Envestnet to Move Into RIA Custody Services

Envestnet says it intends to enter the custody business for registered investment advisors, according to remarks made by company executives during its quarterly earnings call earlier this week. This would put it in direct competition with the “Big Three” — Schwab, Fidelity and BNY Mellon’s Pershing.

Set to be rolled out in the second half of 2023, the custody effort relies on Envestnet’s partnership with New Zealand-based FNZ, which offers custodial and technology services and owns a majority stake of State Street’s Wealth Manager Services‘ business. The news was first reported by Citywire and Barron’s.

“Our new partnership with FNZ opens up multiple significant addressable market opportunities for us to drive increased revenues associated with custody,” CEO Bill Crager said on the call, Tuesday.

Envestnet shares were up 11.24% Thursday as of 4:00 p.m. ET. 

Envestnet and FNZ have “extremely complementary capabilities,” Crager explained on the call. “We also have very complementary geographies. We are accelerating FNZ’s entry into the United States market, and they are bringing us into the international markets. This is truly a global deal.”

The two firms announced their partnership on Oct. 27, referring to it as a step in launching “a fully digital, integrated wealth management experience for the U.S. market.”

A recent J.P. Morgan equity report cited by Barron’s stated that the bank’s analysts believe Envestnet “could scale a custody platform relatively quickly by discounting pricing on its existing products and services but still significantly increasing its overall economics given the healthy level of return potential that exists in the custody ecosystem.” 

The report added, custody services “could represent one of the company’s biggest long-term opportunities to date.”