Technology giant Envestnet Inc.’s total revenue increased 5% year over year to $235.3 million during the second quarter, despite the market sell-off in March, as a result of increased use of direct indexing by advisers, according to the company’s earnings call Thursday.
Most notably, the number of advisers using Envestnet’s direct-indexing solution increased 23% with a 33% increase in accounts year to date.
Meanwhile, adviser usage of tax and impact overlay solutions also grew 16%, and overlay accounts grew 19%. The overlay solution works by tracking an investor’s portfolio along with daily stock market returns to find ways to lower capital gains or harvest losses, according to the company's website.
Now, the leading TAMP by assets is eyeing ways to ramp up adviser usage of its quantitative portfolios after experiencing double-digit percentage growth during the second quarter, CEO Bill Crager said during the call.
The rise in adviser usage for Envestnet’s quantitative portfolios reflects the progress the firm made last year to increase awareness and demand for the products, Crager said. Quantitative portfolios are separately managed accounts designed to offer cost-efficient exposure to beta, tax-efficiency and the ability to be customized, according to the company's website.
The portfolios are passively managed, and are structured to provide a pre-tax return similar to a broad-based benchmark index at a cost that is competitive with ETFs.
“We've spent a lot of time with firms and with advisers on the benefits of direct indexing and then all the services that surround it,” he said. “Then the value proposition, that [advisers] should engage clients with it, and we sent a dedicated team that's been out in the market [as] consultants that have been working with advisers to pave the ground.”
Envestnet's impact portfolios also experienced growth as investors seek to align their social and moral priorities with their investments, according to Crager. Advisers using these solutions are up 12% and impact portfolio accounts are up 18% since the end of last year.
Asset-based revenue increased 2% year over year to $122.25 million — making up more than half (52%) of Envestnet’s total revenue. Subscription-based recurring revenues increased 14% to $104.98 million, represented 45% of total revenues for the second quarter.
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