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Envestnet buys a company to gain an edge with Schwab RIAs

The big TAMP's purchase is a move toward more generalized outsourcing

Author Brooke Southall June 14, 2010 at 5:36 AM
1 Comment
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Mike Apker: We want advisors to think of us as a full outsourcing partner.


Steve Winks

Steve Winks

June 24, 2010 — 4:25 PM

Brilliant Move by EnvestNet

By moving to the RIA space Envestnet is positioning itself to answer questions which the brokerage industry has found it very difficult to resolve, thus becomes a free market solution that simplifies the advice business for advisors of all types.

Turn Key Asset Management Programs are advice products where the sponsor, Envestnet, is acting in a fiduciary capacity as a money manager governed by prospectus, but the advisor is not releived of their fiduciary duties as an advisor to their clients. By focusing on the RIA space, Envestnet as an outsourced advisory services support becomes process driven (asset/liability study, investment policy, portfolio construction and management) and resolves advisor support issues that the brokerage industry as we know it can not resolve.

TAMPs are about 80% there when it comes to fiduciary standing, but 90% of the value is in the last 20%. If Envestnet were to advance just a few innovations for the RIA space it would fill an industry leadership vacuum long needing to be filled. Cerulli say in seven years 80% of brokers will be primarily engaged in advisory services up from 20% today, yet the industry will not acknowledge brokers render advice of have a fiduciary duty to act in their clients best interest. If Envestment cracks the code on the last 20% which will bring fiduciary standing within the reach of all, it could win massive market share. Will it happen? It is up to them, but this is what they have to do:
1. Establish the scope of the counsel they support to establish the limits of their liability and clarify the limitations of its counsel,
2. Create a prudent process (asset/liability study, investment policy, portfolio constructuion and management) with an audit path to statutory documentation to authoritatively assure fiduciary standing.
3. Create client deliverables for the prudent process.
4. Create support for a functional division of labor (Advisor, CAO, CIO) that simplifies the delivery of an extremely high level of counsel.
5. As part of the scope of engagement Envestnet needs to provide client options on estate planning, trust services, private equity valuation, etc which are customized to each advisors service menu.
6. Envestnet can easilt resolve conflicts of interests in ways brokerage firms can not, and in doing so solves a significant problem without brokerage firms having to change a thing.

In doing so, Envestnet makes advice scalable, brings fiduciary standing within the reach of every advisor and does not require the brokerage industry to embrace highly disruptive innovation which requires fundamental changes in its business model.

This could be the large scale institutionalized support fot fiduciary standing that everyone is looking for but know one knows where it is comming from.


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See more related moves

Mentioned in this article:

Tiburon Strategic Advisors
Consulting Firm
Top Executive: Charles Roame

Envestnet Inc
Top Executive: Jud Bergman

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