Envestnet just surpassed $5 trillion in assets and 108,000 advisors on its platform but profits were flatter as rising tide of inflows floats financial services boats
The Chicago-based amalgam of investments and software keeps growing the top line but reaping rewards from its semi-captive audience is still a work in progress
4 min read- Envestnet's platform assets surpassed $5 trillion, supporting over 108,000 advisors.
- Fidelity and Envestnet reported substantial asset growth, mirroring industry-wide gains.
- Envestnet's income growth lagged asset growth, highlighting margin pressures.
- New account openings surged across platforms, fueled partly by retail investor activity.
Envestnet and Fidelity became the latest firms to report top-line jaw droppers amid an historic rising tide of asset inflows.
The firms, located in Chicago and Boston respectively, reported $5.2 trillion and $11.1 trillion in platform assets growing, despite a brave new world of shrinking margins.
Fidelity and Envestnet are of course hardly alone in racking up asset increases.
Firms as diverse as Fisher Investments, which is closing in on $200 billion in AUM this year, and Apex Clearing reported largely unprecedented absolute gains. See: Apex Clearing soared by every measure in 2021's first quarter, except one -- its $4.7-billion valuation held steady ahead of its anticipated IPO
Charles Schwab Corp. opened a stunning 1.7 million new brokerage accounts in the second quarter, its third consecutive quarter of more than one million new accounts, excluding those stemming from mergers.
Schwab also added core net new assets of $108.8 billion in its second quarter, up 133% from the same three-months a year ago and the highest second quarter in its history.
Assetmark's platform assets increased 33.8% year-over-year and 7.2% quarter-over-quarter to $84.6 billion as of June 30. That total got boosted by quarterly record net flows of $2.2 billion. See: AssetMark's AUM hits $78.9 billion to overtake SEI's in blowout quarter marred only by loss that traces in part to Charles Goldman cashing out pre-IPO grants upon exit
Apex Clearing soared by every measure in 2021's first quarter, except one -- its $4.7-billion valuation held steady ahead of its anticipated IPO
Experiencing lift
Envestnet's $5.189 trillion is a "platform assets" total as of June 30, up $1.4 trillion from the same date in 2020 and nearly $400 billion since March 31 when assets clocked in at at $4.83 trillion.
Fidelity's $11.1 trillion of assets under administration is up a full 33% from June 30, 2020, and up $700 billion from $10.4 trillion on March 31. See: Fidelity Investments flies past staggering $10T milestone, but Schwab, finally fully loaded with Q1 results from TDA merger, steals some of the Boston giant's thunder
Fidelity is, in part, the beneficiary of spillover from the Robinhood revolution. New retail accounts open by investors 35 and younger exploded to 697,000, up 65% from the three months ended June 30, 2020.
Envestnet's account opening through conventional IBD reps is experiencing its own lift.
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"New accounts are being opened at a faster pace and we are averaging well more than 10,000 new accounts every week," Envestnet CEO Bill Crager told analysts on his Aug. 6 call earnings call.
Envestnet singled out Securian Financial as one example. Securian's website says it has 1,100 advisors.
"We have relationships with over 5,200 companies, which is up from 3,200 companies just three years ago," Crager said on his May 7 call.
AssetMark's AUM hits $78.9 billion to overtake SEI's in blowout quarter marred only by loss that traces in part to Charles Goldman cashing out pre-IPO grants upon exit
Top line flat
Yet making profits pop as much as top-line gains was more difficult for Envestnet. It grew its adjusted net income per Q2 diluted share 14% to $0.67 from $0.59 in the second quarter of 2020.
Of its $5.2 trillion, Envestnet counts only $741 billion as either AUA or AUM. The rest comes under the header of "subscription" assets.
"These metrics Envestnet shared are absolutely fantastic," says Eric Clarke, CEO of Orion Advisor Solutions. "They speak to the overall strength of the advisor market. We currently have just over $1.6 trillion in assets and see a very similar [to 10,000] number of net account additions each week."
Yet, Crager offers hope that more assets will be more productive in throwing off revenues when more data is applied to match investors to investments that make sense for their objectives.
"The flow rate is 100% higher for that client moving [assets] from brokerage into managed accounts [and] that was before we started the [pilot] program and that is sustained itself over the quarter." See: Bill Crager buys Wall Street patience by detailing how Envestnet can rent out brainpower, deliver 'wellness' and be rewarded with revenues at an astounding 40 basis points higher
A further off potential for revenues comes from fellow financial technology companies that use Envestnet as a platform for their platforms.
"Our developer portal enables over 625, third-party FinTechs to leverage APIs embedding our capabilities and data into their environments," Crager said on the Aug. 6 call.
"This usage has grown by 1700% since the beginning of January 2020. At the same time, we are opening Envestnet's ecosystem for more third-party providers, all of which will drive users and engagement ultimately accelerating our revenue growth and our opportunity."
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