Envestnet's Tamarac to buy Schwab's PortfolioCenter

Envestnet will add Schwab's portfolio management and reporting tool to its back-end platform for advisors.

(city wire) -- Envestnet’s Tamarac, a popular platform for RIAs, said after the market closed Thursday that it plans to purchase Charles Schwab’s PortfolioCenter, a portfolio management and performance reporting tool for RIAs.

Around 1,000 advisory firms use Tamarac. The two pieces of technology are already closely connected to one another, as many RIAs on the Tamarac platform use Schwab’s PortfolioCenter as a back-end data application when they manage and rebalance portfolios.

Financial terms of the deal – which is expected to close in the first half of 2019 – were not disclosed. Envestnet chief executive Jud Bergman said on a conference call with analysts that he expects the deal to give his firm access to a broader range of advisors. The deal is expected to add around $10 million of annualized revenue to the firm, he confirmed.

‘We've already got of the 3,000 users of PortfolioCenter, we have nearly a third of them, perhaps fully a third of them already using Tamarac. The largest of those firms – those firms $500 million and up have adopted Tamarac to a much higher percentage, around a 50% market share of PortfolioCenter users,’ Bergman said. ‘It's the mid-sized advisors that we have not traditionally focused on, and we see this as a tremendous opportunity for us to focus the Tamarac offerings on the mid-sized advisor, which is a huge part of the market that we have not intentionally emphasized. That changes with this acquisition.’

RIA tech expert Joel Bruckenstein told Citywire that with the sale of PortfolioCenter, Schwab would likely concentrate its efforts on its next-generation portfolio management software, Portfolio Connect.

‘The short answer is that it [the deal] makes a lot of strategic sense. Schwab has changed their strategy over the last year, or so it seems. They are now much more supportive of working with third parties in a meaningful way,’ said Bruckenstein, producer of the T3 Conference series for RIAs.

‘Envestnet/ Tamarac has been a consumer of PortfolioCenter tech for years, so they understand it as well as anyone.  The firms have many clients in common. Apparently Schwab will be concentrating their development efforts on their next generation portfolio solution.’

Unlike Portfolio Connect, PortfolioCenter is multi-custodian. As Bruckenstein detailed in an August of 2018 blog post, Schwab originally envisioned that Portfolio Connect would be multi-custodian as well and become a direct competitor to Tamarac and Orion Advisor Services. However, the company has apparently abandoned those plans. A free version of Portfolio Connect is currently available to RIAs who custody their assets with Schwab.

Bergman said that with the acquisition, he expected his firm to both cooperate with and compete against with Portfolio Connect.

‘How the two technologies, we expect, will work is that the new technology will be offered to users of Schwab as a custodian. We expect that all of these advisors that are part of PortfolioCenter will continue to use the custodians that they currently are using,’ he explained. ‘And we will be offering our upgraded technology based on a new portfolio accounting engine, a web-based, cloud-based accounting engine and there will be in the marketplace something of a coopetition that we consider Schwab a very strong partner.’

Popular

More Articles

Popular