Envestnet-Yodlee Deal Shows Convergence of Wealth, PFM Worlds

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Wealth management products and personal financial management tools are converging, but a gap remains between the industries. To Envestnet, the way to bridge that gap is by buying Yodlee.

The $660 million cash and stock deal, announced late Monday, brings together two tenured players in their respective sectors and is something of a watershed. However, it fits into a larger context of wealth management product firms on the hunt for acquisitions that will keep them competitive against the rise of the robo-adviser.

The deal, expected to close in the fourth quarter or next year's first quarter, "accelerates the transformation of financial technology by delivering better relationships and greater lifetime value than connecting financial advisers, individuals, and service providers," said Jud Bergman, Envesnet's chairman and chief executive.

It helps "advisers to cross what we call the digital divide, a divide that separates many advisers from their best prospects and clients," he said in a conference call late Monday.

Earlier this year, Chicago-based Envestnet looked into working with Yodlee, in Redwood City, Calif., to provide its clients with a better understanding of investors' various holdings and assets, Bergman said. But talk of partnering evolved into deal negotiations.

"As we began to look at the benefits of this integration we became increasingly positive about how transformational a merger could become," Bergman said.

This year has already seen a series of technology provider acquisitions by wealth management firms. Fidelity announced it would acquire eMoney Adviser in February and Northwestern Mutual landed LearnVest in March. Meanwhile, Schwab and Vanguard have built their own robo-advisory platforms, quickly gathering billions through cross-selling to existing clients.

But Envestnet has been particularly busy, spending an estimated $32 million on financial technology companies Finance Logix and Upside.

Already providing a suite of investment products and services, portfolio analytics, account servicing and reporting capabilities, the deals Envestnet completed so far were meant to build itself up as a one-stop solution for advisers considering a robo-adviser platform.

The acquisition of Yodlee, considered PFM's pioneering firm, would cement Envestnet's capability to serve an emerging demand for data aggregation and leveraging data insights and behavioral science in wealth management.

"Making digital advice truly personalized requires harnessing the power of data. Doing so can make it as important and relevant as being 'in person,'" Rob Foregger, a co-founder of NextCapital, Personal Capital and EverBank, wrote in an op-ed in Financial Planning last month. "It is very difficult for a fiduciary to provide good advice without understanding what a plan participant owns and knowing who they really are."


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