“Envestnet was asleep at the wheel to let that much AuM go to a major competitor,” said industry consultant Tim Welsh, chief executive of Nexus Strategy. “There’s definitely blood in the water.”

To be sure, it’s been a tumultuous year for Envestnet. 

The giant back office outsourcer’s stock has fallen 37 per cent from its 52-week high. A highly anticipated sale of the public company to private investors never materialized. After months of corporate intrigue, co-founder Bill Crager solidified his hold on the top job with Stuart DePina, an erstwhile successor, retreating to the sidelines. 

With little warning, Envestnet abruptly moved its corporate headquarters from Chicago to Crager’s backyard, suburban Philadelphia. And last week the company unveiled a major restructuring, creating new business lines for solutions, data and analytics and wealthtech. Adding to the corporate drama, top two top executives are reportedly on their out: chief product officer Brandon Rembe and chief client success officer Andina Anderson. 

While Envestnet remains the industry’s turnkey asset manager provider with over $200 billion in assets and a major player in outsourced back office fintech services, it is facing increasingly direct and hard-hitting competition from ambitious rivals, most notably AssetMark and Orion Advisor Solutions.

Losing market share?
“Envestnet is still the big dog in this industry that sets the pace,” said Alois Pirker, research director for Aite-Novarica’s Wealth Management practice. “Acquisitions, however, have allowed AssetMark and Orion to catch up and possibly have a greater focus on certain industry niche.”

“Envestnet is the behemoth,” agreed Mike Wunderli, managing director for ECHELON, the investment banking firm that advised Adhesion. “They get the low hanging fruit. But are they at risk of losing market share? Absolutely. It’s difficult to customize offerings, which leaves opportunities for competitors to customize and specialize.”

Orion, led by hard-driving CEO Eric Clarke, is taking aim at some of Envestnet’s most lucrative business lines, acquiring, in rapid succession, financial planning software vendor Advizr to compete against MoneyGuide Pro; turnkey asset manager Brinker Capital; portfolio analysis software developer HiddenLevers; and, most recently, CRM vendor Redtail, which will go up against Tamarac, a perennial cash cow for Envestnet.

Orion shines
“Orion has clearly been busy building out an end-to-end solution for advisors,” noted consultant Joel Bruckenstein, president of T3 and producer of the firm’s widely attended annual tech showcase conference. “They’ve been doing really well and now have a lot of good pieces in place, but they still have some work ahead of them fully integrating all the pieces into one comprehensive solution.”

While Envestnet still has the “broadest technology installation footprint,” according to industry consultant Chip Roam, managing partner of Tiburon Strategic Advisors, Orion is “focusing more on single office RIAs, a fast growing market.”

These moves have led to speculation that Clarke may be positioning Orion to go public with an initial public offering as an Envestnet competitor, but the recent market swoon appears to have diminished, or at least delayed, that possibility.

Aggressive AssetMark 
AssetMark is publicly traded, but can also rely on the deep pockets of Huatai Securities, the Chinese financial services giant that owns a majority stake in the company.

Natalie Wolfsen, a highly regarded executive who became AssetMark CEO last spring after apprenticing under industry legend Charles Goldman and spending time at Schwab and Pershing, wasted no time making her mark.

Within weeks of her ascending to the top job, Wolfsen launched a new platform for RIA-focused products including managed portfolios and alternative investments and then acquired financial planning software developer Voyant.

The Adhesion deal makes AssetMark the third-largest TAMP and gives it increased clout in the RIA enterprise market with over 2,800 fee-based advisors spread over 180 RIAs as well as one of the industry’s largest model marketplaces with over 400 asset managers and strategists.

Bruckenstein applauded the acquisition as a strategic move for AssetMark, but said the company is “not direct competition at this point.”  And, although AssetMark “does not really play in the technology space,” Roame pointed to the strides the company has made “wholesaling its traditional TAMP.”

The TAMP space itself, Pirker noted, “has become a market place of a few firms competing on all levels. The model itself has changed, as firms expect a customized platform with varying capabilities and services delivered to them at scale. This is quite different from the old TAMP model.”

Vulnerable?
So how worried should Envestnet be in this brave new world?

A lot, according to one veteran RIA executive who asked not to be identified. 

“Most of the financial services industry is a commodity, including back-office technologies, clearing, custody, reporting, investment products, and asset allocation,” the executive maintained. “When a company's relationship with its clients, whether it is a financial advisor or individual investors, is simply an intangible and emotional perception of value, that relationship is easily fractured when the perception is challenged. Platform providers are no different, their ‘differentiation’ is largely a marketing spin with little actual tangible differentiation. So when a brand fades, a company stumbles, or a leader changes, the bonds with the clients and culture become vulnerable."

Others think Envestnet is just fine – at least for now.

“Envestnet is a good offering for a large number of advisors,” Wunderli said. “It’s the largest model portfolio marketplace and advisors can find whatever they want. It’s the easy button. They’re a gateway to the TAMP market, and that benefits everybody. Are they losing market share? Probably. Are they losing market share faster than they’re adding new customers? Probably not.”

“Does Envestnet have challenges? Yes,” said Bruckenstein. “Am I writing them off? No. Financial planning may be the growth engine of the future and it’s now underpriced. The jury is out on the new business lines and revenue streams they’ve added with the insurance and debt marketplaces. And their reorganization was well timed. I think combining Tamarac, MoneyGuidePro and other assets under the leadership of Tony Leal will be advantageous to Envestnet.”

In addition to Orion and AssetMark, Envestnet also faces strong competition from InvestCloud, Addepar and Vestmark in wealthtech and from SEI in the TAMP market, Chip Roame noted.

“There’s probably room in the fast growing market for all of them,” he concluded.