Big deal: Envestnet will acquire Tamarac for $54 million

The big Chicago outsourcer nabs the fast-riser in the RIA software business and one competitor says: "now what?"

Thursday 2.16.12 by Brooke Southall

Brooke’s Note: When this story first broke I wasn’t able to reach all the principals. Since then I have spoken to Bill Crager, Stuart DePina and others and wrote this artiicle: See:Can the new Envestnet-Tamarac Godzilla take on the Advent-Black Diamond King Kong?.

Envestnet Inc. has entered into a definitive agreement to acquire Tamarac Inc., for $54 million in cash.

The Chicago-based outsourcer is buying the Seattle-based maker and host of software used by 500 registered investment advisors. See: One firm’s odyssey to upgrade its rebalancing system with Tamarac.

Envestnet has become the biggest, best-financed provider of ways for an independent-broker-dealer rep to build a fee-based business. It provides a platform for managers but also bundled solutions under a turnkey asset management program.

But the company has continuously made clear that it sees its future growth coming more from the RIA business. See: Envestnet to zero in on RIAs and family offices.


Jud Bergman, chairman, founder and chief executive of Envestnet, made it clear in a release that the Tamarac purchase is a big strategic move to bridge that gap — with Tamarac’s relationship to advisors perhaps trumping the technology itself.

“While Tamarac has developed industry-leading software for rebalancing, practice management, performance reporting and CRM integration, we value their market position within the independent RIA segment, which is core to Envestnet’s growth initiatives.

Stuart DePina: Now that we can leverage Envestnet's solutions, Tamarac will accelerate many aspects of our strategic initiatives.
Stuart DePina: Now that we can
leverage Envestnet’s solutions, Tamarac will accelerate
many aspects of our strategic initiatives.

Tamarac has been on a phenomenal growth spree of late with annual 50% growth that has taken the amount of assets managed over its platform to $250 billion. See: Tamarac claims what was unthinkable two years ago — that it is on the same playing field as iRebal for rebalancing software.

Alois Pirker, senior analyst for Aite Group Inc. in Boston, called this is a big deal in a statement.

“The acquisition of Tamarac is a big step forward for Envestnet in its endeavor to capture a larger share of the RIA market. While Envestnet has established itself in a certain subsegment of the RIA market already, those RIA firms that lead with investment management as their core proposition to retail clients have traditionally looked towards firms like Tamarac and TD Ameritrade’s iRebal for increasing efficiency in their investment management process. Acquiring Tamarac will allow Envestnet to reach those firms and cross-sell some of its capabilities like performance reporting,” according to the statement.

It’s also part of a high-stakes arms race in an industry where first-movers get rewarded.

“Today’s deal follows Advent Software’s acquisition of Black Diamond a few months ago, Pirker added. “The race amongst vendors to become the platform of choice for the fast-growing RIA market is on.” See: Advent to buy Black Diamond for $73 million.

Competition to Black Diamond

Indeed, the Advent-Black Diamond combination has been considered a potential juggernaut with no obvious countervailing force — until now. There has been recent tension between Black Diamond and Tamarac. See: Tamarac shuts out Black Diamond from integration.

The other big player in portfolio accounting is Orion Advisor Services, LLC and Eric Clarke, CEO of the company, says he received a telling email earlier today. “I got an email saying: you’re the last man standing.” See: The TD Ameritrade-Orion pairing again proves productive — this time to wrest assets from a $3.6 billion Schwab RIA.

There are other notable players in the portfolio accounting field including: FinFolio, AssetBook, Inc., Morningstar Office (though Morningstar is a public company), Private Client Resources LLC and Cornerstone PowerInvestmentTOOLS

Clarke admits that seeing both Black Diamond and Tamarac swallowed up in short order gives him pause, especially because he’s at the T3 conference currently where his company and the other two were all privately held last year. But says he continues to enjoy his differentiated position as a private company and believes he can serve advisors better in that atmosphere. “We’re going to keep doing what we’re doing.” See: Orion wins a $2-billion RIA account from Advent after two very long drives across the prairie.

Alois Pirker: The race amongst vendors to become the platform of choice for the fast-growing RIA market is on.
Alois Pirker: The race amongst vendors
to become the platform of choice
for the fast-growing RIA market is


Tamarac was able to build close ties to RIAs by building a tremendous following for its rebalancing software. It came strong into the market with the product at a lower price point than iRebal — almost creating a democratization of an expensive application. See: A close look at Tamarac’s Advisor 9 and its strategic use of Schwab software.

But then it went after another unserved need — integration between applications — and wove its rebalancing software in with Microsoft CRM and Schwab PortfolioCenter. See: What Tamarac’s overhauling of its Advisor Xi has yielded

Envestnet itself is no slouch in the RIA portfolio accounting and performance reporting business but got a late start and has a relatively small account base. See: Envestnet unbundles portfolio management software for RIAs and it won’t be a sideshow.

Bergman said in the release that the two companies’ technologies will work together.

“We are eager to leverage Tamarac’s highly sought-after solutions in combination with our integrated wealth management software and advanced portfolio solutions. We welcome the Tamarac organization and look forward to supporting their clients, people, products and their continued development of proven high-end solutions for RIAs. As more advisors look to outsource to an integrated platform, we are uniquely positioned to meet this need — now and well into the future.”

Tamarac CEO Stuart DePina will become group president of Envestnet. He has fought — successfully it seems — a PR battle in recent months. See: Tamarac CEO: Mark Spangler’s big trouble with the feds won’t harm Tamarac.

Eric Clarke:  "...You understand why they [Black Diamond and Tamarac] did it [sold out] but then you stand back and say: Now what?"
Eric Clarke: "...You understand why
they [Black Diamond and Tamarac] did
it [sold out] but then you
stand back and say: Now what?"

“We are excited to build on the momentum Tamarac has generated with independent RIAs seeking to streamline their operations through integrated technology and outsourced services. Now that we can leverage Envestnet’s solutions, Tamarac will accelerate many aspects of our strategic initiatives while allowing us to focus on our client’s needs,” DePina said in a statement. “We believe the combination of Envestnet/Tamarac will transform the way financial advisors support investors with Advisor Xi, one of the most comprehensive suites of technology and investment solutions available in the industry.” See: The inside story of a giant RIA’s move to Tamarac from Advent.

Though the Tamarac-Envestnet merger appears to make sense for both sides, it may have its challenges, according to Jim Starcev, a consultant to the RIA technology industry who was the co-founder of Etelligent, which he sold to Schwab Advisor Services.

He says Envestnet may find it difficult to compete with Advent Software Inc. using Schwab PortfolioCenter as its core portfolio accounting software. “They’re really going to have to figure that out. I can’t imagine they’ll want to rely on the competition. This could be a challenge in integration and development.

Tamarac and Envestnet’s principals could not be reached before publication of this article.

Still, Envestnet already acquired one company, B-Ready Outsourcing Solutions, Inc. that hosts Schwab PortfolioCenter and has let it continue to operate that way. See: Envestnet buys a company to gain an edge with Schwab RIAs

The deals suggest a big arms race and one where Orion looks to be the next on the firing line. But Clarke says he’s not eager to be purchased by a public company. “People ask me that all the time and I don’t see the advantage of it,” he says. “...You understand why they [Black Diamond and Tamarac] did it but then you stand back and say: Now what?”


Jud Bergman | Alois Pirker | Stuart DePina | Jim Starcev

Envestnet | Tamarac | Aite Group