as the investment side of what they do has become more commoditized. This is true for traditional RIAs, as well as for advisor-facing and client-facing robo advisors (e.g., AdvisorEngine, Betterment and Wealthfront).

Probably the biggest threats to the LearnVest model were Schwab’s Intelligent Advisory and Vanguard’s Personal Advisor Services, both of which deliver robo investing and digital planning tools with some human support for roughly 30 basis point AUM-based fee on middle-market-sized accounts. The goliath in the space, Vanguard’s PAS, recently surpassed $100 billion in AUM.

Alexa von Tobel founded LearnVest in 2009. Bloomberg News


LearnVest faced the same customer acquisition and servicing cost challenges as the robo advisors, but without any assets under management, they lacked the fee structure necessary to give them a fighting chance at standalone profitability. Even for robos that charge a fee based on AUM, the path to profitability has been far from clear, and has led many of the hottest entrants to pivot to B2B models or put themselves up for sale.

For LearnVest to have operated profitably at a unit level, either customer acquisition cost would have had to decrease significantly over time or they would have had to find a way to increase their average customer lifetime value. With just a $299 initiation fee and a $19 monthly subscription, and with no other products or services to sell, it’s hard to see a way for them to have been profitable.

In that sense, a combination with a full-service wealth manager with a well-developed suite of products may have been inevitable from the beginning — recurring fees on AUM that grows with the market and the favorable economics associated with cross-selling create a much stronger potential for customer-level profitability. This is much of what made them attractive to Northwestern in the first place.

LearnVest did many things right in building customer relationships, starting with meeting underserved people where they were. They put the importance of financial planning front and center, brought it into the digital age, and made it relevant for women, millennials and those more concerned with debt and an emergency fund than wealth accumulation or preservation.

LearnVest was ahead of the curve in leveraging behavioral economics to motivate clients to buy into and stick with their personal financial plan. They utilized their digital platform to A/B test seemingly all aspects of the client experience, leading to continuous improvement as well as a trove of actionable customer data. In short, they applied the best of Silicon Valley to the staid world of financial planning.

They met client demand for human support combined with highly-responsive digital communication channels. They assigned each client to a single planner with a visible profile to promote a relationship of trust and confidence, and made that planner available via email for continued support. They smartly launched a mobile app back in 2012 to support clients as they made financial decisions on-the-go throughout the day.

What might have been lacking from an experience perspective?

Phone interactions were generally limited to the plan generation and delivery phase. LearnVest offered no face-to-face interactions (neither in-person nor virtual), and the platform lacked texting functionality. We know almost half of mass affluent advisory clients surveyed want the ability to video chat with their advisor, and texting is increasingly being offered by financial services startups and the big banks as compliance solutions make this channel a manageable risk.

The LearnVest team likely understood all of this but it appears that Northwestern might not have had the appetite to continue investing in the LearnVest planning service. It wouldn’t be surprising to see these channels developed to support Northwestern advisors once the new incarnation of LearnVest comes to market as part of Northwestern’s end-to-end offering.

Today, consumers want to be met where they are — to have their needs understood, to be able to interact through their channel of choice in a given moment, and to be offered solutions in that context. To meet this demand, financial services firms must evolve from pushing products and services to owning and investing in the client relationship over the long term. The infrastructure required to acquire and serve today’s consumers requires significant and sustained investment, and those firms with a viable revenue model who can best leverage ownership of the customer will come out the winners.

While LearnVest made solid strides in developing customer relationships and planning capabilities at scale, without a broader suite of solutions that would allow them to grow with their customers, they didn’t have a chance. Time will tell whether Northwestern can overcome any integration issues to leverage their own legacy businesses to reap the rewards of their investment.

Kate Magaram

Kate Magaram

A corporate lawyer and consultant by training, Kate Magaram is a financial services strategist for asset managers and independent RIA channels. Follow her on Twitter at @KateMagaram