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Envestnet Joins Increasingly Crowded Digital Estate Planning Space

How will their offering match up with Steve Lockshin’s Vanilla and other trust accounting tools for RIAs?

Envestnet announced the launch of the Envestnet Trust Services Exchange this week, an initiative meant to help registered investment advisors and broker/dealers access trust and estate planning services and attorneys for clients. The platform will be fully integrated with Envestnet | MoneyGuide, Envestnet | Tamarac and other offerings within the Envestnet ecosystem, currently available to more than 105,000 advisors across 5,100 companies.

This marks another entry into the increasingly crowded space intended to help advisors extend their client services into the estate planning space. In August, AdvicePeriod's Steve Lockshin announced the rollout of his own digital estate planning effort—Vanilla; and just a few months ago we saw the acquisition of digital vault leader Everplans by National Guardian Life Insurance with the stated goal of using the new capital to further build out the tech firm's Everplans Pro, which targets financial advisors.

Envestnet’s trust platform will operate similarly to the insurance and lending exchanges it has rolled out in the past few years, with digital estate planning concern Trucendent filling the role played by FIDx for their insurance offering and the Advisor Credit Exchange for lending. Like those companies, Trucendent will remain an independent entity, with Envestnet taking a minority stake.

Envestnet Executive Managing Director and Head of Strategic Initiatives John Yackel, who joined Envestnet as part of the Prudential Wealth Management merger eight years ago, explains that his long-term goal is to “round out the financial wellness business offerings on our platform via these exchange companies.”

Yackel and Trucendent co-founder and President John Scarpato both spent time together with SEI in the trust accounting space.

Many advisors have clients that would benefit from estate planning, but few offer the service.

"The control and flexibility associated with the trust account make it the ideal estate planning vehicle for accommodating clients with various types of family structures, while helping to manage and mitigate tax liabilities," says Scarpato.

Yackel agrees, stating that “a trust account should be the appropriate wealth transfer vehicle for all types of accounts, not just the high net worth.”

Traditionally, advisors who came to the conclusion that clients could benefit from a trust would tap a limited referral network, if they had one, then send around spreadsheets and emails to bring together the various advisors and attorneys needed to create and fund the account. It's a restrictive approach, according to Scarpato, and advisors, and their clients, would benefit from being more proactive with the estate planning structures.

“Identifying clients for whom [trust planning] is a top-of-mind issue is step one for the platform,” he says.

Trucendent’s system allows advisors to send a branded personal goal-setting questionnaire to clients. It analyzes the answers and produces a preliminary trust planning recommendation. That recommendation is then reviewed by the advisor and an independent attorney from the Trust exchange’s network. (There is currently no fee for attorneys to sign up for the exchange, but they do have to go through a due diligence process before being added)

Depending on where things go from there, the attorney (and trust administrators, if necessary) will work with the advisor to handle trust account documentation, asset transfers and regulatory compliance navigation. Once a trust account is opened, the advisor, client, attorney and administrator can work together on the Exchange's platform, where the advisor will maintain custody of the client's assets.

It’s important to note that it is the independent attorney and trust administrator with whom the client will sign engagement letters, not Envestnet. “We are not a trust company,” Yackel said.

That is a point of differentiation from their most direct competitor, Vanilla, who created its own law firm to service the platform.

There are pros and cons to each approach. Having all of the lawyers under one “roof” allows for greater control over the end product, easier due diligence and quality control and just more speed in general, which makes sense, since Vanilla’s model is based on a fuller robo-ization of the estate planning process.

On the other hand, jurisdiction and differences over the tax laws of where the trust is officially located are both issues; it’s difficult for one firm to maintain the necessary certifications and legal expertise to properly blanket the entire range of possibilities in the United States. This is why Vanilla currently offers document production services only in about 20 states (though its advice service is available in all U.S. jurisdictions).

Envestnet's exchange model allows for far broader coverage to comply with jurisdictional issues at the possible cost of centralized control and faster expedition.

“Our solution has to solve for all 50 states. Which is why we work with a mixture of players, from those with a national charter to others who specialize in specific trust jurisdictions,” Yackel said. “There’s a difference between creating a network and making something where it’s cookie cutter and the client only gets 15-20 minutes with the attorney. The industry just isn’t ready for that approach yet.”

Currently the Envestnet Trust Services Exchange is only working with a few advisory firms in a limited pilot offering, according to a spokesperson. It will be made more broadly available to advisors later this year.

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