Envestnet announced today that it will work closely with four of the world's largest asset managers deepening the levels of customization that can be achieved in building investment portfolios on its platform.
The four firms—BlackRock, Fidelity Investments, Franklin Templeton and State Street Global Advisors—will be the first among more than 800 asset managers that Envestnet works with to develop customized investment strategies that will be available to 109,000 financial advisors in it. platform and their customers.
According to Dana D'Auria, solutions group president and co-CIO at Envestnet, the first of these new developments will be available sometime in the third quarter.
These new levels of personalization will result from a more granular set of choices embedded in Envestnet's technology around personalization, and three new product collaborations have been announced.
The first is the development of customized direct index products acceptable to the UMA by each of the four managers.
Then there are the strategy UMAs, essentially one-to-many models designed for advisors to HNW and UHNW clients that can be further customized to include separately managed accounts, not just ETFs or mutual funds, with a minimum account size of $250,000.
Finally, HNW Consulting will be able to offer one-to-many and one-to-one bespoke models for accounts over $1M. This is the highest touch of the three, creating models based on client specifications, either from the asset manager itself or from Envestnet | PMC.
To be sure, customizations in the Envestnet UMA platform are not new, D'Auria said. Looking at how an SMA is performing in the firm's UMA program today, an advisor can make some limited, incremental adjustments.
She said that in the new products, Envestnet will make full use of the optimization algorithms developed over the years of offering live indexing, which began in 2013, and apply them to models of any type.
UMA advisors and managers will have 100 customization points to choose from in the new products. These will include everything from market capitalization size to selection of factor biases – be it value, quality, momentum or low volatility – and a wide selection of sustainability themes, which have additional preference settings within them (the say, “climate” and leaning towards “green” transportation” within it), to name just a few.
These client-specific models created will then be tested to ensure stability and Envestnet will work with the advisor to ensure the result is investable and create the client's custom indexed portfolio.
“We will have a series of products with each of the four managers, essentially a menu of solutions that advisors and home offices can use,” D'Auria said, referring to what will be available later this year. D'Auria also noted that a big driver of the project had been firms looking to build custom portfolios in an affordable and scalable way.
While she said it was too early to tell which of the managers might be the first to come online, she added that, among many other considerations, much work remained on which asset classes would be chosen for the products.
When asked how the four initial asset managers were selected, she said the firm looked for managers who had been best suited to work with Envestnet in the past. The product announcement said Envestnet would be compensated by the managers, but details of those arrangements were not disclosed.
In one May interview with WealthManagement.comMolly Weiss, a group president at Envestnet who oversees all of the firm's wealth platforms and technology, said these and other developments were part of a fundamental shift in the way the firm's clients access managed accounts.
“Where it creates the most value is portfolio construction and management, and historically, UMA has been something that Envestnet markets and allows the advisor to manage the sleeves themselves and/or transfer others to other managers, but Envestnet marketed it that. ” she said.
“The technological improvements we are working on and continue to work on is the ability to trade with different parties; the advisor can trade part of their sleeve and another contractor,” Weiss said.
Envestnet currently works with more than 500 of the nation's largest RIA firms and reports having more than $6 trillion in total assets on its platform.