After posting an 11% increase in revenue year-over-year during the first quarter, Envestnet executives detailed plans around the firm’s $30 million investment in its digital “financial wellness ecosystem” to generate future revenues.
In the company’s first-quarter earnings call on May 6, Chief Financial Officer Pete D’Arrigo broke down how the $30 million of additional operating expenses throughout the year will be utilized.
“Roughly $20 million are resources to support technology initiatives and roughly $10 million of expenses related to those go-to-market marketing and sales activities and resources,” he said.
Moreover, Envestnet ramped up its recruiting team, and will start additional hiring during the second quarter, D’Arrigo said. Envestnet expects these investments to begin to generate incremental revenues in the second half of 2022.
Envestnet CEO Bill Crager outlined in the call how the firm is keeping its word to use its additional operating expenses toward the financial wellness ecosystem’s development. The ecosystem, which Crager announced in February, is designed to connect the daily cash that people spend to their long-term investment goals.
Other wealthtechs, like InvestCloud, are trying to keep up with Envestnet’s ecosystem by building their own through mergers, acquisitions and integrations.
Still, Envestnet’s size and scale is a major competitive advantage, and a part of how it enables future growth, Crager said. Today, Envestnet serves $4.8 trillion in assets, manages $229 billion in assets, and powers more than 2 million financial plans a quarter. During the first quarter, Envestnet executed 50 million trade orders and onboarded 42 billion in conversions. Envestnet serviced 500 million aggregated accounts each day, and has relationships with over 5,200 companies.
Moving forward, Envestnet is zeroing in on three areas of focus to accelerate revenue opportunities around the tech ecosystem, Crager said. The first is capturing more of the addressable market that already resides on Envestnet’s platform. “Asset-based solutions are an important part of this opportunity,” he said.
The second growth focus is on modernizing the digital engagement marketplace, and Envestnet has plans to launch a new client engagement portal, Crager said.
“The [artificial] intelligence of our financial planning infrastructure connects to the portal and threads the consumer’s experience to actionable services to achieve their near and long-term goals,” he said.
Envestnet is also rolling out a new trading platform that brings together “the best of all of Envestnet’s leading capabilities to advisers across every channel,” Crager said.
The third focus of Envestnet’s growth strategy is to open its platform for expansion. The February launch of MoneyGuide engine, which opens financial planning APIs to the industry, will bring to market one complete ecosystem of APIs for the entirety of the Envestnet network, Crager said.
“This universe of APIs will enable us to power financial wellness for more people and will drive growth for Envestnet,” he said.
During the earnings call, Crager also highlighted a number of initiatives throughout the first quarter that support Envestnet’s growth strategy.
In March, the fintech launched Spend vs. Borrow and Mortgage Refinance blocks to its MoneyGuide MyBlocks that address pain points on the adviser side of financial planning. For example, the Spend vs. Borrow block guides clients to make a better-informed decision between liquidating assets and taking out a loan to pay for a specific goal.
The acquisition of Harvest Savings & Wealth Technologies in April leverages Envestnet’s existing bank relationships and brings capabilities that opens all of the bank’s accounts to its addressable market, Crager said.
He cited savings accounts as an example. “Harvest gives banks the ability to use savings accounts as launch points for people to plan for their future, enabling micro savings, which can connect to investment accounts, again, intelligently connecting people’s financial lives, offering answers and the ability to take action.”
Envestnet also launched an integration with Trucendent so advisers can manage trust and estate planning accounts for their clients while bringing down costs and account minimums for advisers’ clients.
“This capability is connected to our legacy studio, which helps families develop estate plans for next generations; once again, answering questions, supporting decisions with the ability to execute, all intelligently connected,” Crager said. “Each of these examples shows our vision in action, providing practical, actionable information to address a person’s financial question or need, intelligently connecting the dots of their financial life.”
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.