Raj Udeshi invokes 'Theranos' fraud in testy exchanges over data collection with Envestnet's Bill Crager and Jud Bergman at Tiburon CEO Summit
HiddenLevers co-founder offended some audience members with his accusations, but others say he raises a valid concern: Where is the line drawn for firms capturing and selling advisor and client data?
Brooke's Note: As a journalist, in particular, I can see why some Tiburon CEO Summit attendees thought it was constructive that Raj Udeshi confronted Bill Crager on stage in a big way in New York last Tuesday. I can see why others were irked by Udeshi's actions. What is certain is this was a very interesting, high-intensity clash on a topic of large and rising importance: Whose data is it anyway? The financial advice industry's databases contain some of the most valuable and closely-guarded consumer information out there. Sooner or later, hard lines will be drawn as to its use, whose sting could be far worse than an entrepreneur's words.
The usually tranquil Tiburon CEO Summit in New York City got rocking last Tuesday when the CEO of one of the smallest firms there took on an executive at one of the larger -- spilling over into a testy hallway exchange to try to calm the waters--over the sensitive subject of collection and sale of data.
Raj Udeshi called out Bill Crager and his firm, Envestnet, during a moderated panel discussion on the subject. Orion Advisor Services CEO Eric Clarke moderated the panel, which also included Lori Hardwick, founder of AI Labs and Clara Shih, founder and CEO of Hearsay Systems.
Envestnet first got publicly attached to the issue of data privacy last July in a Forbes article, when a columnist lumped in the Chicago outsourcer (and Yodlee owner) with data sellers like American Express and Mastercard.
'I would like to think that many people will be shocked to learn that companies they do business with -- like Mastercard, AmEx, and Envestnet-Yodlee -- are selling their transaction data in real-time," the article stated.
Udeshi, the outspoken CEO and co-founder of HiddenLevers, played off the article for his comments. HiddenLevers recently made waves by winning a giant data analytics account from Focus Financial. See: HiddenLevers' Raj Udeshi takes victory lap after nabbing Focus Financial account: 'We dropped a bomb in BlackRock's backyard;' But it's just a battle not the war, analysts say
Crager, CEO of Envestnet Wealth Solutions, is the company's No. 2 man behind chairman and CEO Jud Bergman.
Though nobody attending the CEO Summit, which bars the media, was willing to speak on the record about the incident, a number of sources noted the pin-drop moment came when Udeshi took the floor.
They recalled him saying, "the industry is having its Theranos moment." Udeshi made the comment amid insinuations that Envestnet may be taking its collection and sale of client financial data too far.
Theranos closed its door in September. Founded by Elizabeth Holmes, it made big news after it was revealed it fraudulently claimed its tests required only about 1/100 to 1/1,000 of the amount of blood that would ordinarily be needed.
In the buttoned-down world of financial conferences, the friction caused by Udeshi rabble rousing stands out, says Timothy Welsh, president of Nexus Strategy of Larkspur, Calif.
"Nobody ever gets after anyone [at those events]," he says. "That is a dramatic moment. It's an AOC [Alexandria Ocasio-Cortez] confrontation in that staid, collegial atmosphere."
Udeshi declined to respond to two emails asking him for comment about what was said and Crager's subsequent comment to RIABiz, which is below.
Welsh adds that Udeshi has a track record of speaking up at various conferences on the circuit. Most famously, he took on President Donald Trump's counselor, Kellyanne Conway.
"You know you didn't win the election," he reportedly told her at the MarketCounsel Summit in Miami that immediately followed the election. See: MarketCounsel Summit weathers Trump mayhem as Scaramucci and Priebus bail and Kellyanne Conway makes a night flight to Miami
This time around, Charles "Chip" Roame, managing partner, Tiburon (Calif.) Strategic Advisors, had "no comment on the particulars."
