COVER STORY
Other fintech executives are even more blunt.“ It’ s not the industry pushing change, it’ s the clients,” says Bill Capuzzi, the CEO of Apex Fintech Solutions.“ Transparency, speed, seamless tech— these aren’ t [ just ] nice-tohaves anymore. Advisors who adjust will win. Those who don’ t? They’ ll get left behind. Simple as that.”
Todd thinks AI will help Envestnet bring new programs and services to market faster while empowering advisors to engage in more meaningful conversations with clients. In particular, he expects to see“ tremendous growth in tax overlay products.”
This reflects a desire“ to meet clients where they are.” Todd realizes that there has been huge growth in the high-net-worth market as many clients have enjoyed serious increases in wealth over the last decade. At the same time, technology has helped advisors deliver direct indexing and tax overlay, so that something once available only to those investors with eight-figure portfolios is now accessible to the mass affluent.
Like many at Envestnet, Todd also says he is“ extremely proud of our UMH [ unified managed household ] chassis,” the master account that combines multiple accounts. Indeed, Envestnet’ s managed account supermarket is believed to be a major profit center.
Ultimately, success in AI hinges on possessing a wealth of data, and Envestnet is well-positioned in that arena, according to industry consultant Joel Bruckenstein, producer of T3, a leading advisor fintech conference. The company is making“ a push to be a data warehouse and they have some cool stuff,” he says.
If Envestnet enjoys a wide swath of opportunities, it also faces a sea of competition, or“ co-opetition,” as Todd refers to it, since some fintech companies competing with Envestnet on one product might partner with it on another.
Upstarts like Altruist, as well as long-established fintech companies like SEI, are offering both custody and portfolio management solutions. Other companies— such as Goldman Sachs, Axos Advisor Services and Trade PMR( now part of Robinhood with 25 million accounts)— are also expanding into many sectors of the business. Goldman executives said at the company’ s May RIA event that their long-term goal is to be as important to advisors as Schwab. It was a bold statement.
Former Envestnet CEO Bill Crager announced several years ago that the portfolio software company planned to enter the custody business, though that plan has yet to materialize. And the company’ s private equity backers might have no appetite to enter a notoriously low-margin business like custody for advisors( the margin is widely considered to be about 0.1 %).
When asked about it, Todd says the current plans are“ somewhere between not a priority and no,” though he adds“ priorities can change.” When asked if Envestnet’ s existing businesses boast better profit margins than custody, he responds mischievously,“ A smidge.”
Also consider that one of the company’ s investors, Fidelity, is already a leading player in custody and might feel territorial about its turf. Then again, Fidelity, Schwab and BNY Mellon / Pershing already face dozens of smaller custodian competitors, so another one probably won’ t faze them.
Some advisors believe new emerging custodians with powerful technologies will shake up the advisor fintech ecosystem, nonetheless. One of those advisors is Ron Bullis, CEO of Lifeworks, a Milwaukee-based RIA with $ 800 million in client assets. He sees these upstarts offering services like tax-loss harvesting, direct indexing and automated portfolio rebalancing for little or zero cost, which means the leading players will be forced to respond.
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.
Schwab and Fidelity are likely to remain entrenched as custodians to the big RIAs, many of which have relied on these companies’ referral networks to source new clients and are now locked in.“ Cash is king, and Schwab and Fidelity own the cash,” Bullis says. But they’ ll have to respond to new fintech players anyway.
What this all means for Envestnet remains to be seen. It has skillfully diversified well beyond its original client base of independent broker-dealers into the faster-growing RIA world, and if it wants to expand its penetration of the advisor universe, the RIA space is the place to do it for now.
That means whatever it does, Envestnet is likely to stick with“ a multi-custodial strategy,” in Todd’ s words. The company remains“ agnostic to who you want to work with, and that’ s an important part of who we are.”
When it comes to integration, the views of fintech leaders differ.“ If you talk to 100 RIAs about what technology they want, you will get 100 different ideas,” says one executive, adding many advisor ideas about merging software programs are impractical.
“ There is a growing demand for having a more integrated system that requires less manual intervention,” says Michael Lane, executive vice president and head of asset management at SEI, which provides custody services to 10 of the nation’ s largest banks and which is also looking to expand in the RIA world. That desire to meld systems is not universal, though, and many advisors“ don’ t want to give
Continued on page 58
JUNE 2025 | FINANCIAL ADVISOR MAGAZINE | 35