Envestnet Working to Add Fractional Shares to Platform
The move by the industry’s largest TAMP follows the recent introduction of Schwab Stock Slices.
Envestnet CEO Bill Crager says the firm is working to offer investors the ability to buy and sell fractional stock shares.
During the technology and turnkey asset management platform’s recent second-quarter earnings call, Crager disclosed the news while talking about plans to expand its business.
“I think the trick will be … how do we bring those solutions more down market so that more investors can take advantage of it,” he said, when asked about adding new innovations. Those solutions “would include fractional shares and other capabilities that we’re working to introduce over time.”
Crager didn’t elaborate on Envestnet’s development of a fractional share program on Thursday, and the company declined to comment further on the matter on Monday.
The CEO did, though, describe the economics of rolling out such offerings: “It’s just harder to execute and provide the diversification that we’d want to as you get too far down market. But for a typical $150,000 portfolio, we can achieve that … ,” he explained.
A Competitive Field
In May, Charles Schwab said it would soon let retail investor clients buy partial shares of S&P companies’ stock. That news came almost seven months after Schwab said it planned to move into fractional shares.
Schwab Stock Slices became available in June for as little as $5 each. The firm is set to complete its $26 billion merger with TD Ameritrade by year-end.
Fidelity introduced the option for its investor clients in late January — for both stocks and ETFs — while Robinhood did so in mid-December. Folio Investing, though, started selling fractional shares in 2000.
More Updates
Although Envestnet won’t be the first firm to offer fractional shares, a large number of advisors use its wealth technology platform — more than 103,000, according to Crager.
“Those advisors oversee more than 12 million accounts with $3.8 trillion in assets supported by our platform,” he explained.
Envestnet has stepped up efforts to enhance its advisor solutions on multiple fronts in recent weeks, the executive says. For instance, it recently launched Insights Solutions to provide “hyper-personalization” functionality for advisors using its Envestnet | Yodlee data platform.
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In late July, the company introduced an RIA Planning Analytics tool for its Envestnet | MoneyGuide financial planning software.
MoneyGuide “had its best quarter in its history” in the second quarter, Crager said, adding it now has “over 200 integrations, and we continue to see success in renewing, expanding and cross-selling existing enterprise relationships, while we’re also establishing new ones.”
Envestnet also is “seeing a large uptick in the number of RIAs leveraging MoneyGuide solutions,” he said, adding that sales to independent advisors not associated with large broker-dealers or enterprises grew 23% in the second quarter from a year ago.
Plus, the number of advisors using Envestnet’s tax and impact overlay solutions grew 16% since December, while overlay accounts grew 19%, according to the executive.
Quantitative Portfolios, the firm’s “first direct indexing solution, also experienced higher usage, with 23% more advisors using these solutions in 33% more accounts … since the end of 2019,” Crager stated.
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