Envestnet CEO on the company’s recent challenges and the opportunities ahead

Envestnet has been through a lot of changes over the past year. From reports of a private equity acquisition in early 2022 to a corporate reorganization, a headquarters relocation, high-profile departures from the executive leadership team and a public contest with an activist hedge fund, Envestnet CEO Bill Crager has had his hands full. And that’s on top of the seemingly never-ending economic, social and political turmoil everyone contends with.

So when Crager took the stage at Envestnet Summit 2023, which brought 2,200 attendees to Denver this week, he leaned into the theme of change as a driver for innovation. As markets face headwinds and $84.4 trillion in wealth is expected to be transferred to heirs by 2045, advisors need an interconnected ecosystem of technology, Crager said.

Crager also introduced the themes of the Envestnet conference: personalization at scale; improving the digital experience for clients and advisors; using data for actionable insights; and new partnerships with companies like Empower Retirement and FNZ.

InvestmentNews spoke with Crager in Denver about the changes his company has faced, as well as the other major themes from his keynote.

The following has been lightly edited for length and clarity.

InvestmentNews: The conference opened with a video about how the world is changing, and how change creates opportunities to evolve and innovate. What was your strategy there and what were you hoping to convey to the audience?

Bill Crager: During the dotcom crash, the world is falling apart, everybody is losing money, retirements are going up in flames, and the advice industry was siloed into these boxes. The Merrill [Lynch] box, the Morgan Stanley box. We had to build a cloud-based platform — no one knew the word 'cloud' then — to do what Merrill Lynch did. So our heritage is taking on these big things and solving problems that then can scale.

Somehow, the company has done it. Today, Envestnet is a market-share leader, more assets than any other wealth platform, all these things. But we’re good at it, we’re expert at it. I think that people look at the downside of challenge versus the upside of what it creates. So my message was really, don’t be so obsessed with the negative and the volatility and the difficulty. How do you turn it into an opportunity? It’s a personal philosophy of mine, and that’s what I was conveying.  

IN: Envestnet has gone through a lot of change in the past year, from the reported private equity exploration, the restructure, an HQ relocation and the Impactive Capital stuff that just resolved. How has that challenged the company and you as a leader? What innovations are coming out of that for Envestnet?  

BC: What I would say is that our strategy was very intentional. We had acquired businesses, we needed to put those businesses together, we needed to spend capital to do it. In a fragmented world, the ability to compete is easier when you bring the holistic parts together. That is really hard to compete against. We’re the only ones that have those parts.

As a mid-[size] public company, it’s hard to invest. You’re on a quarterly cycle and you’re held to the scrutiny of these shorter-term mindsets. But we knew if we effected the strategy that we would create a lane for the company for a very long time.

So we invested, knew it was going to be short-term pain, knew that the market was going to hate it, but we had conviction and we also knew that we had to break down the walls of our organization because we had acquired businesses. A lot of those businesses are very narrow-minded, and so we had to change the organization. With that came change in personnel, change in cultural center, [change in] the way the firm was thinking about itself and thinking about its future, change in the way we’re investing and how we’re prioritizing investing.

That change for a company like Envestnet, I will tell you … every person, every deal we did, every single relationship inside the company is personal. It means something to me. To change the organization and to create this more consolidated environment was very difficult, personally, because we had to bring new people and we had to change the team in a lot of ways.

So what do we get out of that? You have a data set that looked at $5 trillion in consumer spend last year, $5 trillion in deposits — think of the value of deposit direction and flow given the bank crisis — and $5 trillion in invested assets. You set that into a combination of technology that we have, from the [financial] plan to the consumer portal to the execution engine, and you network more to the broader set of solutions: investments, we built an insurance exchange, credit exchange, trust, health care, alternatives. Bringing that together is a game changer for our industry.

That’s what we invested in, that’s what we’re executing on, that’s what's going on [at Envestnet Summit 2023] this week.

For our shareholders, and they are a very important constituency, we’ve created a long-term value platform that will provide tremendous return for them. We’re an interesting company, we’re a unique company, and I think a firm like Impactive, who are more 'constructive-ist' than activist, is not a bad case scenario for us. [Impactive co-founder and managing partner] Lauren Taylor Wolfe is someone who understands the company, understands that you have to invest to grow, and is very aligned with our strategy. She thinks there are ways we can go about it, and that’s what our board is all about.

IN: You spoke this morning about Envestnet’s Insights Engine. Is that something that’s built off Yodlee data? What can you say about the opportunities you see there for advisors?

BC: Yodlee has an incredibly unique AI and data science organization. We crossbred our data infrastructure to every corner of our business.

Now you have all of the puzzle pieces, but how in the world do you bring that volume of data together into something that’s smart? We’re able to run algorithms, learn patterns, anticipate things and, at a very macro standpoint, see things that are going to happen to a [client] segment over the next five years. That’s pretty powerful.

Hand that to the advisor, and the advisor is able to act on a recommendation to you based on things they know about [the clients]. Every single one of those insights has an economic value for the advisor and for the firm.

IN: You said this morning it can help advisors achieve 31% revenue growth, and something I’ve noticed across advisor tech conferences in 2023 is this theme of technology helping advisors grow. It seems a more intentional part of the messaging now. What do you think is driving this?

BC: It’s what we hear from advisors, right? How can they pay attention to each and every client and also grow their business?

You’ve got a lot of marketers [pitching] services out there that say here’s how you use social media, here’s how you target. All well intended, all very good. I want to be precise. I want to know about you and I want to target you and I want to give you exactly what you’re looking for. [Then] the advisor can cross-sell and provide more holistic advice than the single solution they had provided. [With technology], we can begin to find people that that advisor would absolutely be best to engage with, and tell them how to engage with that consumer. That’s powerful.

I think it is a theme, it’ll prove out. What you’ve got to challenge us on, next time I see you, is how much are your advisors actually growing? How much are they using the tools? What’s the bottom line, is this moving the needle?

IN: I’ll take you up on that. I also want to ask you about the partnership with Empower Retirement you announced this morning. What’s going on there?

BC: We had a good retirement business, but it wasn’t in the core of what we were thinking about or doing. It was one of those pieces that was independent, and we had far too many independent pieces. So we did an evaluation — do we lean in and invest in this business? How do we bring retirement plans closer to the center?

We acquired a small business, 401kplans.com — a place you’ve never heard of but they really were a threading for us to bring that business into the heart of our wealth business. Empower [has] this enormous retirement complex, and they also have Personal Capital.

Most of our advisors have one or two retirement plans that they serve for their high-net-worth business owner clients. They call them two-plan Tonys, that’s the nickname for most advisors. How do you streamline that and how do you bring it back into the holistic view? That’s what we’re doing. Empower is helpful because they’ve got broad distribution and are aligned in the way we’re thinking together about retirement and wealth.

IN: How about FNZ? You had first mentioned in an earnings call about exploring the custody business. What can you tell me about where that partnership is going?

BC: We are enormous, trillion-dollar-type asset partners with Pershing, with Schwab, with Fidelity. They’re our partners. But our job is to create optionality for our advisor clients.

We work with everyone, with 32 different trading engines. Think about the composite of our clients: 106,000 financial advisors who do the myriad things that we configure for them.

FNZ is another option, but it’s a very interesting option. Say this week we open 10,000 new accounts. Guess what the average time is to open an account? More than seven business days. What if you can do that in a minute? What if you can serve in real time? It would change the competitive landscape from a service standpoint and the entire industry is going to lift. I believe that.

FNZ is just going to be a disruptor and I want to partner with them. We know this space well, so you make your bets.