Envestnet announces agreement to acquire Tamarac

It would appear that integrated wealth management provider Envestnet Inc. is in expansion mode.

The firm today announced that it was acquiring Tamarac Inc., an increasingly popular provider of portfolio management technology among independent registered investment advisers, for $54 million in cash.

That’s the second acquisition for Envestnet in as many weeks, having announced a deal to purchase Prima Capital Holdings Inc. on February 10 for $13.75 million.

“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. We are eager to leverage Tamarac’s highly sought-after solutions in combination with our integrated wealth management software and advanced portfolio solutions,” said Jud Bergman, chief executive of Envestnet in a prepared statement.

“As more advisers look to outsource to an integrated platform, we are uniquely positioned to meet this need — now and well into the future,” he added.

Envestnet Reporting Solutions provide advisers an in-depth view of clients’ aggregated investments and has over $127 billion in total assets under management or administration and more than 909,000 investor accounts.

Mr. Bergman’s statement above perfectly reflects what Envestnet has in mind for the future. That came through in an interview with the company’s president Bill Crager.

I joked with Mr. Crager that these things tend to happen in threes and asked him what was next. He responded that Envestnet’s acquisition of FundQuest Inc. in December did make three.

His firm acquired the U.S.-based portion of FundQuest from BNP Paribas Investment Partners for $24.4 million in cash for all outstanding shares of the firm.

“Honestly, if I was to walk through the process we noted some time ago that Tamarac has an impressive solution and is growing rapidly and we knew that the firms together would be very synergistic,” he said.

Mr. Crager explained that adding Envestnet’s middle office, back office and service engine would make the Tamarac offering even more compelling to RIAs. That service engine supports everything from tax loss harvesting or systematic withdrawals as well as access to Envestnet’s product universe and unified managed account platform. Tamarac’s systems will also be able to take full advantage of Envestnet’s well-developed trading pipes to the custodians as well as its data reconciliation offering located in India and its performance reporting and billing engine.

“We are not going to touch Tamarac’s operations or pricing at all, all our integrations will happen on the back end,” he said referring to Tamarac’s current technology offerings including its platform and modules, though the branding will likely be changing to Envestnet Tamarac he added.

When asked whether this all might prove disruptive to the efforts underway at the four major custodians to build out their own RIA platforms Mr. Crager responded that the firms was not thinking along those lines.

“We are listening to the advisers and building what they want and the custodians are our partners in so many ways, it really depends on the profile of the adviser as to what they will want and we fully expect that some will be a better fit for the custodial models and others our offerings,” he said.

Last fall Tamarac rolled out the latest version of its web-based integrated portfolio and customer management platform for advisers, Advisor Xi.

More than100 RIA firms are now using the full integrated suite and outsourced services said

Tamarac has a more diversified clientele than when it started offering its sophisticated rebalancing technology a decade ago. The firm size it serves now ranges from less than $15 million in assets under management to firms managing over $20 billion.

A total of 2,700 advisers and 500 firms are now using Tamarac’s services representing a total of $250 billion in assets being managed.

Tamarac chief executive Stuart DePina will join Envestnet as group president of Envestnet. In that role he and his leadership team will continue to focus on integrated solutions for the RIA marketplace according to the statement.

In an interview with Mr. DePina he said that Envestnet had approached his firm last April to begin discussions, which he frankly said he did not take seriously at first.

“They operate heavily in the broker-dealer space where we don’t have much experience but the more we discussed things the more I began to feel that they were one half of the puzzle and we the other half,” he said. In asking him to elaborate he said that this had ramifications both in terms of the business side of the equation as well as the technology side.

“We have much to offer them in terms of our rebalancing technology and that of our CRM developments for example, but at the same time I think we will help accelerate their offerings to RIAs,” Mr. DePina said.

“There are many things we are going to be able to leverage as well, for example their investment proposal statement generator and their reporting,” he added. He noted Envestnet’s turnkey asset management platform-like features as well and that Tamarac had long had partnering with someone to develop those features on its roadmap.

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