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Does Envestnet’s Latest Strategy Sidestep Advisors, Going Straight for Retail Investors?

By Miriam Rozen May 8, 2018

By end of the year, Chicago-based Envestnet expects to start rolling out a new goals-based investing tool that will “minimize the effort for the advisors” and “give full discretion to the asset managers,” according to Blake Wood, an Envestnet senior vice president and its director of product strategy.

Dubbed Glidepath, the online tool helps investors set investment goals and then directly matches those goals with asset manager product offerings, letting retail clients calibrate – and recalibrate – their individual portfolios so they continuously adhere to goal-based planning objectives, says Wood.

Envestnet currently provides wealth management software tools to around 60,000 advisors, 46 of the nation’s top-ranked broker-dealers, and more than 1,000 RIA firms, so its introduction of Glidepath could alter dramatically the dynamics among asset managers, advisors, and their clients, industry commentators warn.

Glidepath will be paired with the existing capabilities of Envestnet’s technology, which let investors vacuum up and present in a user-friendly fashion their own financial data from a wide range of institutions and sources. But ultimately Glidepath has the potential to lead to automated mass customization of clients’ asset portfolio adjustments to meet goals-based planning objectives, say some advisors, and its introduction raises the prospect of reducing the significance of advisors and enhancing that of asset managers’ goal-based products.

Envestnet’s Wood addresses that prospect, knowing it could trigger concerns in the advisory world. “It’s a careful balance between an advisor and asset manager. We need to make sure that the advisor remains very relevant and the asset manager doesn’t become too much of the story.”

For advisors currently using the Envestnet platforms, Glidepath will be presented as just one of many options and its use not at all obligatory, Wood says.

The company expects to have a large national RIA with its own asset management division be the first to launch the new tool. The RIA is not yet willing to be identified publicly, Wood says.

The new tool is part of a wide array of options Envestnet will be rolling out to make it easier for advisors and their clients to incorporate goal-based planning more seamlessly into their portfolio choices.

“When a client’s life changes, things shift in their financial plan. This will change their investment along with that change,” Wood says.

Brandon Rembe, who is the chief technology officer for Tamarac, Envestnet’s division for platforms tailored to RIAs, expects his customers will ultimately embrace the new tool because goal-based planning has already become popular.

“The role of the advisor is not just about performance. It’s to have a broader impact on the client’s life,” Rembe says.

Robbie Cannon, the CEO and president of Charlotte, N.C.-based Horizon Investments, an asset management firm with $4.5 billion in assets under discretionary and nondiscretionary management, welcomes the introduction of the new Envestnet tool.

“I am completely embracing this,” he says.

Two years ago, his asset management firm rebranded and reset its focus on goals-based investing. It restated its mission as “goals-based investment management strategies that will empower financial advisors to help their clients achieve their most important financial objectives throughout life.”

Notably, mutual admiration flows between Horizon and Envestnet. Earlier this month Envestnet identified Horizon Investments as one of four finalists for its annual award for top strategic asset management.

By creating Glidepath, Envestnet is responding to demand by broker-dealers, Cannon says. It also happens that Glidepath will give his asset management firm a new pathway to get its goals-based investment products before advisors’ clients.

“Envestnet knows broker-dealers are moving in this direction,” Cannon says. “There’s demand from broker-dealers for goal-based investment management platforms, which better complement the financial planning that their advisors are already doing,” he adds.

Although he states broker-dealer demand exists for the type of tool Envestnet plans to unveil, Cannon expects no widespread adoption of it immediately. “It’s going to take time. I think it will be ongoing for a couple of years. It’s a massive transition, almost like moving from steam to coal,” Cannon says. But five years from now, “I really believe it will drive better outcomes for the customers. You're talking about mass customization,” Cannon adds.

Robbie Cannon

Ross Gerber also welcomes the potential of Envestnet’s proposed new tool. Gerber, the president and CEO of Santa Monica-based Gerber Kawasaki Wealth and Investment Management, an advisory firm with more than $700 million in assets under management, recognizes that the tool could be viewed as helping asset managers cut advisors out of the picture. Clients could simply plug in risk tolerances and goals-based planning options and get matched with investment products, and their portfolios reset when their goals are scheduled to adjust or otherwise change. But Gerber doesn’t share that fear.

“It doesn’t work that way. No human behaves all the time in a rational manner. They need advice. There’s nothing to be scared of,” Gerber says of the new tool.

He’s not surprised, however, that Envestnet would be catering to asset managers who are at risk of losing the justification for their fees as investors become more enamored of the consistency of indexed funds’ returns rather persuaded by the advantages of managed funds. The Envestnet Glidepath tool will “create value for asset managers’ products by tricking it out with technology,” Gerber says.