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Asset Allocation, Green Investing Evolving

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The last time we spoke with 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, it was early 2007 and he was focused on the aging population of the country, the rise of the independent advisor, and the growing trend of outsourcing among these advisors. With the arrival of 2008, these developments continue to be “quite healthy,” according to Crager, and are transforming into a new set of trends for this year.

“A prevalent theme in 2008 is the evolution of asset allocation,” Crager says, pointing out that the older investor who wants to protect capital and avoid volatility will drive that evolution. “Everyone uses an asset allocation with the usual stocks, bonds, and cash,” notes Crager. “I think what’s going to happen is that as the desire to protect assets becomes more of a priority [for retirees], asset allocation will begin to evolve with some nontraditional asset classes, such as alternative investments or a structured investment note.” Crager believes there will be some challenges when it comes to increasing the popularity of alternative investments, primarily educational ones. “Any investor hearing this for the first time may not understand the investment solution–it’s not as intuitive to them as a mutual fund or shares of Intel,” he explains. Envestnet’s solution to this is aiding advisors as they distill the complexities into an understandable story for the investor that tells the correlation between nontraditional assets classes and traditional asset classes and how they balance each other out.

A second development among aging investors is one of environmental concern. “We clearly see a trend, especially in the ultra-wealthy and high-net-worth category, but also in the affluent category, where investors are seeking out opportunities to invest according to their risk tolerance but doing it in a way that’s not blind to any environmental or social cause,” Crager explains. He credits the newly retired generation with boosting awareness of green investing and the notion of sustainability, calling them “a more socially conscious generation than those that have approached retirement in the past. When they invest dollars, they want to know what the companies they are investing in are doing and how they are operating their facilities–are they big-time polluters or are they doing something beneficial for the environment?” Crager believes that over the next ten years, the trend will become even more mainstream.

As for what Envestnet is doing to support these trends, major initiatives in 2008 include the launch of a sustainable investment platform in March with access to money managers who invest in socially consciously, sustainable portfolios, as well as screening tools to apply to current portfolios “so you know what you own and you know what the implication of what you own.” Envestnet’s year-old relationship with Fixed Income Securities (FIS) is “very strong,” Crager notes. “We launched the Monitored Fixed Income Portfolio solution in late 2007. It gives the advisor and client the ability to build a bond portfolio that best suits the client–their income needs, state- specific credit needs, and so forth, and do it in a very low-cost way.” Future plans for Envestnet, which currently has over $50 billion in assets, include broadening the relationship with FIS to offer more individual bond security access, as well as access to its structured investment product called Marketplace.

“I can see these independent advisory firms really flourishing in this environment. We give them that infrastructure to help them grow. We give them the infrastructure to help them deliver those investment solutions,” Crager concludes.


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