Two weeks ago the big industry news was Northwestern Mutual’s announcement that they are terminating their monthly subscription fee financial planning solution, terminating their LearnVest@Work solution, and that the LearnVest brand would be going on a 6-month hiatus, to re-launch later this year as a “fresh, digital resource focused on educating consumers on how to meet their financial goals.” When the news broke, the industry media pounced on this with the message “Northwestern Mutual is shutting LearnVest down”, and immediately began with the “post-mortem autopsy” analyses of what happened and how Northwestern Mutual got to the point that they’re shutting down a business that they bought 3 years ago for a whopping $250 million dollars. However, I think the industry and the media have completely missed the point on this story, and the reality is that Northwestern Mutual’s acquisition has not been a failure, and may in fact still be just getting started!
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why Northwestern Mutual’s acquisition of LearnVest has not been a failure, and particularly why the acquisition was never about Alexa Von Tobel’s “$19 per month financial planning service” in the first place, but instead about acquiring a powerful technology tool along with 1.5 million users who are leads that Northwestern Mutual can cross-sell products to!
To better understand what was really going on in the LearnVest deal, it’s important to recognize that there were really three separate assets associated with LearnVest, all under one umbrella… The first was the LearnVest financial planning business, which at the time had about 10,000 “premium” clients paying $19/month for financial planning advice, as well as another 25,000 clients who were workers enrolled in the “LearnVest@Work” financial wellness program that they had just launched. The second asset of LearnVest was their content platform. LearnVest had a content and educational website, targeted primarily at women and younger investors, that had hundreds of thousands of unique monthly visitors, and was supported by the media exposure of their CEO Alexa Von Tobel herself. The third asset of LearnVest was their Personal Financial Management portal, and the financial planning software they built on the back end, which at the time of acquisition reportedly had a whopping 1.5 million registered users.
The reason this matters is that much of the criticism of at the time of Northwestern Mutual’s acquisition was solely focused on the LearnVest’s financial planning business, with commentators asking how a business could be worth 50 to 100 times their revenue while not growing that much. But the reality is that the real value of LearnVest was not their planning business, it was their planning software and the 1.5 million users that Northwestern Mutual could cross-sell their products to. In light of the value of lead generation implied by SmartAsset’s new lead generation service for advisors ($60 to $570 dollars per lead) as well as Fidelity’s purchase of eMoney for $250 million, Northwestern Mutual paid $250 million for planning software with a PFM portal, and a strong consumer brand to bring in prospects, and a list of 1.5 million existing users who could be prospects that alone might have been worth $250 million. Which means, when carefully looking at each of these assets, the market value of that deal might have been closer to half a billion dollars.
And this is why it’s so misguided to suggest that Northwestern Mutual didn’t get, or isn’t going to get, its value out of the LearnVest deal just because the LearnVest planning business is shutting down. Because it wasn’t about the LearnVest business model in the first place, it was about Northwestern Mutual’s business model. Northwestern Mutual’s primary business is manufacturing insurance products. They didn’t buy LearnVest’s content platform and planning software for the LearnVest model. They bought it to power the Northwestern Mutual model. And they can do that by getting 1.5 million leads to whom they could sell Northwestern Mutual products, as well as financial planning and PFM software to make all the Northwestern Mutual agents more efficient and better engaged with their clients (which helps sell more Northwestern Mutual products). In fact, one of the “little noted” details about the news that “Northwestern Mutual was ‘shutting down’ LearnVest” is that the actual staffing of LearnVest in New York City is up, from 150 employees when they were bought, to almost 450 employees now. That’s not an acquisition that’s failing. That’s an acquisition that’s becoming a major part of the entire national Northwestern Mutual enterprise.
The bottom line, though, is just to recognize that the Northwestern Mutual acquisition wasn’t the acquisition of financial planning business. It was a technology acquisition. Insurance agents have always gone the deepest on cash flow planning (granted, to help show them how to “save” $200/month into a permanent life insurance policy), so the deal shouldn’t be viewed as a “failure” because LearnVest Planning didn’t survive. LearnVest’s financial planning wasn’t why Northwestern Mutual bought it in the first place!
source https://www.kitces.com/blog/learnvest-shutting-down-northwestern-mutual-success-financial-planning-software-pfm/?utm_source=rss&utm_medium=rss&utm_campaign=learnvest-shutting-down-northwestern-mutual-success-financial-planning-software-pfm
No comments:
Post a Comment