I’ve been a big fan of Jemstep for quite a while now. I first met their president, Simon Roy, at a T3 conference a few years ago when he was on a panel of robo-platform providers. (See 4 Robo-Platforms Go Head-to-Head at T3 Conference)
While Jemstep started out with a short-lived direct to consumer model and then pivoted to B2B, their business model has been as a service provider to advisors, not a competitor. This was probably one of the criteria when Invesco was shopping for acquisition targets that was not in the same space as their clients.
Selling technology to advisors isn’t glamorous and doesn’t generate the kind of press heaped on robo-advisors like Wealthfront, Betterment or Personal Capital. But the Kevin Cimring, Jemstep’s CEO, Simon and their team, decided to focus on building a business for the long-term.
This acquisition caused a bit of confusion in the press.
Everyone knows what Invesco does. They’re a mutual fund and ETF manager. But some in the press don’t seems to understand what Jemstep is all about. They can not see the daylight that exists between a robo-advisor, which is a digital RIA that manages assets for a fee and competes with traditional advisors, and a robo technology platform provider that sells to advisors and does not compete with them.
You can see from the headlines that some were confused:
- Invesco acquires robo-adviser Jemstep
- Fund Manager Invesco Acquires Robo-Advisor Jemstep
- Invesco Buys Robo-Advisor Jemstep
A few sources got it right:
This was clearly the case of a vendor to the advisory business buying another vendor that has a complimentary product. There are many reasons why a fund manager would want to purchase a technology provider.
RIABiz has an excellent overview of this deal, How exactly Invesco plans to get a return on its Jemstep robo purchase with a TAMP-evoking strategy. Some industry pundits think the goal was to buy a new channel for distribution of Invesco products. I don’t see this as a major driver since advisors that launch a digital channel naturally gravitate to the lowest cost investment products, which usually aren’t Invesco’s. Trying to force their inventory on them would be doomed to fail.
I have written extensively about Jemstep and robo-platforms. I believe that a digital advice channel will become table stakes for all RIA’s soon. Now that the big four RIA custodians are offering robo-platforms, every advisor will be able to offer a low-touch service to attract smaller accounts.
While their automated onboarding process is seen as a major benefit, our review of their platform highlighted other areas:
- free portfolio analysis and account aggregation for prospective clients
- integration with Salesforce CRM to automatically create contact records when prospects register
- a dynamic proposal process with automated segmentation of incoming prospects
This functionality sets them apart from other digital advice platforms and has been a key aspect of their success. By extending their reach beyond account opening into prospecting, they add value where advisors are usually weak. By automatically populating Salesforce with prospective client’s data, they improve efficiency.
Jemstep is also an attractive target since their prospecting features attract clients with more assets. Incoming prospects that utilize their data aggregation feature have an average of $250,000 in assets. (See Jemstep Advisor Pro Helps Convert Robo Prospects into Clients)
Invesco has a presence in 20 countries, which could be leveraged to sell Jemstep technology outside of their primary US market. They would need to add features such as multi-currency, multi-lingual and support for international regulations such as the EU’s MFID 2. But where there are financial advisors, there will be a need for digital wealth management platforms, like Jemstep.
Targeting commonwealth countries such as England, Australia, New Zealand and South Africa, where both Cimring and Roy are from, is an attractive first step in this direction.
Invesco Acquiring Jemstep Helps Compete With TAMPs
The acquisition of Jemstep by Invesco will help their efforts to move upmarket. They have been selling primarily to smaller RIA’s but getting a lot of interest from larger firms. Jemstep needed a cash infusion to continue their growth and had a choice between more private equity money or selling the company to someone with deep pockets. They chose the latter. With Invesco, they gain a parent that can not only finance their expansion, but also provide other benefits, such as improved portfolio analysis, due diligence and model portfolios. All of these services would help Jemstep to become more of a TAMP and better compete with bigger players in the RIA space such as FolioDynamix and Envestnet.