AmEx is doing a U-turn to get back into financial planning now that competitors VISA and Mastercard are expressing an interest in the business.
American Express is marketing financial planning, again, 16 years after spinning off its 10,700-advisor planning mega-unit to concentrate on high-end credit cards.
In July, the New York City giant offered robo-advisor “My Financial Plan” to 25,000 card users.
AmEx’s old planning unit, then known as American Express Financial Advisors, was the envy of Wall Street, says Tim Welsh, president of Nexus Strategy.
“When I was at Merrill Lynch, we copied their planning approach, and if they charged $500 for a plan, we’d charge $200. We also copied how they trained their advisors to do planning and often made ex-AmEx advisors into branch managers.”
The firm spun-off the Minneapolis-based unit into an independent, publicly traded company in 2005, and rebranded it as Ameriprise,.
Today, Ameriprise Financial, Inc., is a diversified financial services and bank holding company. It provides wealth management, asset management, insurance, annuities and estate planning among other services. It trades on the NYSE under the symbol AMP and is part of the S&P 500. AmEx also trades on the NYSE as AXP.
John Brine, an Ameriprise spokesman, declined to comment for this article.
Little to lose
American Express is likely more focused on covering the moves of its card rivals than anything else as it revisits its old planning niche, says Lex Sokolin, head economist at ConsenSys, a blockchain software company.
VISA and Mastercard have both made moves in the direction of wealth planning by purchasing data aggregation companies such as Tink and Finicity, he says.
“The card networks became ‘money in motion’ companies and analytics and planning services like BodesWell deepen the customer relationship. It is possible, for example, that financial planning is free as long at some particular tier of spending,” Sokolin says.
Indeed, American Express has little to lose using its approach, says Hussain Zaidi, who worked at Ameriprise in the early 2000s and ultimately sold his firm Advizr to Orion Advisor Services. See: Advizr founder Hussain Zaidi parts ways with Orion but mission accomplished: Orion’s AUA leapt 50% in his 19 months
“This doesn’t surprise me for one very specific reason. If the large 900-pound gorilla has a problem they’re trying to solve, there’s a company that can do it,” he says.
“It’s an extension of the budgeting tools that others have been offering for years, but instead of short-term, these tools are now focused on long-term planning.”
American Express is offering the planning software without charge for now and sent mixed signals about what the service entails, says Tufts in an email.
“There’s no advisors – and we don’t provide any financial or investment advice. It’s a digital and self-service planning tool that’s designed to help card members make, track, and achieve their financial goals.”
American Express, with a market cap of $135 billion, actually may still have a far superior brand and marketing position for building up a financial planning practice than Ameriprise, despite its $29 billion market cap, Welsh says.
“They’ve got a killer brand and they can just market to their platinum clientele.”
For now, AmEx is calling its fresh foray a six-month “pilot,” and it’s private labeling software from BodesWell, a seven-person Boston startup launched in 2019.
American Express is “excited” about getting back in the planning game — for much the same reasons it got into it before, namely to get past the monochrome of card services, says spokesperson Ashley Tufts.
“We’re focused on providing cutting-edge digital services to our customer that go beyond the card. We’re excited to test this financial planning offering,” she says.
The focus of the software is to remove the need for financial advisor, BodesWell founder and CEO Matthew Bellows told TechCrunch,
“So much of financial planning software is aimed at financial advisors, and requires them to run it,” he told the publication. “…Our hope is to expand benefits to a lot more people.”
When asked if the American Express would hire staff to assist in financial planning, Tufts said the company is focused on automated planning, but did not rule out a more fulsome offering, including staff, in the future.
American Express quietly invested in BodesWell in late 2020 via its venture arm, Amex Ventures.
AmexVentures and BodesWell came together after Bellow and Julia Huang, head of consumer fintech and commerce investments at AmexVentures, sat in on a conference panel together in 2019.
Huang was hip to the Bellows pitch because she had already “evaluated the space quite extensively,” she told TechCrunch.
AmEx and Cambridge, Mass., startup began a collaboration more than vendor-customer engagement, according to the publication.
Huang introduced Bellows and his staff to Amex’s Digital Labs team, and they embarked on jointly developing a specialized offering for Amex customers, according to the article.
“I was drawn to the fact that it was not a round-up savings tool, but rather a holistic tool to understand your full financial picture that could be used to plan for the financial impact of your life decisions,” Huang told TechCrunch.
Cheap, holistic approach
The financial services behemoth is working with the startup to use a tool designed to help users make major life decisions about buying a house, a car or retirement.
The opportunity to deliver cheap and holistic financial planning to the masses is immense, says Steve Chen, founder and CEO of NewRetirement.com, which sells financial planning as a service via web.
“Today, it’s very expensive to get a financial plan. Companies are doing turbo-tax for planning, which can be very cheap.”
He adds that his Mill Valley, Calif., firm has recently signed enterprise deals so those companies can sell financial planning as a service.
The industry needs more holistic planning tools, Chen says. Both his tool and BodesWell are focused on planning and not AUM, he says.
Either way, Chen applauds BodesWell and AmericaExpress for introducing planning in an unconflicted way.
“Most of the financial industry is helping you to accumulate assets because they’re paid on assets. They want you to save money because they make more money when you save money.”
The new generation of planning software, including BodeWell and his own, is more focused on decumulation and aspects of existence outside pure investing.
“We’re helping you think about housing, social security, health and medical and how all of these things work together. It’s a much more complicated problem.”
American Express bought its way into financial planning in 1984, buying IDS Financial Services and gaining a sales force of 4,500.
When AMEX spun it out in 2005, it had 2.7 million clients, 3,700 offices and $410 billion of advised assets.
Since then, Amerirprise had done fairly well. It’s grown from $36 per share in 2005 to $250 per share currently and has nearly $1 trillion in AUM.
“At a market cap of $30 billion, it is about 20% of the $140 billion market cap of American Express That said, it is a very different business,” says Sokolin.
The question remains whether American Express foresees monetizing financial planning or using it as a loss leader, Chen notes.
“Are they just going to give BodesWell for free and up-sell to American Express for clients who work with an advisor?”