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Envestnet to Buy Schwab's PortfolioCenter

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Technology and platform provider Envestnet has inked its second deal less than three months after asset manager BlackRock bought close to a 5% stake in it.

Envestnet said late Thursday that its Tamarac business is buying PortfolioCenter, Schwab’s portfolio management and reporting technology for RIAs — a move that was not wholly unexpected, says one industry insider.

“Given the deep interconnectedness of Tamarac and PortfolioCenter and Schwab’s RIA network’s increasing usage of Tamarac and the diminishing utilization of PortfolioCenter independently, this deal has been rumored for a while and it makes sense for Envestnet, Schwab and their mutual clients,” said Gavin Spitzner, president of Wealth Consulting Partners.

Plus, Spitzner points out, now it’s clear what Envestnet Chairman and CEO Jud Bergman and President Bill Crager “were thinking about when they took the $123 million from BlackRock in November.”

About a month ago, Envestnet’s Yodlee unit purchased Abe AI to boost advisors’ and financial firms’ conversational artificial intelligence abilities, so they can interact with clients via Amazon Alexa and Google Assistant, for instance.

Schwab Tie-Up

“We’re excited about the opportunity to acquire PortfolioCenter,” according to Adina Anderson, head of Envestnet | Tamarac. “With more than a decade of experience supporting RIA firms leveraging the integration between PortfolioCenter and our comprehensive platform, this acquisition will enable us to provide an even higher level of service to our RIA clients.”

The firm says that its RIA clients have been using PortfolioCenter as the back-end data application with Tamarac’s portfolio management and rebalancing applications “for years.” Some 3,000 advisory firms use PortfolioCenter either directly from Schwab Performance Technologies or from Envestnet | Tamarac.

Advisors rely on portfolio-accounting software to run their practices, says Anderson, and PortfolioCenter is “one of the most widely trusted solutions.”

Complicated Scene

Bergman said during the firm’s earning call Thursday that the deal fosters a closer partnership between Envestnet and Schwab and will help Envestnet Tamarac grow its marketshare among mid-sized RIAs — so the firm can catch up to its 50% share of the larger RIA ($500 million in assets and up) segment, according to Spitzner.

The deal also should help the firm do more cross-selling of managed accounts, data analytics and aggregation to that market. Still, Bergman acknowledged that in keeping with today’s world of “coopetition,” Envestnet will be competing at times with Schwab.

For Schwab, the situation seems to involve this and other complications, according to Tim Welsh, head of the consulting group Nexus Strategies.

“The cloud is the future, and Schwab is definitely throwing in the towel on their advisor technology plans,” said Welsh, a former Schwab executive. “It creates tremendous opportunity for the other portfolio-accounting systems to pick off the thousands of [potentially] unhappy advisors who may feel betrayed and abandoned by their custodian.”

What advisors most fear when their systems get sold, Welsh explains, is that the technology they are used to gets shut down, support levels are cut, and costly upgrades emerge.

Schwab, of course, sees the situation differently. “As a longstanding user of the PortfolioCenter infrastructure, Envestnet | Tamarac is an ideal strategic fit to acquire and continue to support the platform,” said Andrew Salesky,  head of Schwab Digital Advisor Solutions, in a statement.

“Our top priority is meeting advisor needs with the best solutions, including proprietary capabilities as well as integrations with third-party providers. The agreement with Envestnet | Tamarac supports this strategy …,” added Salesky.

— Check out What’s Next for Advisors? Envestnet Betting on Voice Tech on ThinkAdvisor.