When it comes to incorporating a digital advisor into a financial services firm, a few clear paths have opened up. The largest firms can either acquire a tech startup, partner with a company like SigFig to build a custom product, or simply invest in building their own. For smaller broker/dealers, it comes down to either paying for a white-labeled product from a third-party tech vendor, or rolling with whatever solution their custodian provides.
Faced with the choices, Plancorp, an RIA based in St. Louis with $3.6 billion of assets under management, didn’t just take a road less traveled, it built a new road. The firm announced Thursday that Prumentum, a technology startup led by former executives of Salesforce and Cisco, was acquiring a “significant equity stake” in Plancorp to launch a new direct-to-consumer, hybrid robo product called BrightPlan.
Usually it’s the other way around — a financial services firm leveraging its assets to acquire a stake in the startup tech company — but Plancorp president Chris Kerckhoff said the product it envisions requires such a significant capital investment, it had to “get a bit creative in how to attract the right capital in order to fund the platform.” The specifics of the deal weren’t disclosed, but Prumentum did also announce Thursday that it closed a $25 million round of Series A funding from family offices that represent “America's most successful entrepreneurial families.”
“It took some time to make sure we had the right investors involved who are in it for the long haul and not interested in a short-term play here,” Kerckhoff told WealthManagement.com.
Prumentum had been developing the technology for years before a national search by CEO Marthin De Beer connected the company with Plancorp. The companies wanted to build a product that places a heavier emphasis on goals-based financial planning than other robo products on the market, which Kerckhoff said focus more on investment advice.
Plancorp is lending its 34 years of fee-only financial planning experience (Kerckhoff said the firm didn’t manage any assets for its first six or seven years) to help Prumentum perfect its product. Plancorp advisors will provide live advice in the direct-to-consumer BrightPlan product. Its advisors will also get the technology to service existing clients.
Kerckhoff said this level of integration just wasn’t possible with other products on the market. He looked at several solutions, but said nothing matched his vision of prioritizing planning ahead of investment and went beyond retirement to helping make everyday financial decisions with digital tools, real-time goals tracking and access to a live advisor.
“The reality is the challenges surrounding integration, the challenges with having a planning-first approach and [having] something that continues to innovate and keep up with emerging technologies out there. That’s something we couldn’t find anywhere else,” Kerckhoff said. It was this that led to the unique deal Plancorp struck with Prumentum. “It just makes sense to use that we’ll have shared equity. We don’t view it as much as them purchasing an interest in us as much as starting on a path of integrating a company that’s been around 30 to 40 years with a startup.”
The move fits with Plancorp’s history of innovation, Kerckhoff added. Not only was Plancorp an early advocate for fee-only financial planning, it was one of the first non-institutional firms to gain access to Dimensional Fund Advisors. It was an early adopter of Monte Carlo simulations, and had to build its own proprietary solution in the late 90s before off-the-shelf software was available.
To support the direct-to-consumer product, Plancorp is looking to boost its advisor team with young, diverse wealth managers; most of the firm’s shareholders and wealth managers are under the age of 45. Plancorp recently hired a chief talent officer and partnered with various universities to boost recruitment. The company hopes the technology provided by Prumentum will make Plancorp an attractive place for new advisors.
Specifics on BrightPlan, including pricing and features, are currently under wraps, but Kerckhoff said he expects to provide advice via phone, webcam and even with live meetings if required.
BrightPlan is currently in beta testing and is hoping for a public launch in the fourth quarter.