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Envestnet gets Matt McGinness as it launches an advisor consulting division

The problem for the Chicago outsourcer is that its insourcers are stung by 2008 and operating in suboptimal fashion

Wednesday, April 15, 2015 – 12:45 PM by Brooke Southall
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Matthew McGinness: A lot of advisors have grown rusty in engaging clients.

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July 27, 2022 – 2:27 AM

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Envestnet turns to former FIS executive -- and replaces a CTO -- to help shape up the firm's disparate offerings into a unified whole around the concept of 'wellness'

The Chicago outsourcer gets Donna Peeples to harmonize products and marketing to move beyond the 'TAMP' label as Orion contends for market share with Brinker added.

November 10, 2020 – 2:45 AM

Envestnet nabs Dani Fava to cross-pollinate semi-autonomous units and reap 'financial wellness' as the end product

The Chicago outsourcer has a massive, partially disconnected arsenal of products that CEO Bill Crager is rationalizing into 'wellness' with yet another new unit.

July 23, 2020 – 1:42 AM

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Mentioned in this article:

Envestnet Inc
Top Executive: Jud Bergman

Cetera Financial Group
RIA-Friendly Broker-Dealer
Top Executive: Larry Roth

Stephen Winks

Stephen Winks

April 17, 2015 — 9:17 PM

Everyone indeed is on the steep part of the advisory services learning curve. As Harvard’s Clayton Christensen tells us the biggest mistake made by firms faced with industry redefining innovation is to look at innovation in the context of their existing business model when a new business model is in order.

Envestnet, originally a TAMP now a technology FIRM with the acquisition of Tamarac, is an ideal launching pad for innovation and the innovation must be profound to be effective. (The goal of the new consultancy unit is to help turn advisors into wealth managers. “They all have wealth management strategies,” says Crager. “But how do you get there, do pricing, products?”)

Product access is a commodity, custody and enabling advisory resources that commoditize brokerage advice products for 25 bps via Orion is a good start. Yet, there are three key areas McGinness, Hummel and Crager must resolve for market leadership in advisory services. These are best managed as financial services which are not presently being performed by any brokerage entity yet are essential to advisory services, professional standing and fiduciary duty.

(1) Advisors must be able to look at a recommendation in the context of all a client’s holdings, otherwise it is not possible to determine a rationale for a recommendation, whether it improved overall portfolio return, reduced risk or enhanced the tax efficiency, liquidity, cost structure or timeliness, etc. of the client’s portfolio as a whole. Remarkably this is not possible in any US brokerage format but is essential for private trust banks in performing their fiduciary duties.

(2) To facilitate “continuous, comprehensive counsel” required for fiduciary duty a more modern approach to portfolio construction is required which requires access to real time holdings data not possible with packaged products. The advisor can not manage through product packing to address and manage investment and administrative values (risk, return, etc.) essential to individualized success of the consumer.

(3) To streamline the industry and simplify investment in the consumer’s best interest, the industry’s new compliance protocol becomes prudent process (asset/liability study, investment policy, portfolio construction, performance monitoring) authenticated back to statute, case law and regulatory opinion letters. Instead of the brokerage industry assuring absolutely no advice is rendered to avoid fiduciary liability, the consumer is assured their best interest is being served and can prove it.

The three above innovations go a long way in giving the advisor control over their value proposition, cost structure, margins at the advisor level and professional standing. Advanced process, technology, work flow management and a more modern approach to portfolio construction will give Envestnet a massive competitive edge in attracting advisors who wish to act in their client’s best interest. Actify will brilliantly help with work flow management but has held back on prudent expert authenticated investment process for fear of being prescriptive requiring broker/dealers to actually fulfill fiduciary duty, now that should not be a problem. Though fear of fiduciary duty may be the case also with Envestnet. But, if wise, Envestnet will embrace Tamarac as a technology at 25 bps as well as the innovations above that will transform the entire industry in the best interest of the investing public and in its favor.

Clayton Christensen is correct and so was Adam Smith as there has never been an instance in a free market since 1776 when Adam Smith introduced the “invisible hand” that the best interest of the consumer has not prevailed. If Envestnet has the presence of mind to understand its unique market position as a technology company, it can transform the entire industry, not as a TAMP but as a technology.

Stephen Winks

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