Startups in the digital financial advisory sector are going to need some wealth management tools of their own as money continues to pour in to the market.
In the latest news, Personal Capital, a provider of electronically enabled wealth management services, said it has raised $50 million in a new round of financing. The investment comes on the heels of news that Wealthfront, another provider of electronically enhanced wealth management services, had raised $64 million in its own later stage round of financing.
For Personal Capital, money for its Series D came from the late stage private equity investor Corsair Capital, alongside BBVA Ventures and USAA.
The company’s existing investors, IVP, Venrock, and Crosslink Capital, also participated in the big new round.
These rounds for Wealthfront and Personal Capital show just how competitive the wealth management market has become and how big the potential market is. While Wealthfront has carved out its stake servicing the newly minted dot-com millionaires of Silicon Valley (and Silicon Alley), Personal Capital has taken a different tack, and tried to reach the mass affluent market of investors with between $100,000 and $2 million in holdings, according to chief executive Bill Harris.
The company put its foot in the door with customers not by offering investment management services, but with a financial management tool that Harris says shows the full picture of a customer’s financial health. Beyond any stock portfolio or basket of mutual funds, the Personal Capital tool assesses a person’s cash holdings, debts, and investments to give investors a view of their total financial holdings.
Harris said capital from the round will be used to roll out additional products and services centered on products like mortgages and other financial tools that customers could expect from a big financial services provider.
Personal Capital also differs from the traditional electronic management tools in its use of advisors and technology to service its customers. Over 600,000 families use Personal Capital’s financial management software and services tools to track $100 billion in holdings, although the number of customers using Personal Capital to actually manage their holdings is much smaller.
The company’s money management tools are free to use, but customers pay for the advisory and investment services. The company recently launched a private client service to invest money for families with over $1 million in invested assets, and that service now accounts for over a quarter of the company’s business, according to a statement from Jay Shah, Personal Capital’s chief operations officer.
The San Francisco-based company has managed to carve out a niche for itself with affluent customers, just as Wealthfront and Betterment tackle the dot-com millennial set and high-end white-collar professionals; while FutureAdvisor and SigFig try to offer up services for the middle class.
“Personal Capital is at the intersection of consumer technology and financial services, a sector we believe is poised for continued growth” says Jeremy Schein, a principal with Corsair Capital who will take a seat on the Personal Capital board.
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