The world’s largest robo advisor has bought itself a brick-and-mortar presence, with last week’s announcement by Financial Engines that it will purchase the Mutual Fund Store for $560 million.
The combined entity will retain FE’s name. It will have almost $115 billion in AUM, with Financial Engines accounting for $104 billion.
The Mutual Fund Store is a Registered Investment Adviser providing personalized financial planning and fiduciary advice through advisors in locations across the United States. It has approximately 345 employees, approximately 84,000 accounts at about 39,000 households and more than $9.8 billion in assets under management as of Oct. 31, 2015. Not only does FE gain 300 advisors, it gets 125 retail storefronts with the acquisition.
The Mutual Fund Store was founded by radio personality Adam Bold (an associate of Scott Revare from FiRM), who left after the acquisition by Warburg Pincus. FE’s CEO Lawrence Raffone acknowledged that some investors need face-to-face holistic financial planning, a concession he made when FE started hiring tele-advisors earlier this year.
Based on the terms of the transaction, Warburg Pincus is expected to become Financial Engines’ largest stockholder, with a beneficial ownership of approximately 12.5% following the closing of the transaction. Michael Martin, managing director of Warburg Pincus, will be appointed to Financial Engines’ board of directors upon closing.
While a good start, FE still faces the battle of brand and access to data, especially in the DC market. FE gathered DC assets by leveraging brand and access to plan participants from record keepers, but it’s not clear whether those participant investors even know who FE is. Furthermore, to really help investors, robo advisors need access to data — data which many record keepers, hoping to retain those assets post-plan participation, remain reluctant to surrender.
Regardless, with more than $100 billion in assets and now 125 storefronts, FE has made a bold statement, separating itself further from pure, online robos.
