The merger will give Envestnet the largest set of SMA and UMA strategies in the industry, President Bill Crager says.

Envestnet Inc. announced Tuesday that it has agreed to acquire Placemark Holdings Inc. for $66 million in cash, giving the Chicago-based firm a stronger presence in the regional broker-dealer market, balancing Envestnet’s already strong presence in the SMA and UMA space among independent BDs and RIAs.  

“Placemark has been very successful in helping firms that have successful SMA programs,” like regional BDs that “didn’t have the capital to build their own UMA solutions, which are now more of a core offering in fee-based programs,” said Envestnet (ENV) President Bill Crager in an interview.

Stressing that unified managed accounts, or UMAs, are “not a product, but an infrastructure,” Crager said Placemark has succeeded in “helping those full-service broker-dealer firms to transition” from traditional SMA offerings to UMAs.

Placemark Chairman and CEO Lee Chertavian will join Envestnet as Group President of Envestnet|Placemark. The “most senior members” of Placemark’s management team—including Chertavian, Ron Pruitt and Richard Dion—“will remain in impactful roles” at Envestnet, Crager said. 

The integration of Placemark, including its portfolio overlay and tax ptimization offerings, onto the Envestnet platform will be done slowly and deliberately, said Crager, saying final integration could happen by late 2015 or early 2016. “We won’t rush the integration,” Crager said, since a “slower process” with plenty of time for planning will be “very helpful” to Placemark’s clients. He said by that time it will be “clearly an accretive acquisition.”

Envestnet has had much experience over the past few years in integrating firms onto its platform, from which it learned that such integration “is an extended process; we want to make sure the client has plenty of time to transition.”

As for the SMA and UMA strategies, Crager said “we have 1,500 strategies; they have 2,000,” so “there’s massive overlap,” and that even with duplicate strategies removed, “the superset together will be the largest in the industry,” which will make it easier as well for employee brokers to maintain access to their preferred managers should they go the independent advisor route.

Crager said that in acquiring Placemark — the deal is expected to close by early in the fourth quarter — it did so because it expects “down the road [that] firms will look beyond the UMA” offering alone to integrated features like performance reporting, rebalancing and due diligence on a wealth platform like Envestnet’s.

For some BDs, he said, “it will make sense” to adopt “a cloud-based, highly flexible, nuanced” integrated platform like Envestnet’s that delivers the flexibility needed in fee-based programs. Total UMA assets at the combined firm will be about $25 billion; Envestnet alone had $572 billion in assets as of the end of Q1 2014.

Are there more acquisitions in the offing? “We continue to look for opportunities,” Crager said. “We evaluate a lot more opportunities than we follow through on.

“This one ticked all the boxes,” he said, referring to Placemark and its culture, people and offerings.

“We’ll be focused on how advisors’ practices are evolving, and what they expect in the next generation. Some of that we’ll build ourselves,” he concluded, while some will be provided by “strategic” moves.

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