In the two weeks since Northwestern Mutual announced that it was “shutting down” its 2015 acquisition of the LearnVest financial planning business and relaunching the LearnVest brand as an education-only content platform later this year, the industry has been immersed in “post-mortem autopsy” analyses of what happened and how Northwestern Mutual got to the point that they’re closing a business line that they bought just 3 years ago for a whopping $250 million dollars. However, the truth is that Northwestern Mutual acquisition of LearnVest was likely never about the LearnVest business model in the first place, and that by integrating LearnVest technology into Northwestern Mutual, the acquisition not only hasn’t been a failure, and in fact may 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 decision to shut down the LearnVest planning business is not a sign of failure, why the acquisition was likely never about Alexa Von Tobel’s “$19 per month financial planning service” in the first place, and where the real value of LearnVest was for Northwestern Mutual instead.
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, 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 (i.e., retail consumers).
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 all 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! After all, by some industry measures, 1.5 million leads alone could be worth close to $250M (at least if they’re qualified), and Fidelity’s purchase of eMoney for $250 million makes it clear the substantial strategic value of financial planning and PFM software for a large brand. Add a strong LearnVest consumer brand on top, and arguably Northwestern Mutual may have gotten a deal for LearnVest… even ignoring the actual LearnVest financial planning business altogether!
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 $2M/year business model in the first place, it was about Northwestern Mutual’s $30B/year business model – manufacturing insurance products – and how the LearnVest’s platform and planning software could better power that Northwestern Mutual model. 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 really about the acquisition of a financial planning business. It was a technology acquisition of financial planning and PFM software platform, for which LearnVest’s cash-flow-and-budgeting-centric focus was an especially good fit for Northwestern Mutual (in a world where insurance agents have always gone the deepest on cash flow planning). And from the perspective of using LearnVest financial planning and PFM technology – plus 1.5 million leads, and a strong consumer brand to generate more Northwestern Mutual Prospects over time – there’s still ample room for Northwestern Mutual to gain a positive ROI on its LearnVest acquisition… and their LearnVest hiring suggests that may already be happening!