The new Envestnet practice management offering is a bold solution, aimed at streamlining an advisor's practice. With several recent acquisitions, Envestnet has evolved into a leading resource for financial advisors and institutions. Its open architecture platform can be customized for an individual provider and claims to offer institutional-quality research, investment products and advisory resources.
Over the past five years the company has spent more than $800 million acquiring eight firms. The most recent addition is Yodlee Inc., the well-known cloud-based data analytics firm. The Yodlee acquisition allowed Envestnet the ability for its clients to link their banking and credit accounts with their investment accounts. This enables advisors to offer a broader wealth overview.
To understand Envestnet, it’s useful to examine two of its other recent acquisitions: Upside and Finance Logix. The Upside buy gave Envestnet access to a robo-advisor platform with investment management and analytics components. The Finance Logix purchase added well-tested financial planning software that has been used by financial advisors and clients since 1998.
The Envestnet Platform
Envestnet offers advisors and institutions an a la carte menu for all facets of the investment management process. The institutional level, open-access products, services and information advisor toolkit includes:
Automatic account monitoring
Efficient rebalancing tools
Archiveable action plans
Financial plan solutions
The customizable financial plan resources allow the advisor to gather and integrate all of a client’s holdings from 401(k)s, trusts and college accounts into one overview. This overview integrates premium research along with an advanced asset-allocation engine. The personalized financial plan capabilities include adaptable risk profiling tools for various life stages—think wealth accumulation and wealth income planning. The distribution option models are customizable as well.
Generate seamless proposals
The Envestnet proposal generator is another advanced, customizable client tool. This component combines client requirements into an investment policy statement that can then be used to monitor and adjust the client’s portfolio. The platform then alerts the advisor to review or rebalance client portfolios. Additionally, this feature automates the client contact communication.
PMC research and legal
Due diligence is a time-consuming and complex portfolio manager responsibility. The PMC due diligence ensures that the client portfolios meet the highest standards. Envestnet’s team of experienced analysts vet client portfolios, both qualitatively and quantitatively, in a process that includes both on-site interviews and assessment of the advisor’s ability to execute the strategy.
Client management and financial planning, together
This combined and customizable platform pools both financial planning applications and client management activities by integrating investment research, portfolio construction, practice management and performance monitoring services. The capacity for an end-to-end solution resolves a busy financial advisor’s needs.
A large part of a financial advisor’s planning duties involves "what if" scenarios. What if a client retires early, has another child, buys a vacation home or relocates? All of these actions have financial outcomes. The portfolio analytics tool examines the client’s complete financial picture and offers advisors the capacity to look at hypothetical changes, make future projections and analyze performance scenarios.
Simplified solutions for complex portfolios
Envestnet appears to stand alone with its breadth of offerings. The company works with 80 leading strategists and portfolio consultants to guide their investment and portfolio management recommendations. Additionally, the platform includes 15,000 searchable investment vehicles for client accounts. The services make it convenient to select, research and trade investments.
The Envestnet Detractors
In a recent InvestmentNews article, Eric Clarke, CEO of Orion Advisor Services, claimed that Envestnet bundles its services. He alleges that this can limit an advisor’s choices and flexibility. There are others who question the company’s acquisition approach, wondering about the firm's decision-making behind either breaking up and integrating parts of new acquisitions into its offerings or using the new purchases as is.
The Bottom Line
Envestnet may be an answer for the portfolio manager's, financial advisor's and institutional advisor's desire for a complete client service system. Designed to cover all aspects of the financial planning process, Envestnet can simplify the backend so that a financial advisor can focus on the human touch of his practice. Envestnet is creating a large scale operation, although integration of its large acquisitions may prove to be challenging for the company.