Envestnet drops plan -- for now -- to enter RIA custody, opting for 'deepened integrations' with Fidelity, Schwab, and Pershing in first major reveal since Bain Capital buyout

Envestnet will spend the next 18 months making improvements – not least integrations with Schwab, Fidelity and Pershing – but has scrapped plans to compete with those giants as an RIA custodian.

New CEO Chris Todd, who joined the firm on Jan. 21, is going to stick with Envestnet's historical strengths.

"After what has been a pivotal year of transformation for us, we are as committed as we have always been … to lean in and develop the products and solutions advisors need," he states in a May 13 release. See: New Envestnet CEO first reached out to his financial advisor before accepting.

Those solutions include helping the Big Three custodians to be more competitive with upstart “digital” custodians.

“Custodian integrations with Fidelity, Schwab, and Pershing are also deepened – providing seamless trading, authentication, and data flow across systems,” the release states. 

“This commitment to ecosystem flexibility gives firms the freedom to build the tech stack that fits their unique model.”

Prior to joining the company, Todd spent four years at US software giant Ultimate Kronos Group (UKG), where he served first as president and then CEO.

Directional shift

RIA custody was notable in its absence from Todd's statement. 

Former Envestnet CEO Bill Crager championed the move two years ago (May 2023) as a potentially transformative leap in the wake of Schwab absorbing TD Ameritrade and removing one of the giants. 

He saw it as a natural add-on, albeit in partnership with FNZ – the spun-off State Street RIA custody unit. See: Envestnet will roll out RIA custody by 2024, disputing Bernie Clark's lean Schwab profit math, by citing average 15-basis-point margins

“We expect to be in the market by the end of this year and see gaining traction starting in 2024," Crager said in a May 4, 2023 call with Wall Street analysts.

Aligning with clients

The Berwyn, Pa., outsourcer to RIAs and IBDs will upgrade its rebalancing, unified managed account (UMA), CRM (Tamarac), performance reporting, trading, and accounting software, and improve its ability to share data with third-party tools, the company states.

“At this point, Envestnet is closely aligned with what their clients are asking for – both on the broker-dealer and RIA sides," the external media relations firm said in a statement. 

"The overwhelming majority of them are working with one of three custodians: Fidelity, Schwab, or Pershing. See: A day ahead of IMPACT 2024, Envestnet and Schwab say they will kill off mutual RIA 'pain points' and pledge continued cooperation to co-served RIAs -- even as each edges onto the other's channel turf

“They are currently prioritizing deepening their integrations and enhancing the connectivity across those platforms. This came through loud and clear in conversations at Elevate – from hallway chats to client dinners to meetings with CEOs and our RIA Client Advisory Board," the spokesperson continues.

“At the same time, Envestnet is proud to support a true multi-custodial experience. Beyond the big three, they also work with firms like Altruist, Axos, and Goldman Sachs, and they’re committed to delivering the same high-quality experience across all custodians their clients rely on," they concluded.

Bain buyout

Envestnet announced last July that it had entered into a definitive agreement to be acquired by Bain Capital in a take-private deal valued at $4.5 billion ($63.15 per share). Reverence Capital also agreed to participate in the transaction. 

Fidelity also owns a piece of Envestnet. See: Envestnet lands $4.5-billion deal to go private - with Fidelity and BlackRock joining the future ownership group