Insurers are launching their own ETFs and using their own capital to leapfrogging the otherwise painful first phase of growing the assets of a new ETF that opens the door to being listed in multiple warehouses. The theme was highlighted in Large institutional investors becoming ETF issuers: Follow Insurers last week.
CB insights has produced a great infographic of the activity of insurers in the space of robo-advisory (Where Insurers Are Investing In Digital Wealth Management). The red lines are acquisitions and the other lines indicate a stake in the company.
Two acquisitions have happened. One in Europe and one in the US. Aviva in the UK bought this October a majority stake Wealthify which is a fairly young robo-advisor launched in 2016. Aviva will add the 5 low-cost investment plans that Wealthify has (ISAs and general) to their MyAviva digital hub. Northwestern Mutual, a Milwaukee insurer, had invested through its private equity arm in LearnVest early on and acquired the company for $250M in 2015. Both cases are examples of insurers enriching their digital offering and not of geographical expansion. The case of Northwestern mutual is more interesting because it is 2yrs old. As Jasen Yang, founder and CEO of Polly Portfolio and very sympathetic to the uphill battles faced by single-purpose digital tools that must integrate into multi-line businesses, says: “Such Fintechs kind of disappear into the big company and no one really can see what they’re doing.”. Yang is very outspoken on issues of tech inertia in the wealth management industry in general (See for example, Why legacy firms that buy robos in haste show no signs of urgency after they take title).
The rest of the investments of insurance companies or their VC arms are minority stakes and what becomes clear after looking carefully into who is doing what, are the following observations:
- All European insurers (Aviva and Allianz) have taken stakes in European robo advisors (young Wealthify, and old timer MoneyFarm) mainly to supplement their digital offering and possibly to not lose the millennials.
- All US insurers (USAA, Northern Mutual, Nationwide) have taken stakes in US robo-advisors (Personal Capital, Betterment, Bloom). Notably, all robo-advisors are not only local but also in the “larger” tier.
- All US insurance VC ventures (New York Like Ventures, Allianz Life Ventures, Transamerica Ventures) have mainly stayed local in their investments and again in the “large tier” (SigFig, Bloom, Next Capital) with the only exception of Transamerica VC that has also invested in a German pension solution robo (de)
- The Canadian insurer Manulife has invested in the US robo Next Capital (Manulife, the giant Canadian insurer that owns John Hancock Financial of Boston). The Japanese Mitsui Sumitomo Insurance Group has invested in the also large US FolioFn Fintech. And the Chinese Ping An VC in the social trading European platform EToro. I am not including Aegon, the Dutch insurer, who is shown on the CB insights graph to have invested in Romeo Financial Services in Australia, only because the latter is an old-time automated solution provider.
FolioFn is not only a broker but also an investment platform with various offerings for financial advisors and financial institutions. Folio Investing, is their online brokerage serving individual retail investors; Folio Institutional, provides client management, custodial and reporting services to financial advisors and investment managers; and Proxy Governance, is one of the leading proxy advisory and voting services. This US/Japan cross-border investment makes a lot of sense.
Etoro is a social trading business that continues to expand geographically and in terms of its product offering (started with FX, then equities, derivatives, and now cryptos). The cross-border match Europe/Asia makes sense since most of EToro’s users are in Japan and Asia already.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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