"Generally, I think the lack of media allows for broad ranging conversation. As long as it is respectful, I think sharing differing views is one of the best aspects of the Tiburon CEO Summits."
On stage, observers say that Crager mostly deflected Udeshi's contentious comments and spoke about Envestnet's service in more boilerplate terms.
Where the Udeshi-Envestnet confrontation attracted more interest was following the event. Bergman and Udeshi engaged in what observers called a testy and prolonged exchange in a dark hallway of the Battery Park Ritz Carlton Hotel.
Envestnet declined to be interviewed for this article but Crager, through an outside spokeswoman, issued a strong denial that his company crosses any data privacy lines.
“Envestnet doesn’t sell individual client data, Period. Full stop. To suggest otherwise is false and irresponsible,” he said in the prepared statement.
On its website, Envestnet describes its data inventory in this way:
"Unlike survey and traditional data sets, Envestnet | Yodlee Data Analytics for Retail Solution is powered by a data panel that can be segmented countless ways to reveal consumer spending patterns for a variety of market categories and services. Drawing from 16 million de-identified active consumers, the panel is consistent with the US population in terms of geographical location and income level."
An email went unreturned to Envestnet's spokeswoman, Brooke Worden, asking whether "de-identified" is the key word in harmonizing Crager's statement with the website verbiage.
Reached by email, Orion's Clarke said how firms sell, buy, use and secure data is best handled proactively.
"Data stewardship is certainly an interesting topic for our industry and one that we are all better off to sort through prior to the regulators making an example of a firm and further harming our industry’s reputation with the investing public," he said.
More recently, Morningstar picked up on the Forbes findings and took a shot at Envestnet following the firm's purchase of Schwab PortfolioCenter. The posting was written by Dermot O’Mahony, head of software products.
In the posting, O'Mahony writes:
"Independent RIAs have a clear obligation to understand how solution providers will use their stored data. Morningstar does not sell client data—to hedge funds or any other market participant—and we will always prioritize data security and the individual investor’s right to privacy. You will always know the company we keep.
"Our CEO, Kunal Kapoor recently advised at the T3 Advisor conference that RIAs should 'think closely about who (they) are partnering with. We have the opportunity to pick our partners. More than ever, we encourage advisors to not just learn about the services they use, but also to understand what’s behind it. Understand who you’re partnering with.'”
The Chicago fund tracker, money manager, software and data firm sells a competitive performance reporting software product, Morningstar Office, used by about 4,000 RIAs and it sells data aggregation through its ByAllAccounts subsidiary. See: Why Morningstar's purchase of ByAllAccounts might be a bigger deal than its paltry $28-million price tag shows
Morningstar was one of several firms that joined the feeding frenzy to lure those 2,300 ex-Schwab PortfoloCenter firms that were up for grabs during the transition. See: Schwab PortfolioCenter sale to Envestnet signals open season on 2,300 RIAs in the deal; Orion bags six; 'Why didn't Tamarac call me?' some ask
Behind the scenes, Envestnet's board of directors had much to tussle over before finally subtracting the 'interim' from Bill Crager's CEO title
With Jud Bergman gone at a chairman, a power struggle ensued to fill that spot, and the process dragged when taking the company private came under review
April 2, 2020 – 2:34 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
Brad Shepard unexpectedly resigns from Orion Advisor Services after 10 months, and his chief strategy officer position will remain vacant, the company says
The Nashville, Tenn. executive came aboard to create a 'go-to-marketing strategy' for Brinker, HiddenLevers and legacy units but gave his notice this week.
January 7, 2022 – 11:40 PM
Envestnet and Edmond Walters end odd couple 'Apprise' relationship with buyout, but leave open the door to jointly pursue RIA-to-entrepreneur dashboard... later
The MoneyGuidePro owner and eMoney founder execute clean break with Apprise IP rebranded as 'Wealth Studio.' Walters off to the races with a startup and vague promise to collaborate later.
April 6, 2021 – 12:50 AM
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