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Can Analytics Really Make FAs Smarter?

By Thomas Coyle May 4, 2017

Investment platform provider Envestnet says it’s putting technology to work to give its brokerage and RIA clients better insights into their clients’ financial lives — and a sharper sense of what they should be charging.

“We’ve freed up production data in a really agile way to provide the analytics advisors can use,” Frank Coates, executive managing director at Envestnet’s Yodlee division, tells FA-IQ.

In effect, Yodlee, a financial data aggregator Envestnet acquired about 20 months ago, is taking data from Envestnet’s brokerage-centric investment and portfolio management platforms and from its Tamarac business, which provides analogous services to RIAs. Yodlee then scrubs out identifying details and repurposes the data as information FAs can call on to get a better sense of, for instance, their clients’ saving and spending habits.

The aim, according to Coates, is to give advisors support for providing more targeted financial advice.

“When it comes to setting fee structures, financial advisors often work in a vacuum.”
Frank Coates

This information can also help advisors understand what other advisors charge their clients — and what services they offer to justify their prices.

“When it comes to setting fee structures, financial advisors often work in a vacuum,” says Coates. “They want to how they’re doing things relative to others.”

Envestnet’s new analytics capabilities can also help advisors monitor client engagement. More, FAs can even get warnings about at-risk clients. “It gives them the ability to glean from unstructured data like emails key words that may indicate there’s a developing problem — in time to do something about it,” says Coates.

Alois Pirker, a wealth management expert with the consulting firm Aite Group, thinks Envestnet’s Yodlee-powered rollout may turn out to be something of a vindication.

When Chicago-based Envestnet bought Yodlee in the summer of 2015, its stock price took a tumble — and still hasn’t fully recovered. This was an unusual reaction to an acquisition by Envestnet – a fairly voracious buyer.

In Pirker’s view, investors had “unanswered questions” about Yodlee as a fit for Envestnet. “Yodlee was a departure,” says Pirker. “Envestnet’s previous acquisitions could be seen in terms of market consolidation or expansion into adjacent markets.” But the purchase of Yodlee, he says, “was a bet on the future, not just an exercise in mopping up market share.”

But the rosiness of that future hinges on Yodlee’s ability to take complicated, multi-source investment and client data from various parts of Envestnet and provide “quality outputs where they need to be and that advisors can use,” says Pirker. And that, he adds, is very different from “screen scraping data” on bank deposits and the like.

Will Trout agrees. Research firm Celent’s senior wealth management analyst says all investment-platform sponsors want to put more of the “big data” they generate at the service of their advisors. And Envestnet may be in a better position than bank-based brokerages like Merrill Lynch and Morgan Stanley to do that “given that their bread-and-butter is investment management.”

Frank Coates

Envestnet has another advantage in Wheelhouse Analytics, a Philadelphia-area financial-software maker it acquired to little fanfare last autumn.

“The contribution of Wheelhouse” probably makes Yodlee more effective for Envestnet’s purposes, says Trout. As a standalone technology, however, Trout questions “the solidity of” Yodlee’s “investments analytics.”

Envestnet’s Coates says Wheelhouse — which he founded, and of which he is still CEO — had been working with Envestnet to bring Yodlee up to speed for about six months before it was acquired, and every day since.

“Envestnet needed a scalable way to use clients' financial data to answer a broad set of important questions advisors have about their businesses,” says Coates. To that end, while Yodlee does the heavy lifting, Wheelhouse “answers the question of how to free up production data for use in analytics in a really agile way.”