Envestnet deal puts personal financial data aggregation center stage

Envestnet’s latest acquisition is yet another indicator that the future of financial advice will come from advisers gaining more access to — and making better use of — clients’ personal financial data.

The wealth management technology provider announced Monday it bought Yodlee Inc., a personal finance data analytics provider that specializes in account aggregation, for $590 million. Envestnet, which prides itself on being a one-stop shop for advisers’ technology needs, has been acquiring company after company in the market, including two this year alone: robo-adviser Upside and financial-planning software provider FinanceLogix.

But it’s been missing data analytics. And unlike the most common type of data sets advisers use, which come from custodians, this data will include all aspects of a client’s personal financial picture, including bank and credit-card accounts.

Advisers can use this data to consider the complete view of a client’s financial life, and thus assess where to invest and how to manage those investments based on each client’s assets and liabilities.

“One thing we know financial advisers tend to be focused on is stocks and investing, and yet they don’t have what everybody needs, which is a way to have a good conversation,” said Mark Schwanhausser, director of omnichannel financial services at Javelin Strategy and Research. “This is about finding something to talk about … the key is the data.”

Other players in the data-analytics market think this acquisition highlights the consistent move toward using personal financial data for business purposes.

AGGREGATION AS STRATEGIC ASSET
Lowell Putnam, the co-founder and chief executive of Quovo, a financial services data-analytics company, said Envestnet’s latest acquisition demonstrates that the industry increasingly sees data aggregation as a strategic asset. Many robo-advisers have recognized that trend, too.

“The next set of big changes happening in our space from the technology standpoint comes from better data, pulling together discretionary and held-away data,” Mr. Putnam said. “This shows Envestnet is on the same page.

“That rich, diverse data set that makes up your and my financial picture is not being utilized today, because it’s really hard to work with,” he said.

Yodlee, which runs an online hub for consumer financial apps, works with a number of adviser-oriented technology companies already, including MoneyGuidePro, CircleBlack, Orion Advisor Services and Wealth Access.

Aside from Quovo, ByAllAccounts, which was acquired by Morningstar last year for $28 million, is another well-known personal finance data provider.

With that deal and the purchase of Yodlee, the industry has crossed the $1 billion mark for personal financial data aggregator acquisitions in the past six months, according to Michael Kitces.

David Benskin, the founder and chief executive of Wealth Access, a personal financial management platform for advisers, said account aggregation is incredibly beneficial in allowing advisers to assess the state of a client’s finances and share insights with clients.

“Advisers need to provide an entire balance sheet, whether they’re managing [all of the assets] or not,” Mr. Benskin said, adding that Wealth Access uses a number of personal finance data aggregators.

One concern expressed by some in the industry was whether Envestnet’s acquisition would strain some of Yodlee’s client relationships. Envestnet acquired FinanceLogix, for example, a competitor to MoneyGuidePro that Yodlee works with.

But Bob Curtis, CEO of MoneyGuidePro, brushed off those concerns, saying the latest acquisition was a positive for all parties, and that MoneyGuidePro and Yodlee have a strong relationship.

The next step will be for advisers to learn how to act on the increasing amount of data available to them. Mr. Schwanhausser said advisers will need to analyze the data to see what is important, and decide when to share key data points with clients.

“Where this is all going is collecting data and pulling everything together and finding out what is relevant in real time to a specific person,” Mr. Schwanhausser said. “This is the first step.

“The next step is starting to provide insight and advice — using the data [to inform] recommendations and coaching,” he said.