Envestnet’s New Stake in Dynasty Financial Leaves a Big Question Unanswered

Details about the deal remain scant.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

One of wealth management’s biggest companies has invested in a much smaller darling of the industry but details about their plan are lacking.

Envestnet (NYSE: ENV), a software company used by over 4,700 wealth management firms and 100,000 financial advisors, said it acquired a minority stake in Dynasty Financial Partners, a service provider to a network of 45 RIAs that manage more than $40 billion in client assets, in aggregate.

The deal, announced after Wednesday’s market close, appeared to have no material impact on Envestnet’s stock. Shares rose 0.9% Thursday, on lower-than-usual volume, on a day when all three key stock indexes finished broadly higher.

President and CEO Shirl Penney founded Dynasty in 2010 to help advisors establish their own independent RIAs and provide them with ongoing support, for a fee that is a percentage of the assets they manage. The private company also has a turnkey asset management platform, or TAMP, with $18 billion and recently relocated from New York City to St. Petersburg, Fla., to the delight of some employees.

Bill Crager, the cofounder and former president who became interim chief executive of Envestnet after cofounder, Chairman and CEO Jud Bergman was killed in a car crash last fall, will join Dynasty’s board of directors with eight existing members. Details of the transaction were not disclosed.

Together, the two companies plan to launch the Advisor Services Exchange (ASx) later this year, a platform where Envestnet clients will be able to access services previously only available to Dynasty’s partner RIAs. Dynasty’s consulting, business management tools, marketing services, outsourced CFO services, and capital, all of which helps RIAs grow, will be available through the exchange.

Edward Swenson, the chief operating officer at Dynasty, told RIA Intel that Envestnet is the “best technology provider in the space” and that his firm only enhances their offering.

“We’re very excited to be doing more and leverage our capabilities in the market. I think it will be very additive to those firms that are using Envestnet,” he said.

But whether access to the services will be all-or-nothing is unclear. The announcement was just a peek of the plan.

Prior to the deal, the only way to gain access to Dynasty’s services was to become a partner firm. Dynasty’s RIAs get everything that will be on the Envestnet exchange for the cost of being a partner.

Swenson and Aaron Bauer, the head of Wealth Strategy at Envestnet, declined to explicitly say if Dynasty’s services would be offered independently or continue to be for sale as a suite.

“We’re going to have more details around how exactly the offerings are going to be rolled out. It’s less a la carte, more about integration and making these seamless,” Swenson said.

Additional details related to the deal are still being finalized and will be shared closer to the launch of the exchange, Bauer told RIA Intel. Swenson and Dynasty said the same thing about the potential unbundling of services.

Bundled or not, the expanding availability adds new services to Envestnet’s most prominent services, including its Wealth Management Operating System, Tamarac portfolio management, reporting, trading, and rebalancing, and the financial planning tool MoneyGuide.

In turn, Dynasty will be more visible and accessible to hundreds of RIAs.

“Personally, as a cofounder of the firm, I’m really excited. There’s a cadence and time to everything. We are at a point where this makes a lot of sense to Dynasty. We now have the capabilities and the scale and the team to do it,” Swenson said.

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