© 2020 Arizent. All rights reserved.

Envestnet goes after the richest investors: Q&A with CEO Jud Bergman

Register now

DENTON, Texas — The technology available to independent advisors has exploded in recent years — thanks in no small part to financial planning tools from eMoney and MoneyGuidePro. But, a new product is eyeing another corner of the planning market? The ultra high net worth crowd.

Envestnet and the backers of MoneyGuidePro (PIEtech) recently partnered with former eMoney CEO Edmond Walters to form Apprise Labs, a new startup focused on building software to address estate planning needs. Apprise’s flagship product, which will be featured on the Envestnet platform, is called MoneyLogixPro. It will become available to Envestnet’s 92,000-plus advisors sometime this year.

“We expect that this will solve the same market, but in a little different way,” says Evestnet CEO Jud Bergman.

Several software add-ons break down client assets into a single portfolio dashboard, according to an Envestnet spokeswoman. Showcased at the T3 conference in January, the tool also enables advisors to compartmentalize cash flow through distinct strategies, such as retirement savings, inheritance gifts or endowment contributions.

Envestnet declined to comment on pricing for the tool, although confirmed it would be on a subscription model. MoneyGuidePro plans to roll out its own version of the software, which has not yet been named, later this year.

Envestnet will continue to offer the eMoney software to its nearly 3,500 enterprise clients, says Bergman, which include 500 of the largest RIAs. “It’s a big market. We’re not trying to take a satisfied user of eMoney and get them to switch over,” Bergman says. “The problem is some advisors using Logix and MoneyGuidePro needed more sophisticated tools.”

Envestnet has been busy upgrading the tools available to its advisors. The firm landed a $123 million capital infusion from BlackRock in November, joining the world’s largest TAMP and the world’s leading asset manager. The deal also led to an integration with BlackRock’s newly minted Digital Wealth business, a conglomerate of the firm’s advisor tech business operations. Formed in 2017, Digital Wealth includes BlackRock’s robo offering FutureAdvisor, its risk analysis tool Aladdin and the retirement planning tool iRetire.

Bergman sat down with Financial Planning on the sidelines of the T3 Advisor Conference to talk about the need for new technologies that address the complex issues of the richest clients. He also spoke about the future of the RIA industry and what happens if tech firms like Microsoft or Amazon enter wealth management.

Why another planning tool?
Financial planning falls into a lot of different use cases. There is basic planning for the non-CFP and then there is financial planning that covers a lot more than just financial planning. Envestnet has been able to solve for client goals based on cash flow and fully integrated that into an investment platform that solves a very particular problem for the non planner. And, that’s a huge market. But, that’s not what we’re trying to solve for here.

With MoneyLogixPro, we wanted something that fits the high-end advisor working with high-net-worth and ultrahigh-net-worth families with sophisticated estate and legacy planning. Families really have to have more than $25 million or more to make the tool meaningful.

What are your plans for adoption?
We think it’s going to be adopted by high-end RIAs, the multifamily offices or wealth manager at brokerage firms that have HNW clients. It can strengthen relationships and solve for gaps that we just couldn’t solve for before. We serve 40% of the firms with over a billion dollars, many of those RIAs are multi-family offices with significant HNW clients. We had a planning tool that solved for the mass affluents, but we needed something more sophisticated.

How does this tool differ from other planning tools like eMoney?
I’m not sure we see this as a switch. If you take a step back, the problem we are all trying to solve is a need for a high-end tool that can manage tax and estate planning that our software just didn’t solve. Logix users at Envestnet needed a high-end tool, and at MoneyGuidePro it was a tax and estate planning package that their software did not solve. They are different client bases. We’re trying to create something neither of our softwares handled.

Assets on the independent channel have exploded in recent years. What are the leading tailwinds for RIAs?
Our research suggests that most of the growth in wealth management in the last four years is coming from some of the largest RIAs. Smaller firms have been part of it, but that's been somebody else’s game. Nearly all of the net growth is attributable to the largest RIAs. Why is that? It's just a better business model. It used to be that the best tech was only available at the wirehouses. That’s not the case anymore. Now, the best tech is found at the independent advisors.

Do you see continued growth in the independent channel?
The fiduciary standard is just a better business model. Then, combine that with better technology. It’s going to continue to appeal to quality minded advisors. It’s going to continue to be an important factor and the driving reason behind large RIAs accounting for nearly all of the net growth in the channel. There is about $30 billion to $40 billion coming in every year. Those dollars starts to add up fast.

Are tech companies, like Amazon, a danger for wealth management?
Amazon is already in financial services if you look at what they are doing internationally. I see no reason why that wouldn’t be the case in the U.S. They might be the best run company in the world. The challenge is that you’re going to see them perfect their business in some of these other markets and then turn their sights onto the U.S. But, again, data analytics paired with data driven advice and human advisors has led to better outcomes for clients. Advisors that adopt the right technology will not be disintermediated by anyone.

For reprint and licensing requests for this article, click here.