Envestnet Asset Management Inc. announced Friday that it had added separately managed account portfolios from BlackRock, Janus, Franklin Templeton and PIMCO over the past few months to its platform of vetted SMA managers for its affiliated advisors.
Mike Henkel (left), managing director of Envestnet/PMC, said in an interview that the addition of the new managers was made possible by an improved PMC manager approval process that he characterized as “more quantitatively based and less analyst-driven,” with the intent of providing more transparency to Envestnet/PMC’s internal compliance team, SMA managers who want entrée to the platform, and advisors who might want certain managers to join the platform as well.
Henkel said the new approach streamlines the manager approval process for the Envestnet platform, which he noted already includes 700 to 800 separate SMA portfolios, and will allow the addition of “more, but with the right set of controls.”
Providing a “more automated way to look at the fundamentals” of a portfolio, the approval process begins with Envestnet running a quarterly screen “on every manager in the Morningstar SMA database.”
That’s followed by prospective managers filling out a 40-item questionnaire that ensures that “there’s nothing materially wrong” with each manager—that their Form ADV and other registration documents are up to date and that there are no disciplinary actions in those records to give Envestnet pause. Once those performance and regulatory hurdles are passed, then Envestnet analysts “can say which of those managers they like, and why,” allowing those analysts, he said, to do “real analytical work.”
Finally, advisors can use tools on the Envestnet platform, Henkel says, to do their own “highly analytical” research in order “to build good portfolios for their clients.”
"We do create portfolios," Henkel said, "but our first job is to give advisors the building blocks they need to create portfolios themselves."
(Henkel is a regular commentator on AdvisorOne.com; he is most recently exploring tactical investing and asset allocation.)
While Henkel says “we had very good coverage before” in terms of SMA manager choice, “it’s always nice to have the BlackRocks and Templetons on the platform—they’re talented managers,” and pointed out that “the PIMCO funds have been coming in over the past few months."
He also suggested that the enhanced approval process, which he said he’s been working on since February of this year, will result in advisors seeing even more choice on the platform, saying Envestnet is “looking to do more with these managers—it’s the start, not the finish.”