Envestnet to zero in on RIAs and family offices

Lori Hardwick is certain that Envestnet’s platform is good for RIAs — perhaps even better than it is for IBD reps — but so far, she says, her company hasn’t capitalized on that opportunity.

The Chicago-based publicly held outsourcer does business with 38 of the major 50 IBDs. That demand has consumed the bandwidth that might otherwise have gone to building a more RIA-minded platform, says Hardwick, the executive vice president of advisory services for Envestnet.

But as that IBD market matures and Envestnet continues to grow, that is beginning to change.

Family office business

As part of a series of moves that included building out its IBD team, the company recently hired Sean Mullen, formerly of Fortigent, LLC, with big RIAs in mind. It also has a group working on developing the family office business — Hardwick says family offices may prove to be voracious consumers of a good unified managed household product.

“Sean brings deep experience in the RIA space,” Mark Osmond, managing director of Envestnet PMC, said in a release, “It’s an area where Envestnet is further extending its reach.”

Envestnet works with 14 different asset custodians and, in time, Hardwick said, the company will also work with many of them to make sure their UMA platforms work well.

Mullen will serve as an investment specialist and portfolio consultant at Envestnet PMC, the portfolio consulting group of Envestnet, helping advisors to grow their firms. He will also work alongside custodians and asset managers to communicate the benefits of unified managed accounts.

“Sean Mullen has a very deep understanding of what the high-end advisor is looking for. He understands UMAs and he will work with unified managed households,” Hardwick says.

Original architect

At Fortigent, LLC, Mr. Mullen was a sales director — and an original architect of Fortigent’s UMA platform. Fortigent declined to comment for this article but the Rockville, Md.-based company is a fast-growing outsourcer of investment research for about 88 large advisory firms with $48 billion of assets.

Others in the industry agree that there is an opportunity for TAMPs to serve big RIAs with sophisticated clients.

“We need a high end TAMP to meet the needs of larger advisors with larger and more sophisticated clients. Not sure that this is possible due to the unique investment needs of these clients, but I can dream can’t I?” said Jeff Spears, CEO of San Francisco-based Sanctuary Wealth Services in a recent comment on RIABiz

In the TAMP world, the market for IBDs and smaller RIAs was lower-hanging fruit. Winning a larger RIA requires a courtship process that requires greater faith and patience. RIAs have a fiduciary duty to clients and getting them to entrust their investments and investment process to a third party takes time.

“We just haven’t had the time to focus on it,” Hardwick says. “It’s a much longer sales cycle to build that. Unless you have a team to see it through, it’s really difficult. (Our team) can wait it out and be a good consultant along the way.”

Raving fans

The reward for waiting is a happy first-rate client. “Once they try it, they’ll send their entire book of business and they become long-term clients. They’re raving fans. It enables them not to hire three or four people.”

There is another advantage to building out an RIA business to complement the IBD business. “When an IBD leaves us, they take 2,000 advisors; if an RIA leaves then assets don’t leave in bulk so it gives stability to our firm.”

Envestnet is also building out its IBD team hiring John Fitzpatrick, formerly of Fidelity Investment-owned National Financial Services as senior vice president on the enterprise sales team.

Right now he’s working with his former employer almost exclusively. Fidelity let him go as part of layoffs in recent months and – because much of his job was to make sure Envestnet clicked with the NFS clearing platform – Envestnet hired him to continue his duties.

“Envestnet was the casualty of his not being there,” Hardwick says. “... It helps Envestnet probably more than it helped Fidelity.”

Wider initiative

The appointments serve a wider expansion initiative that includes the recent hiring of Marion Asnes as Envestnet’s managing director and chief marketing officer, and Ron Fiske as managing director, strategic partnerships. See: Ron Fiske comes aboard at Envestnet as company unveils its grander technology vision

Ms. Asnes was formerly editor-in-chief of Financial Planning magazine, and Mr. Fiske was former executive vice president for product management and development for Fidelity.

In addition, PMC recently launched a Liquid Alternatives Program to help advisors identify high-performing liquid alternative strategies, mainly in mutual funds and exchange-traded funds, while providing guidance in utilizing these portfolios.

“Envestnet is an innovative company with a history of anticipating and meeting the evolving needs of advisors,” said Mr. Mullen in a release. “I look forward to leveraging my UMA background to complement PMC’s full and growing breadth of solutions designed to help advisors expand and strengthen their practices.”