Envestnet, the wealth management technology provider, is using Yodlee, the data aggregation and analytics company it acquired last August, to offer financial advisers new personal finance apps that crunch and display clients' assets, said Bill Crager, Envestnet president and cofounder.
Yodlee, a business-to-business service, works with Envestnet and 37 of the top 50 financial institutions to pull in client accounts, with their permission, and create new apps to analyze finances with the help of developers, said Anil Arora, president of Yodlee. Envestnet will begin integrating Yodlee's data aggregation services in July, followed by its Tamarac division. The two expect to incorporate Yodlee's core set of FinApps, the company's various personal finance widgets, onto Envestnet's dashboard, and have the data flow through these applications, by the end of the year.
At the same time, work will be underway to find, build and incorporate new apps, using Yodlee's open architecture.
“They will solve the needs of investors we haven't anticipated,” Mr. Crager said in an interview during the Envestnet Advisor Summit in Chicago.
Yodlee already has a list of “FinApps” available, including Transactions FinApp, which organizes purchases by merchant or category; Expense/Income Analysis FinApp, which analyzes spending and saving behaviors; Cash Flow Analysis FinApp, which includes a projected forecast; and Net Worth FinApp, which aggregates consumer data to show the progress investors have made. Financial institutions can build their own applications to be made available to advisers, similar to Apple's App Store — some may charge for these tools.
“If you actually break out your financial life, there are about 200 different financial decisions we make,” said Anil Arora, president of Yodlee. “In our vision of the world, there would be an app for each one of them.”
Financial decisions on liability management, mortgage payments and college tuition payments are examples of apps advisers could potentially use, Mr. Crager said. Mr. Arora said Yodlee has built a library of FinApps around financial wellness, credit and small business, which will be available to Envestnet advisers on the dashboard after the core apps are integrated.
“It's simply looking at all the information and saying, here is what you can do,” Mr. Crager said.
The market's response was adverse when Envestnet acquired Yodlee, a purchase made after the firm had already acquired
two other software companies that year. The firm's stock price closed at $45.21 on Aug. 10, right before news broke that Envestnet bought Yodlee
for $590 million. By the end of the day on Aug. 11, the stock price was $29.38. As of trading at about 2 p.m. on Thursday, the stock was trading at $31.57.
Analysts who follow Envestnet were not quite as concerned about the deal. Alex Kramm, an analyst at UBS, wrote, “at first glance, Yodlee appears to be unrelated to [Envestnet's] core model and sends the combined company in a new, uncertain direction (at a big price tag). Based on the shares' performance today, we believe that investors clearly also question the deal and direction of the company. While the true opportunity set of Yodlee could become more obvious over time, we are comfortable remaining on the sidelines for now.”
Another analyst said it was a severe overreaction.
The firm has been emphasizing the needs of data aggregation and analytics ever since. During the conference's opening remarks, Jud Bergman, chief executive of Envestnet, said data was the key to making an effective financial plan and having an effective business.
“Data analytics represents the next phase of the digital age,” he said.
Financial institutions, both large and small, are taking note of the hot data aggregation trend. Vanguard and Wealthfront both
tapped this type of technology because it helps improve financial advice provided to clients.
“If you think about our financial lives, the vast majority of us are completely stressed out and overwhelmed,” Mr. Arora said. “All we are trying to do is offer simple, easy tools to manage the financial life.”
