Envestnet buys analytics firm with eye toward DOL fiduciary rule compliance

Firm purchases Wheelhouse Analytics as tool to glean more insight into client portfolios and benchmark accounts against peers.
OCT 10, 2016
Envestnet, the investment services and technology provider that purchased the Yodlee data aggregator firm 14 months ago, now has bought a data analytics firm to help its 50,000 adviser clients meet coming fiduciary requirements and dig into their customer relationships to strengthen their books of business. Chicago-based Envestnet bought Wheelhouse Analytics so its advisers and institutions can glean more insight into client portfolios, investment strategies and products, fees, performance and other information. Firms will be able to benchmark their client accounts against what others are doing with similar types of clients, and how they might be charging for those accounts among different asset classes, said Bill Crager, president of Envestnet. “It's like an x-ray into how an adviser is managing assets,” Mr. Crager said. “It creates a lot of transparency that regulators are looking for.” The tools are available for all types of investment accounts, the firm said, and will generate the type of data advisers will need to comply with the Labor Department's new fiduciary regulation that mandates financial advisers provide retirement advice in the best interests of clients. The rule must be implemented by April 2017, and is expected to spark regulators of non-retirement accounts to require similar standards. (More: Education, training programs crop up as DOL fiduciary rule looms) The firm didn't disclose the purchase price, but said it's well under the $590 million it paid for Yodlee in August 2015. It's more in line with the transaction size of its seven other transactions in recent years, which together totaled $210 million, Mr. Crager said. “The acquisition shows our deep interest in data and how valuable we think it will be for the financial industry and for advisers to better serve investors,” Mr. Crager said. Dozens of advisers already use Wheelhouse Analytics' software through Envestnet because the two firms have been working with each other for a couple of years to create some of the capabilities, Mr. Crager said. For instance, the tools could help advisers see that 20% of their portfolios are lagging their peers and then drill down to which investment strategies within the client accounts are underperforming. (More: Tech-tardy advisers, prepare for a late-adopter penalty) The firms are working on making the tools predictive, so they alert advisers, who can then communicate with clients about certain investment needs ahead of when the client actually comes to them with those questions, Mr. Crager said. Frank Coates, who created Wheelhouse Analytics in 2010 and will now lead the data analytics business for Envestnet, said the tools are headed to a point where they will analyze client spending and consumption habits. For instance, they could predict that a wealthy couple who has rented a vacation house in a certain area annually for 15 years would be interested in buying a vacation home. Their adviser could bring up the subject with that client proactively, instead of waiting for the client to show up and ask, Mr. Coates said. “It's then the human adviser who helps the clients think through the ramifications of such a decision,” he said.

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