LearnVest, a financial planning company, was purchased by NorthWestern Mutual in spring of 2015. NorthWestern, largely known for its life insurance services, says that it hopes to combine the capabilities of its company with the abilities of LearnVest to better serve its clients. The buyout will likely bring changes for both investors and people employed by the two companies.
Leading Up To The Buy Out
LearnVest made a public announcement in 2013 saying that it planned to hire 100 financial planners by the end of the year. However, two years later, there are still hardly any planning positions available and the 70 positions that have been filled were not planning positions. A spokeswoman from the company said that the company intended its “100 planning employees” to include other workers in addition to the planners themselves.
Learnvest is Bought by NorthWestern Mutual
Following the misleading information about hiring, LearnVest was acquired by NorthWestern Mutual in spring 2015. NorthWestern is now making plans to help the company grow and play off of each company’s strengths.
“There has been a gap between what consumers want and what the financial industry has been able to offer,” according to John Schlifske, NorthWestern Mutual chairman and CEO said. He suggests that NorthWestern Mutual will fill in that gap and will take clients “from start to finish, addressing all parts of the planning equation, and to be a partner at the center of their financial lives through all stages.”
Details have emerged that LearnVest may have only a few million dollars of revenue and have been far from profitable. The free Personal Financial Management (PFM) app for consumers and and supporting integrated planning software for its advisers has a whopping 1.5 million users. The app can give NorthWestern Mutual a powerful technology tool to create a leverage across its existing adviser base and provide a treasure trove of 1.5 million perspective clients wherein they can cross-sell financial products and services in the future. With a burn rate this high, it seems likely that LearnVest’s sale wasn’t driven for a chance for a big exit but rather another attempt to raise a capital.
LearnVest’s costs were not trivial. It is spending more money on staff compensation and expenses and the burn rate is much more than their income revenue. LearnVest has appeared to have grossly underestimated the challenges of client acquisition. However, NorthWestern saw significant value in LearnVest’s “other unique” assets that will be able to be leveraged in other ways.
What Did Northwestern Earn?
Since LearnVest has a high burn rate and doesn’t appear to be approaching profitability, nor does it seem to be finding the exponential growth necessary to justify a $250M+ in a sixth round of funding, what did NorthWestern Mutual see and why did it choose to buy the company and what asset(s) was it really after?
The key point may lie in a highly notable statistic in the NorthWestern Mutual acquisition announcement: even if LearnVest only had 10,000 premium clients paying for its services, it has a whopping 1.5 million users in the software app. In fact, the LearnVest PFM tool may have actually been their greatest asset.
In the end, LearnVest may simply finish as an example of a company that has started to disrupt the financial services with a unique business model. By doing this, LearnVest rose too much capital and then had expectations that could not be fulfilled and ended up being sold.The sad conclusion seems to be that, while LearnVest was celebrated as a disruption of financial services, it could just ultimately become a technology-based distribution solution for traditional financial services.