Envestnet's Jud Bergman on His Newly Public Company's Plans: The Weekend Interview

With 'public currency' in hand, firm to focus on helping existing advisors grow and comply with a fiduciary standard of care

Envestnet began life in 1999, and over the intervening years has grown from providing advisors with access to a host of separately managed account managers to offering a broad-based wealth management platform with tools to help advisors grow not only their investment options for clients but their businesses as well. On Thursday, July 29, Envestnet entered a new phase as a public company under the ticker ENV on the New York Stock Exchange. After ringing the opening bell that morning, Group Editor-in-Chief Jamie Green spoke by telephone to founder, chairman, and CEO Judson Bergman, who took the time to talk about his priorities and Envestnet's future.

Green: What does the IPO mean for Envestnet, and for the advisors and enterprise-level firms that use the Envestnet platform? Will it be business as usual?

Bergman: Basically, it will be more of the same. We see [going public] as evolutionary, it enables us to continue to do what we've been doing. We enable financial advisors to provide a higher standard of care for their clients, with a robust, thoughtful wealth management platform offering. It's taken us 10 years to grow to servicing over 19,000 advisors and we support more than $100 billion on our platform. We expect that having a public currency, having additional resources, we'll be able to continue to grow and maybe even accelerate that growth.

We enable advisors to deliver this fiduciary standard, this higher standard of care, what's in the best interest of their clients, and not just what is suitable

Advisors are increasingly figuring out that the end investor they want to serve expects their advisors will have their best interests in mind, and not just sell them something that's suitable. As advisors have recognized this, they have transitioned their practices away from commissions toward fees, and those who are fee-based are looking for ways to do that more effectively, more efficiently, and in an integrated manner.

The world is coming our way, and having a public currency and additional cash is just a way to help meet those advisors' needs who are trying to transition their practices toward that higher standard of care.

Green: When you use the term 'advisors,' you're referring to the wide range of advisors you serve on your platform--from RIAs to independent B/D reps? Some of them have already assumed a fiduciary responsibility, but many of them are scrambling to figure out how to comply, and feel they can't wait six months to see what standards would be imposed on them--to see what the SEC has to say about that standard of care. (The SEC recently sought such comments as part of its six-month study of advisors and brokers' obligations to clients.)

Bergman: You're right; we serve financial advisors with many different practice patterns, but almost all of them are independent advisors, and they're independent for a reason. They've been able to succeed on a unique value proposition. One of the things we do very well is to adapt and configure our core platform for those practice

patterns. For the RIA who's already configured for fee-based business, who already get that the world is moving toward this higher standard of care, they need tools to help them scale their business. Help them do what they do more effectively; reach more clients. For them we're a productivity enhancer. We want them to grow their practices profitably, but not compromise the standard of care they provide clients, in fact, to help them improve their standard of care but at a lower cost.

For those who are transitioning their practice from a more commission-oriented practice to more of a fee-based approach, those same tools and products, those back-office services we provide, will enable them to complete that transition more efficiently and quickly.

But it's all about enabling the advisor to perform that higher standard of care.

Green: Let's talk about your growth. You said that might even accelerate, now that you're public. Might that growth include acquisitions to help you add tools and services to your platform?

Bergman: The most important thing is to continue to do what we've been doing--organically growing by serving more advisors--and then really growing by helping those advisors serve more investors. Over the past five years, we've grown new advisors [coming onto the Envestnet platform] at about a 12% rate per year, but those advisors have grown their accounts at an 18% rate. That compounds out over five years to account growth of 32% per year, during what has not been a best of markets. We've added new advisors and assets every quarter for the past five years. I don't know how many financial services companies or technology providers can make that claim. That's number one.

Having said that, we're always looking. We have a platform that we believe is the broadest, deepest--and most important--the most integrated wealth management platform in the marketplace. I don't believe there any holes in that platform or our investment product offerings, which we make available through Envestnet PMC. But we're looking always at developing or acquiring technology providers or investment solutions providers that deliver value over a long period of time. We've done mergers and acquisitions in the past, integrated them well, and that's something we expect will be part of the future of Envestnet.

In May, Envestnet managing director of advisor-managed programs, Jim Patrick, discussed the IPO in light of the company's strategic plans.

Envestnet's portfolio consulting arm, Envestnet PMC, earlier in July announced a partnership with Singer Partners.

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