Envestnet and Dynasty Financial Partners announced a plan to jointly launch a set of tools and services called Advisor Services Exchange. The joint venture will give advisors using Envestnet some features familiar to Dynasty advisors, like access to growth capital, outsourced CFO and marketing capabilities, business management tools and certain types of consulting.
But deeper into the announcement was notice that Envestnet is also making a minority investment in privately held Dynasty. The terms of the deal were not disclosed by Dynasty, other than to note that the purchase was a “minority, nonmaterial investment,” so the publicly traded Envestnet is not obligated to disclose details of its investment.
Envestnet’s minority stake and the nature of the two firms is enough to convince one analyst that a full acquisition of Dynasty by Envestnet could be in the cards. “I'm wondering if in the long run they’re not going to make a move on Dynasty anyway and maybe acquire the full firm,” said Alois Pirker, research director at Aite Group’s wealth management division. “I mean [Envestnet] has a track record of acquisitions. Certainly, it would be a great fit.”
Envestnet started as a turnkey asset management platform and has broadened its wealth management model to include financial planning, as well as services like insurance and credit exchanges, he said. Effectively Envestnet is closing in on the model with which Dynasty began: a platform that wirehouse breakaways can turn to when they go independent, without having to reinvent the wealth management wheel, so to speak.
In turn, Dynasty being part of Envestnet would take costs off the table for the former. He likened it to SS&C’s acquisition of Advent, a move made in part to save on costs associated with the portfolio management tool Geneva.
Envestnet has a deep bench of data, said Pirker. “The bottom line is, where the data is sitting and can be leveraged is where the power of the ecosystem is.”
For now, both firms are clear that this is a partnership and represents a small, but important investment. “[Envestnet] is making a minority, nonmaterial investment in Dynasty, alongside of Dynasty’s current largest investor, who has been with us since launching,” said Shirl Penney, founder, president and CEO of Dynasty. “We are appreciative of the investment and feel it further aligns us going forward on the work we are going to be doing in the Advisor Services Exchange.” He wanted to keep attention focused on the joint venture, he said, which would serve mutual clients of Dynasty and Envestnet.
Capital raised by the sale of the minority stake will be used to invest in the Dynasty platform and employees, “ultimately leading to a better client experience,” said Dynasty spokeswoman Sally Cates. Nothing will be changing with the firm’s management or governance as a result of the transaction, she added.
For Envestnet, the joint venture and new investment comes as the firm announced its first crop of lenders on the Credit Exchange and named one of the first major players using its Insurance Exchange. “The investment in Dynasty was made in order to solidify our partnership and enable the exchange’s success and further empower our advisors with a deeper bench of solutions,” said Aaron Bauer, head of wealth strategy at Envestnet. “Envestnet has worked closely with Dynasty over the last 10 years and has a deep admiration for what they’ve been able to build.”
The spirit of cooperation was echoed by Penney, who said in a statement that the joint venture is an opportunity for the two firms to further combine capabilities.
Advisor Services Exchange is set to launch before the end of the year. The cost of the service for advisors was not disclosed.