Empower follows its 2018 rollout of Wealthsimple’s mass-market solution with the acquisition of Personal Capital, a high-net-worth offering that includes a powerful financial dashboard available to all. These two wealth management solutions, Wealthsimple and Personal Capital, support Empower’s strategic goals of enhancing its financial wellness and technology offering in the workplace and continuing relationships with participants once they leave the plan. Retirement plan providers face yearly asset erosion from participants retiring or leaving their firm. By cultivating strong relationships with participants through differentiated tools and advice and by offering two competitive wealth management solutions, Empower becomes better positioned to retain assets once participants leave the plan.
Empower serves 135,000 IRA and brokerage account customers with approximately US$13 billion in assets. The Personal Capital acquisition doubles assets held outside of workplace retirement plans and positions the firm for accelerated wealth management asset growth. Through Personal Capital’s platform and highly credentialed advisors, Empower can now provide a solution for investors with more sophisticated asset management needs who require customized investment management and tax-loss harvesting.
In addition to offering a solution for high-net-worth individuals through a financial-advisor-first digital solution, this acquisition gives Empower a financial wellness platform for plan participants that includes account aggregation and ongoing management and insights into a consumer’s entire financial life—from daily cash flow tracking to investment portfolio performance and asset allocation. The dashboard also offers free digital advice to help consumers set up a savings and retirement plan and analyze retirement fees across aggregated retirement assets. Consumers are converted to paying clients once they start an ongoing relationship with a Personal Capital financial advisor, which requires a minimum initial transfer of US$100,000 and asset-based fees of 0.89% for management of the first US$1 million under management.
Aite Group estimates a strong adoption of Personal Capital’s attractive dashboard across plan participants, which will position Empower as a desirable wealth management provider for assets held outside the workplace plan. Presumably, Personal Capital advisors will be offered to participants with a minimum of US$100,000 of assets in their plans while Wealthsimple will be offered to those with less than US$100,000. Empower will be able to offer either solution based on its understanding of participants’ assets as aggregated through the dashboard. Empower will need to be careful about how it positions its wealth management solutions to participants to avoid conflicts of interest and comply with Department of Labor rules.
These solutions give Empower a differentiated wealth management offer with which to compete with firms such as Fidelity, Vanguard, and Edelman Financial Engines that offer workplace solutions as well as both digital-only and hybrid advisor/digital solutions. Personal Capital’s financial dashboard is an attractive financial wellness platform that will help Empower win more business from employers concerned about the financial wellness of employees. Personal Capital also provides Empower with a business-to-consumer solution that will expand the firm’s distribution beyond the workplace.
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