Envestnet Inc., the purveyor of wealth management technology to numerous U.S. advisory firms, announced Thursday after the market close that it would be buying PIEtech, the parent company of popular goals-based financial planning software MoneyGuidePro. The transaction, expected to close in mid-2019, will be worth $295 million in cash and approximately 3.185 million shares of Envestnet, or roughly $500 million in total value.
Envestnet has been on an acquisition and integration tear of late, recently buying Charles Schwab’s PortfolioCenter and entering a strategic relationship with BlackRock in late 2018, but this deal is different, said CEO Jud Bergman.
Bergman likened the purchase of MoneyGuidePro to its purchases of Yodlee in 2015 and Tamarac in 2012, a true strategic acquisition. “We see financial planning as a key, and maybe even the key element, of our financial wellness strategy,” he said. “We own the wealth management platform. We own a data source, or a data aggregation and analytic piece,” pointing to Tamarac and Yodlee. The newest strategic element, MoneyGuidePro, offers financial planning.
Envestnet has been pursuing the purchase of MoneyGuidePro for quite some time, added Bergman. “This is a company that we’ve been interested in acquiring for really almost as long as we’ve been public. This is a company that we identified five years ago would be the financial planning capability of choice,” he said. “We expect that this business will continue to grow profitably, probably a little bit faster under our stewardship than on its own.”
The decision by PIEtech co-CEOs Bob Curtis and Tony Leal to sell to Envestnet, even when there was an unnamed higher bidder, resulted from a number of factors, including the co-CEOs’ legacy and a desire to see their clients cared for, said Bergman. But even greater was that Curtis saw the limits of a single-point application “in a platform world.” The ability for Curtis to do what he wanted was “more compelling for him within an ecosystem, within a platform, within a network,” characterized Bergman.
These were sentiments reinforced in a separate conversation with Bill Crager, CEO of Envestnet's Wealth Solutions unit. "The structure of this is just like what we did with Tamarac; MoneyGuidePro is going to be its own business unit—and remain an independent business very focused on financial planning software—we only want to feed that," Crager said, referring to the capital and resources Envestnet will bring to bear.
"We're going to allow them to focus on their market," Crager added.
Both Leal and Curtis will continue to play leading roles in the new entity, Envestnet | MoneyGuide. Leal will assume the role as CEO of Envestnet | MoneyGuide and continue in his role as CTO, reporting to Envestnet CEO Bergman.
In a separate interview, Leal laughed at the question of whether the company's other longtime co-CEO would retire. "Bob will be sitting in a room and designing software faster than I could code it, while I will be dealing with the day-in and day-out excitement of running the business," Leal said, noting his almost 30-year relationship working in programming with Curtis deep in the weeds.
And when it comes to product road map Leal did not hold back: "Detailed cash flow and estate planning are two weaknesses in MoneyGuidePro and what we have to do is to bring into the software the detailed cash flow of Logix, which has had a lot of work done to it and a face-lift over the past two years," he said. He added that the previously announced plans of working with Edmond Walters and Apprise Labs to create a high-end estate planning software and integrations were unchanged.
Envestnet's acquisition will make the firm a leading provider of both goals-based and cash flow-based financial planning (the firm acquired Finance Logix in 2015; terms were not fully disclosed in that deal). While having the expertise and resources at Envestnet from both the Logix and MoneyGuide teams available should keep both the brokerage-focused and fiduciary-focused customer constituencies of the larger firms appeased, it should also allow for the buildout of new products in the financial wellness arena. Envestnet hopes to appeal to CFPs using its products, as well as non-CFPs giving advice to 401(k) participants on plans they advise and even for advisors needing to buy annuities for income protection. To the latter, Envestnet announced that its Insurance Exchange would be fully launched this summer.
Many industry observers concluded the deal was largely positive for both players, while noting that it brought the late January launch of Apprise Labs into better focus. “It's somewhat awkward that Envestnet acquired FinanceLogix in 2015 and is now ALSO acquiring MoneyGuidePro,” said XY Planning Network co-founder Michael Kitces on social media. “[T]he recent three-handed deal between Edmond Walters' new Apprise along with Envestnet and MGP seems 'less weird,' though.”
“More broadly, the MGP acquisition sets up a massive pitched battle between Envestnet's MGP and Fidelity's eMoney Advisor,” he added. “The biggest 'loser' in this deal appears to be [Advicent], which has already struggled from the competitive enterprise pressures of eMoney and MGP.”
Advicent took the announcement in stride, seeing upside to the transaction. “No one would call this a surprise since rumors of this acquisition existed for some time,” said Advicent COO Anthony Stich. “This acquisition certainly changes the dynamic—two of the three largest players in this space are not independent, leaving Advicent as the largest, privately owned financial planning software provider for firms of all sizes.”
But Envestnet doesn't see any changes in the competitive environment.
"We’re in a landscape of ‘co-opetition,’” said Bergman. “We want the experience for the user of eMoney to be as robust and seamlessly integrated as the user of MoneyGuide is going to have," he added, addressing cases where advisors might be using both eMoney and MoneyGuidePro. “We’re committed to open architecture. We believe in it.”
Dynasty Financial Partners, a client of Envestnet, called the deal “fantastic and significant news for independent advisors,” according to a statement from Shirl Penney, president and CEO of the network. He was most excited about the prospect of having data aggregation, financial planning, proposal generation, along with investment management, under one roof.
The deal comes on the heels of other recent announcements in the normally quieter, more staid world of financial planning, including the February heralding of a scaled-down offering from eMoney. For Envestnet and PIEtech, however, Pi Day was a big day.