May 02

Wonders & Blunders: Revolutionary Robo Advisor Acquisition

 
OUR CRITICAL ANALYSIS OF THE WEEK’S NEWS
Big news this week in fintech M&A: PE firm Hellman & Friedman announced its plan to buy the original robo advice platform Financial Engines and combine it with Edelman Financial Services. This deal could upend the digital financial advice industry.
 
In other financial news, one U.S. banking regulator privately proposed changes to lending rules created before the digital finance era. Community activists say the changes could result in decreased lending opportunities for low-income populations. Is a compromise possible?
 
Finally, remember the crippling cyberattack that happened in Atlanta? The city spent significantly more money recovering from the attack than the actual amount of ransom demanded. Increasing cybersecurity as a preventative measure would have been a lot easier on taxpayers’ wallets. Lesson learned!
H&F Buys Original Robo Financial Engines
Suleman Din, Charles Paikert and Sean Allocca in Financial Planning.
 
Hellman & Friedman (H&F), a private equity firm and majority shareholder of Edelman Financial Services, announced its planned acquisition of Financial Engines, one of the first online financial advice platforms. H&F plans to merge $169B Financial Engines and $21.7B Edelman into one company. The epic M&A deal “… is seen as remaking the digital advice landscape … [combining] two leading scale providers in two different channels of distribution.”
Bank Regulator Wants to Reduce Incentives for Lending to Low-Income Areas
Blunder: Shake-Up Considered on How Banks Lend to the Poor – Ryan Tracy in the Wall Street Journal.
 
Banking regulator Joseph Otting, head of the U.S. Office of the Comptroller of the Currency, asked other regulators to weigh in on eliminating the need for “geographic assessment areas” when they determine banks’ compliance with the 1977 Community Reinvestment Act. The assessment areas were created to encourage lending to the poor based on the physical locations of bank branches. While both bankers and community groups agree the 1977 rules are outdated now that a large percentage of financial activity occurs online, community activists say the proposed changes would reduce incentives for lending in low-income areas.
Atlanta Spends More than Demanded Ransom on Cybersecurity Recovery
 
Last month, the Atlanta cyberattack requesting a $52,000 bitcoin ransom resulted in the city spending $2.6M on emergency response efforts. The city’s officials did not reveal if they paid the ransom, but the hacker quickly removed the ability to pay the ransom by taking the payment system offline. Most of the city’s expenses went to digital forensics, additional staff, cloud expertise, crisis communications and a $600K incident response consulting fee from Ernst & Young. Atlanta’s actions may have beefed up their cyber defenses for the long term, but doing so during an emergency situation required a lot of additional taxpayer dollars.
» IN THE NEWS
Wealth Management reports that Atria Wealth Solutions is acquiring Cadaret Grant, an independent broker-dealer.
Paul Behnke, director of innovation at Brain Corpwrites in ISSA Today about how sensor technology is changing the way we work.
» BOTTOM LINE: 3 Reasons the Path to Capital Does not Always Equal Success for Startups 
The startup landscape is full of big VC names, high valuations and a lot of companies vying for the same cash. As a startup founder it can be a challenge to view venture capital funding and success as mutually exclusive events. So why, as a startup founder, do all roads often point toward capital? The answer is relatively straightforward – securing a large amount of capital can mean rapid brand exposure, instant clout and, generally, a seasoned team of advisors to help guide the business plan.
» FEATURED CASE STUDY: Intrinio
Intrinio, a financial marketplace driven by machine learning and artificial intelligence, wanted to appeal to investors, developers and financial services companies as a data provider that delivers enormous efficiencies at a lower price point than firms such as Capital IQ and Bloomberg. The company formed a strategic partnership with QUODD Financial Information Services to provide Nasdaq’s real-time data directly to enterprise clients (institutions and banks). Previously, Nasdaq’s data was provided in a raw and unfiltered form. The partnership provided enterprise users with faster implementation and a lower cost to access Nasdaq basic on the market.
 
 
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