Tag: envestnet

I like high-level ideas, especially ones that look at industry trends.  One of the best sources of these ideas for investors requires going directly to recent/upcoming IPO filings (S-1) at the SEC website. Companies write this stuff themselves to raise money — who should know or understand better about an industry than the market participants?

So, the recent float of asset management technology/network firm, Envestnet (NYSE:ENV) should tell us a lot about what’s going on in the investment management industry and the companies that service it.  Envestnet’s pre-IPO filings have great information.

Additionally, recent financial services/technology IPOs like SS&C ($SSNC), Financial Engines ($FNGN) and Green Dot ($GDOT) have all traded up more than 10% since their IPOs.

Here’s are the 5 wealth management trends Envestnet says is driving its business:

1. Increased prevalence of independent financial advisors. percentage of financial advisors have elected to leave large financial institutions and start their own financial advisory practices or move to smaller, more independent firms. We believe this trend was accelerated in the past two to three years as a result of the reputational harm suffered by several of the largest financial institutions during the recent financial crisis. In particular, according to Cerulli Associates, an estimated 44% of financial advisors were considered independent in 2009, compared to 41% as of 2005, and Cerulli Associates projects that 50% of financial advisors will be independent by the end of 2012.
2. Increased reliance on technology among independent financial advisors. In order to compete effectively in the marketplace, independent financial advisors are increasingly relying on technology service providers to help them provide comparable services cost effectively and efficiently, according to Cerulli Associates. For example, an advanced platform technology with fully integrated tools helps reduce the need for the manual processing of data and the use of multiple incompatible technology applications, allowing financial advisors to spend more time interfacing with their clients, while also potentially allowing the financial advisor to reduce technology-related costs.
3. Increased use of financial advisors. We believe that the recent significant volatility and increasing complexity in securities markets has resulted in increased investor interest in receiving professional financial advisory services. According to Cerulli Associates, the percentage of households investing through a financial advisor increased from 50% to 58% from August 2008 to June 2009.
4. Increased use of fee-based investment solutions. In order for financial advisors to effectively manage their clients’ assets, we believe they are seeking account types that offer the flexibility to choose among the widest range of investment solutions. Financial advisors typically charge their clients fees for these types of flexible accounts based on a percentage of assets rather than on a commission or other basis. According to Cerulli Associates, the percentage of commission-only financial advisors declined from 18% in 2003 to 12% in 2008. We believe that financial advisors will increasingly require a sophisticated technology platform to support their ability to address their clients’ needs.
5. More stringent standards applicable to financial advisors. In light of the economic crisis and related securities market volatility in 2008 and 2009, we believe that there will be increased attention on investor consumer protection, whether as a result of regulatory changes, voluntary industry initiatives or competitive dynamics. Increased scrutiny of financial advisors to ensure compliance with current laws, coupled with the possibility of new laws focused on a fiduciary standard, may require changes to the way financial advisors offer advice. In order to adapt to these changes, we believe that financial advisors will benefit from utilizing a technology platform, such as ours, that allows them to address their clients’ wealth management needs, manage and memorialize decisions made throughout the process, and that assists them with recordkeeping and account monitoring.

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Photo credit: epicharmus