CHICAGO — A year after Envestnet’s controversial purchase of Silicon Valley data cruncher Yodlee for $550 million, the back office outsourcing giant is making Yodlee’s data analytics and aggregation available to advisers.

Yodlee will be embedded in the next generation of Envestnet’s Investor Portal, Chief Executive Jud Bergman said in an interview with Financial Planning following his keynote address at the company’s annual Advisor Summit. Beta versions are available now and “the first real versions” are set to launch this summer, Bergman said.

The major benefits of Yodlee’s data analytics and aggregation platform for advisers will be the acceleration of a paperless on-boarding process for advisers and "the ability to see real time changes to a client’s financial picture," according to Bergman.

Advisers will have to pay extra to use the data. Envestnet will charge on a subscription basis, per adviser, per year on three tiers: basic data aggregation; data combined with PFM tools; and a data, PFM and goals-based planning package.

DATA USERS: TWICE AS MUCH WALLET SHARE
Data analytics is “the next phase in digital innovation” and will be “the key to more effective planning and business growth,” for financial advisers, Bergman told more than 2,000 attendees at the conference. According to a company study, advisers who use data aggregation and analytics have twice the average share of a client’s wallet than advisers who don’t.

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Advisers will have to pay extra to use Yodlee data.

Envestnet president Bill Crager, who followed Bergman, compared the advisory businesses’ increasing use of analytics to the way medicine is integrating data to augment a patient’s experience with a doctor.

As clients have more data coming from more financial sources and accounts, Crager said, advisers who are able to aggregate and analyze data will have the “predictive ability” to call clients with advice based on spending patterns or cash flow before even the clients themselves are aware of a financial issue.

JUSTIFYING YODLEE
To be sure, Envestnet has a vested interest in touting the value of data analytics; investors thought the whopping $550 million it paid for Yodlee last August was too high, causing Envestnet’s stock to drop 35% at the time of the purchase.

Nine months later, Envestnet’s valuation has not fully recovered. Analysts continue to question the wisdom of the purchase and also when the investment in the data supplier, which did not have any profits when it was bought, will pay off.

If Envestnet had merely licensed Yodlee’s technology, it would not have been able to achieve the full value of the data it sold, Bergman told Financial Planning. “The strategic importance of the data comes from mining, extracting and disseminating it, and you can’t do that through licensing,” he said.

Envestnet chief executive Jud Bergman says if the firm merely licensed Yodlee’s technology, it would not have been able to achieve the full value of the data it sold.
Envestnet chief executive Jud Bergman says if the firm merely licensed Yodlee’s technology, it would not have been able to achieve the full value of the data it sold.

In the long run, Envestnet is betting that advisers will be willing to pay up for an investor portal hosted by Envestnet that they can brand and will, as Bergman puts it, “cross the digital divide” between investor and adviser.

Bergman said he expects the Yodlee offering to get traction in the second half of 2017 and 2018. “Our horizon [for Yodlee] is four to five years,” Bergman said.

NEW COMPETITION
Envestnet’s focus on Yodlee has underscored the increased competition the company is facing in the competition for the adviser desktop. Major players such as Salesforce, Morningstar, Fidelity and BlackRock have all entered the market, putting pressure on legacy companies such as Envestnet.

Bergman acknowledges that Envestnet used to have a category of the market he described as a combination of “tech and product-driven” to itself. But, he said, new competition and the attention being paid to end-to-end integrated technology is a “validation” of Envestnet’s long time strategy.

Some observers also note that Envestnet is reliant on a few large customers for a sizable portion of its revenue. In its most recent quarterly earnings report, for example, Envestnet reported that Fidelity accounted for 15% of the company’s revenues.

Bergman said he was confident Envestnet’s relationship with Fidelity was on solid footing. “I expect our contract with Fidelity will continue for many years to come,” he said.

LOOKING AHEAD
After buying Yodlee, robo advisor Upside, financial planning software company Finance Logix and Tamarac over the last several years, Bergman was asked if Envestnet was still in the market for acquisitions.

“We will continue to evaluate acquisitions and other strategic relationships that leverage the scale that we've developed or expands our capabilities.” he answered.

But Bergman dismissed talk that Envestnet may position itself as a custodian in the future. “It makes no sense for us to compete in that business,” he said. “Envestnet remains [committed to] open architecture and continues to deepen our custodian relationships.”

Envestnet will focus on delivering integrated technology solutions that, Bergman said, support what the company calls “Capital Sigma,” its term for the financial return advisers can expect for the advice they provide on asset allocation, investment selection, rebalancing and tax management.

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Envestnet's chief executive dismissed talk that the firm may position itself as a custodian in the future.

Indeed, financial planning is “moving to the center of the adviser value proposition,” Bergman told advisers at the conference. While robo advisers have ushered in an era of commoditized investment advice, he said, the phenomenon also highlighted differences between “the cost of advice and the value of advice.”

Bergman envisioned a symbiosis of humans and computers in the future where “experts and machines can deliver better outcomes than experts or machines alone.”

FUTURE RELEVANCE
According to Crager, “financial advisers will be more relevant in 2020 than they are now.”

Accordingly, he called Envestnet’s newly launched Open ENV technology that provides more access to third party products and better integration with Envestnet offerings a “game changer” for advisers.

Envestnet’s Tamarac division unveiled a new edition of its Advisor CRM application compatible with Microsoft Windows 10 and Microsoft Office 2016. The new version features new search, navigation, mobile support and social-pane features. Tamarac’s Advisor Rebalancing technology, featuring a new dashboard, was also updated.

Content for consumers as well as advisers was also highlighted at the conference.

Envestnet will also begin offering advisers content from Advisor Stream, a company which aggregates and curates articles from a variety of financial media that advisers can utilize. And advisers will be able to access educational content to improve their own practices from a revamped Envestnet Institute.

Charles Paikert

Charles Paikert

Charles Paikert is a senior editor with Financial Planning, a SourceMedia publication.