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BlackRock's Envestnet Deal Is a Big Win, Analysts Say

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BlackRock is buying about 5% of Envestnet, worth about $123 million, as part of a digital-wealth deal announced by the two firms early Tuesday. The aim of the strategic partnership is to boost investment technology tools for advisors and their clients.

According to one equity analyst, the deal is big win for Envestnet and its two platforms, Tamarac for RIAs and ENV2 for broker-dealers.

First, the integration of BlackRock portfolio construction and risk tools should give the platforms a new leg up on the competition, at least for a time, say Chris Shutler and Andrew Nicholas of William Blair.

Second, the tie-up is likely to “enhance advisors’ movement to fee-based accounts, which helps Envestnet’s growth as a primarily fee-based platform,” the two CFAs explain in a recent note.

Third, by purchasing a stake of Envestnet, BlackRock is giving “more firepower for M&A activity, which feels imminent,” the analysts say.

This news comes about a year after BlackRock consolidated its digital efforts, including its robo technology FutureAdvisor (acquired in 2015) and the iRetire planning tool.

“Integrating BlackRock Digital Wealth offerings into the Envestnet platform represents an industry milestone, advancing advisors’ ability to help investors meet their financial goals,” according to Envestnet President Bill Crager.

For BlackRock, the Envestnet partnership means its technology and brand are put in front of 93,000 advisors, the William Blair analysts say, which could boost net flows, especially for iShares ETFs.

“The agreement is in line with BlackRock’s vision of the future of financial advice— one that is more tech-enabled and fee-based,” they explained.

On a Tech Tear

Along with the initial investment of about 2.36 million shares at $52.13 per share, BlackRock will be given a four-year option of buying some 470,000 shares of Envestnet common stock at $65.16 per share, or roughly $30.6 million.

“As wealth managers shift to fee-based advisory relationships, they are asking for new technologies to help them scale their business and build better portfolios,” said Venu Krishnamurthy, BlackRock’s global head of digital wealth, in a statement. “Through this strategic relationship, we aim to bring BlackRock Digital Wealth’s solutions to Envestnet’s clients in a modern, highly integrated way.”

BlackRock manages roughly $6.44 trillion in assets worldwide.

Other tech-related deals and partnerships of recent years include:

  • an investment in the alternative-investment platform iCapital in 2016
  • the purchase of cash-management tech firm Cachematrix in 2017
  • an investment in European robo-advisor Scalable Capital in 2017
  • an investment in the micro-investing site Acorns in 2018.

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