Portfolio Software Merry-Go-Round
In short, being public can be an expensive distraction, which partly explains why the number of public companies in America has shrunk by more than 50 %— from about 7,500 in 2000 to around 3,500 today, according to the Wilshire 5000 figures. Being private gives Envestnet certain advantages.“ If we see a new market we want to enter, we do have the luxury of time,” says Todd, who came to the job with a 20-year background running enterprise technology businesses.
A serious criticism of Envestnet was that it failed to integrate many of the software programs it purchased. In conversations with the firm’ s 80 to 90 clients in recent months, Todd has heard that too.
Clients“ want to have a deeper relationship with us, and they’ re telling us that one of the gateways to having a deeper relationship with us is a more integrated platform,” he says.“ We’ re sort of doing that work right now to figure out what that looks like. How do we put it together and how do we deliver value to the advisors that makes their lives easier, allows them to attract more customers, allows them to keep more assets?”
To their credit, the Envestnet backers who took the company private didn’ t overleverage it at the same time. According to Todd, the company is valued at $ 4.5 billion and has about $ 2 billion in debt, though net debt is significantly lower if one counts cash on the balance sheet. Besides Bain, Envestnet’ s shareholders include Reverence Capital, Fidelity, BlackRock, Franklin Templeton and State Street— as well as Envestnet’ s employees.
The company’ s balance sheet should provide it with room to invest, but the challenge is where to spend cap- ital. For many advisory firms, portfolio management software represents the single biggest expense in their software budget, so what advisors can spend must be factored into any plan by software manufacturers.
One investment area the firm has already moved into is AI. At its annual Elevate conference in April, the company rolled out a generative business intelligence solution, Gen BI, and Insights AI, an enhancement to its existing Insights Engine. Both are designed to streamline the way advisors access and use data, so advisors can make better, faster decisions, says Jeremi Karnell, head of data solutions.
Todd shares the widespread belief that one of the advisory industry’ s biggest threats is the talent shortage. There are simply too few advisors given the number of Americans seeking financial advice. AI, in the view of many, is an obvious instrument to empower existing advisors to service more clients.
But adoption of AI by financial advisors, or other businesses, isn’ t yet turning into a stampede. One market strategist, David Kostin at Goldman Sachs, recently said at Goldman’ s RIA Professional Investor Forum that he was“ underwhelmed” by the adoption rates when he spoke with CEOs and CFOs across American industry.“ Only about 6 % say they use AI, and that figure is expected to go to 10 %,” Kostin told advisors at the forum, held in New York in May.
Todd believes that advisors who embrace AI inevitably will develop a competitive advantage.“ We’ re infusing AI into our business to allow advisors to be more efficient and serve more clients,” he says, adding that the technology can also address productivity slack.
Portfolio Software Merry-Go-Round
If Envestnet has emerged as the leader among the five major players in portfolio management software, it’ s not for lack of competition. The rivalry seems to grow more intense every year, as the field attracts wellknown investors, and some key executives find themselves in play.
Addepar, a platform started by entrepreneur Joe Lonsdale and backed by venture capitalist Peter Thiel, was designed initially for family offices and the ultra-affluent, and it sports impressive abilities in alternative investments. It recently received a $ 3.25 billion valuation. Reports are that Addepar is looking to move from the super-wealthy to the merely wealthy market. As uppermiddle-class Americans see their net worth surge, many are expected to add alternatives to their portfolios, Addepar’ s strong suit.
Another leading platform is Orion, which was spun out of asset manager CLS Investments years ago and has become popular in the RIA community. The firm lured former AssetMark CEO Natalie Wolfsen to take the helm as chief executive in October 2023. Earlier this year she acquired Summit Wealth, run by former Black Diamond founder and CEO Reed Colley, who has become president of Orion Advisor Technology. His mission is reportedly to integrate various Orion systems, much the same as Envestnet is doing.
Meanwhile, Black Diamond itself, which is now a subsidiary of fintech giant SS & C Technologies, recently took over the Morningstar Office portfolio management software. The fact that a successful technology company like Morningstar exited the portfolio management space speaks volumes about the level of competition. Apparently, Morningstar management concluded that financial data was its core business and decided to focus there.
According to Joel Bruckenstein, producer of the T3 fintech conference, the hottest company in the space today may be Omaha, Neb.-based Advyzon. Started 12 years ago by former Morningstar tech executives, Advyzon began producing low-priced software for small advisors and has steadily moved up market. There have been published reports that Schwab is interested in acquiring the firm, but management told Financial Advisor that it’ s not for sale.
34 | FINANCIAL ADVISOR MAGAZINE | JUNE 2025 WWW. FA-MAG. COM