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Plenty of Platforms

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It seems as if new and revamped versions of Web-based platforms are constantly popping up as providers attempt to come up with just the right products and tools for advisors. According to Bill Crager, president of Chicago-based Envestnet Asset Management, which provides such services as online proposal generators and Web-based reporting tools for financial institutions and independent advisors with clients at all asset levels, there are four major trends in the industry that are pointing advisors in the direction of these investment platforms. First is the strong movement in the independent marketplace from a traditional commission-based business to a fee-based model. “Advisors are shifting rapidly to a fee-based business model and the platform is what’s enabling them to do that,” he says.

The second trend deals with demographics–investors are aging. “Therefore,” Crager explains, “the bulk of assets that are being invested or will be invested are of a retirement nature. Clients are looking for preservation and longevity of capital, and then accumulation.” He goes on to say that in response to this need, advisors are frequently using fee-based solutions to address their client’s needs. Crager’s third reason why platforms, like Envestnet’s, are becoming so popular is because advisors are “moving from captive environments to independent environments.” He notes that advisors are in need of technology support when they go the independent route, which the platforms provide.

Finally, Crager believes that the trend toward outsourcing is another reason why advisors are seeking these platforms. “What we build and deliver is very expensive to support,” he notes. “It’s not possible for an independent practitioner to replicate what we deliver.” Crager identifies Envestnet’s single platform as a strong point in its appeal to advisors, whether the advisor is interested in a fee-based structure, technology, or any other of the trends previously mentioned. “In the past, an advisor has used a product provider for separate accounts, a different one for mutual funds, etc., and coordinating all that into a practice has been a very large challenge for them. Envestnet has all of those capabilities on a single platform.” Besides the single platform, the technology integrates to a single performance report across multiple custodians, as Envestnet works with multiple brokerage firms, using the platform as a unifier. Compliance becomes less of an issue for advisors using the platform as well. “The platform creates complete transparency and visibility into the advisor’s book of business,” remarks Crager. “They can observe the clients’ accounts on a daily basis–they can see the performance, do tax management, and manage the account.” Envestnet’s platform also provides users with an alert system. If an account is out of balance, the advisor will be notified and can rebalance the account immediately.

Although Envestnet has about $30 billion in assets under management and more than 300,000 investor accounts, it’s enhancing its existing platform. “We’ve recently added an array of new mutual fund strategies and strategists to the platform,” notes Crager. “This year we will be adding a relationship with a firm called Fixed Income Securities, so advisors will have access to a full inventory of fixed income securities. Any bond they want to purchase, they can have access to that full inventory. We will also add broader performance aggregation in 2007,” he says.


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