Jud Bergman, Envestnet CEO Jud Bergman, Envestnet CEO

One day after it the news broke that wealth platform provider Envestnet is buying the financial planning software group PIETech, which owns the MoneyGuide suite, for $500 million in cash and stock, plenty of conflicting views on the deal have emerged.

Some opinions — shared via Twitter — are that Envestnet is spending too much money on it. Others see the move as a checkmate in the game of acquiring advisor dollars and loyalty.

Tech consultant Tim Welsh of Nexus Strategy found the price tag shocking. “They waaaaaaaay overpaid. Financial planning software is now a commodity; anybody can create a calculator,” Welsh said. But for popular blogger and advisor Michael Kitces, the PIETech acquisition is “a real coup” for a variety of strategic reasons. 

When it comes down to why the deal really happened, Envestnet Chairman and CEO Jud Bergman made the motivation pretty clear while discussing it with equity analysts late Thursday — coincidentally, Pi Day. Admiration for the MoneyGuide suite and its innovative leadership had given Envestnet a desire to acquire PIETech “for about as long as we’ve been a public company,” Bergman said, or nearly nine years.

“We’ve been trying to get to it” for a while, he explained. “And we were not the highest bidder. There was another party. We were a much better fit for their client and employee base, and for … the legacy the [leaders] want to leave.”

PIETech founder and co-CEO Bob Curtis “took 40% [of the deal] in Envestnet stock,” Bergman added.

Paired with the $660 million purchase of Yodlee in 2015, the announced acquisition represents “a profound shift in Envestnet’s focus from its investment/separately managed account roots into a full-scale advisor tech platform with a financial planning focus,” Kitces explained.

The move comes less than a month after Envestnet said it was buying the PortfolioCenter management and reporting technology from Charles Schwab — prompting some rival tech firms to offer discounts and other enticements for their competing products and services.

The deal “makes perfect sense from Envestnet’s perspective in their quest to own the advisor desktop and client experience,” said Gavin Spitzner, president of Wealth Consulting Partners. “They already had fairly deep integration with MoneyGuidePro, and now they’ll clearly tighten things even further across planning, proposal generation, data analytics, client portal and aggregation.”

What’s Next?

At least for Kitces, MoneyGuidePro users have “nothing to ‘fear’ here.” It wouldn’t make sense for Envestnet to pay $500 million and then “ruin” MGP, he said on Twitter. “They paid to get it and grow it further, and bring more tech synergies to bear (especially with Yodlee).”

Craig Iskowitz, head of the fintech-focused Ezra Group, sees the tie-up differently.

It isn’t aimed at “cross selling or better integration — this was 100% a ‘data play,’” according to the consultant. “MGP is No. 1 in market share of financial advisors, and Envestnet now has access to assets by custodians, by tech provider, [portfolio] positions and tons of customer demographics.”

But William Blair equity analysts point out that Envestnet will likely deploy “parts of the MG code base into its insurance, retirement and credit platforms,” and that over time adoption rates for its Yodlee technology “will benefit as advisors come to realize benefits of creating a financial plan that updates in real-time, (easier to do by owning both the planning and aggregation).”

As Iskowitz points out, there is much to “unpack” with the deal.

For Baird analysts Chris Shutler and Andrew Nicholas, the PIETech merger carries some execution risk “for a company that already has a lot of balls in the air, including the integration of FolioDynamix and PortfolioCenter, [the] launch of the Envestnet Insurance Exchange, opportunities around credit,” according to their recent report on the deal.

Though some advisors would like Envestnet to prioritize integration of what it’s acquired before the PIETech news was announced, the analysts say, “with only a few scaled assets in the financial planning space, it makes sense in our view to seize the moment.”

In addition, they point out, the deal further positions Envestnet to benefit from trends like “the movement of advisor assets from commissions to fees, greater outsourcing of investment management, the unification of advisor and end-client experiences across bank and brokerage channels, and increasing importance of data and analytics throughout the financial services ecosystem.”

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