Envestnet CEO departure sparks call for streamlining

With Envestnet CEO Bill Crager stepping down this spring, people who work closely with the firm are hoping for a return to innovation and further consolidation of the many businesses the firm has bought over the years.

Doug Fritz, the co-founder and CEO of the wealthtech consultant F2 Strategy, said he believes Crager's coming departure opens two doors to Envestnet. The Berwyn, Pennsylvania-based advisor technology and turnkey asset management platform could bring in a new CEO who embarks on a round of cost cutting. Alternatively, it could start selling some of the businesses it has bought in recent years — which include the advisory tech firms MoneyGuide and Tamarac — in order to both raise cash and eliminate organizational redundancies.

Fritz, who has many clients who turn to Envestnet for technical and software support, said he sees the latter path as the one more likely to be taken.

"They could sell a few firms and go buy a few other entities that would make their offering more relevant," Fritz said. "That would be a pretty significant transformation of their product."

Envestnet announced in a statement Monday that Crager's last day as CEO will be March 31. Starting in April, board chairman James L. Fox will serve as interim CEO until a full-time successor is found. 

The board plans to consider both internal and external candidates with the help of an executive search firm. An Envestnet spokesperson did not indicate that there's any set timeframe for having a new permanent CEO in place.

Crager, 59, will stay on as a senior advisor working primarily on relationships with clients and other partners. He became CEO of Envestnet in 2019 following the death of his fellow founder, Jud Bergman, in a car crash in San Francisco.

Without wanting to take anything away from Crager's accomplishments, Fritz said Envestnet has struggled to recover the innovative spirit it once had under Bergman.

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"Envestnet has no real right to call themselves an innovative industry-leading firm," Fritz said. "They are huge, and they are very good at what they do. But they are not driving things forward."

Crager, who founded Envestnet with Bergman in 1999, said in a statement: "We now serve more assets, more financial advisors, and more accounts than anyone in the marketplace. Together, we have built a more integrated, cohesive organization with a connected operating platform that provides a gateway to the future for the industry."

Envestnet lists itself as working with 107,000 advisors who, in turn, manage $5.4 trillion in client assets. The spokesperson credited Crager for building "a strong and experienced management team that will continue to execute Envestnet's growth strategy," among other accomplishments.

But Wall Street has not taken a favorable view lately. Envestnet in November lowered its prediction for total annual revenue in 2023 to a maximum of $1.24 billion, down from about $1.26 billion. That came after layoffs in September.

There has also been a good deal of turnover at the top. Envestnet's former president, Stuart DePina, announced in June 2022 he was stepping down amid a reorganization meant to simplify the business.  

The company, whose share price is down more than 20% over the past year, has come under scrutiny from the activist investor Impactive Capital, which had a say in the appointment of two of the firm's board members in March. Impactive Capital didn't respond to a request for comment on Monday.

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Fritz said he doubts anything the activist investor did led to Crager's stepping down. Rather than pressure from a specific source, he said, the decision more likely came about as a result of a recognition that change was needed.

Though the firm enjoys a huge market presence, "Other players have come in and started drinking their milkshake a little bit," Fritz said.

The Envestnet spokesperson said, "Bill's decision to transition from his role as CEO is not related to any disagreement with Envestnet or with Envestnet's operations, policies or practices."

A recent Advisor Software Survey found in July that Envestnet's financial planning software, MoneyGuidePro Elite, had lost 2% of the market for advisor software over the past two years as rival firms like RightCapital began to make inroads. 

"In past reports, we've been accustomed to talking about a Big Two in the financial planning space, but as of now, RightCapital should be considered part of a Big Three," wrote the report authors Joel Bruckenstein, the president of the tech and consulting firm T3 Technology Hub, and Bob Veres, the owner of the Inside Information industry publication.

Still, Envestnet remains a force. A separate report by the advisory consulting and support firm Kitces found that Envestnet's MoneyGuide holds 32% of the total market for industry software, well ahead of RightCapital's 23%.

Envestnet acquired MoneyGuide and its parent company, PIETech, for $500 million in 2019, when Bergman was still at the helm. That purchase was preceded in 2012 with the acquisition of Tamarac, a portfolio management system for financial advisors. In 2018, it bought another portfolio management system, FolioDynamix. Bloomberg reported in December that Envestnet was considering selling Yodlee, a data aggregator it bought in 2015 for $590 million.

Fritz said he has seen little evidence that Envestnet has done much to eliminate the sorts of redundancies that inevitably result from these sorts of deals.

"You have multiple sales teams, leadership teams, middle offices, call centers, billing," he said.