Envestnet boosts expenses to build new financial ecosystem

Envestnet plans to ramp up investments into a digital financial wellness ecosystem that connects multiple aspects of a user's financial journey.

After posting an 11% increase in revenue for year-end 2020, Envestnet revealed it added $30 million to its operating expenses this year partly dedicated to building a digital “financial wellness ecosystem,” according to the company’s fourth quarter earnings released Thursday.

Envestnet plans to leverage the additional operating expense to curate, connect and orchestrate everything that can impact a consumer’s financial life, said co-founder and CEO Bill Crager.

“Today, most people have two distinct financial lives, how they interact with their money each day, and then have a plan for their money into the future,” Crager said during the earnings call. “Neither of these connects with each other, resulting in a complex challenge for the individual, oftentimes leading to extraordinary stress in their lives.”

Crager outlined why an interconnected ecosystem that brings financial services all together for the consumer is Envestnet’s next big opportunity in a white paper titled: The Intelligent Financial Life. “The white paper was a call to action for our industry, a playbook for more deeply engaging and impacting the financial lives of consumers,” he said.

The expectation of the ecosystem is to bring a digital and smartphone enabled experience to consumers where financial advisers are a part of the consumer’s financial life every step of the way, Crager said. “Our industry today is a sum of parts, their components — you have your cash, you have your bills, you have your investments, you have your insurance,” he said. “What we’ll do is bring those together.”

Envestnet’s game plan for the $30 million includes, first, making enhancements to its existing tools, Crager said. “For instance, we’re providing an integrated trading environment that will bring together the features of Envestnet, FolioDynamix, and Envestnet Tamarac into a singular tool,” he said.

Redefining the way data is used is another area of investments. The goal is to better connect the data from a person’s daily financial transactions with Envestnet’s financial planning software — MoneyGuide.

Digital experience is the third area of investment for the ecosystem, Crager said. While specifics of how exactly that digital experience will be presented to clients and consumers weren’t laid out during the earnings call, the whitepaper notes the goal of putting connected financial lives into the pockets of consumers via mobile apps.

“These investments will ramp up over the next couple of quarters as we add headcount and other resources in product engineering, marketing and go-to-market activities to accelerate revenue growth in the business longer term,” said Pete D’Arrigo, chief financial officer, during the earnings call.

This ecosystem is expected to create a broader reach into the market for Envestnet and faster revenue growth as the model is utilized, D’Arrigo said.

Envestnet’s footprint already includes more than 13 million investor accounts, 106,000 advisers, 600 fintech companies, and more than 35 million paid subscribers.

Envestnet expects to surpass $1 billion in revenue for the first time during the first quarter as a result of the fintech’s accelerated investments in the financial wellness ecosystem, according to the earnings release.