In its quest to become a one-stop shop for digital wealth management solutions, Envestnet's newest acquisition shows it is not enough to possess big data alone.

Envestnet announced its purchase of financial data company Wheelhouse Analytics on Monday. The terms of the acquisition were not disclosed.

After a string of acquisitions, Envestnet slowed its deal flow last year. Founded in 1999, the platform provider has shifted its efforts toward becoming a data analytics leader in the digital wealth management space in recent years. The firm says it now serves 50,000 advisers and processes over 5 million investment accounts.

Envestnet snatched up fintech software company Finance Logix and digital advice solutions firm Upside prior to its purchase of Silicon Valley PFM tool and account aggregator pioneer Yodlee last August. Wall Street wasn't a fan of the $590 million deal for Yodlee, and Envestnet share prices slid 35% soon after.

But the firm has maintained its strategy toward building tech capabilities, preaching patience and its long-term vision. In hindsight, many of Envestnet's acquisitions heralded the current rush by wealth management firms to invest or acquire fintech companies.

The decision to acquire Wheelhouse came to fruition after working with the company on a variety of initiatives since 2014, according to a release announcing the deal. Envestnet president Bill Crager says the combination of Yodlee | Envestnet and Wheelhouse's offerings will yield a more comprehensive platform.

“Last year, we made a movement toward data analytics. The importance of data is the solution set for advisers and institutions,” Crager says. “This acquisition leverages all the information we have and will help [our] clients deliver a better offering and solution to their clients.”

BUILD OR ACQUIRE?
Platform providers have been forced to become more flexible in the wake of increased oversight from the Department of Labor according to Aite Group senior analyst Isabella Cagnazzo Fonseca. Firms are trying to juggle a desire to serve all financial segments with added regulatory pressures.

“As a platform provider, you have two options: You either build additional capabilities or you acquire successful companies,” says Fonseca.

Each of the three companies brings a different specialty towards a custom financial planning approach, says Wheelhouse founder and former CEO Frank Coates. He says Yodlee's data capability along with Envestnet's security offerings complement Wheelhouse's datamining successfully particularly when meeting compliance needs.

Quote
"Either build additional capabilities or you acquire successful companies."

Coates, who will serve as executive vice president of the Yodlee | Envestnet division, says the acquisition also presents the opportunity for advisers and institutions to create a "financial genome" for their clients: Advisers will be able to present investing options not only based on their clients' demographics, but also on their individual day-to-day spending habits.

"It gives all of us the ability to do what we want in the future," Coates says.

ACTIONABLE INTELLIGENCE
Joel Bruckenstein, co-creator of the Technology Tools for Today conference series, echoes Fonseca's point. "There's a lot of data available through investment platforms," he says. "But really applying actionable intelligence for advisers has been a challenge for the industry as a whole."

Bruckenstein adds that Wheelhouse's distribution analytics will help advisers analyze data better. He notes one of the biggest challenges institutions face is teaching employees how to use software efficiently while keeping up with regulatory restrictions, including the fiduciary rule.

The firm says Wheelhouse's e-learning platform will address this need. "We have built our company with a sharp focus on designing analytics and education tools that provide key business insights and enable our customers to become change agents in running their businesses more profitably while providing key support to investment advisers," says Coates.

Together, Envestnet and Wheelhouse "can deliver the industry's most comprehensive oversight and surveillance tool to support compliance," he adds. "We also look forward to continuing to invest in enhancing and expanding our current set of solutions."

Gabriella Iannetta

Gabriella Iannetta

Gabriella Iannetta is a contributing writer for Financial Planning.
Maddy Perkins

Maddy Perkins

Maddy Perkins is the Assistant Managing Editor for Financial Planning, Bank Investment Consultant and On Wall Street.