The year 2024 was only a few days old when Envestnet co-founder and CEO Bill Crager revealed his coming departure as of March 31.
Though Crager announced on Monday he will remain as a senior advisor, the company he co-founded with the late Jud Bergman in 1999 will be charting a new path forward under an as yet un-hired CEO.
At least one industry analyst found the timing unexpected. Surinder Thind, equity analyst at Jefferies Group, said this change occurred a year or two earlier than expected.
Thind wrote in a report distributed Monday that despite significant recent investment over the past few years, Envestnet has had “limited success” changing the narrative. The lack of a named successor points to the possibility of friction among leadership as to how to best alter the company’s fortunes. This adjustment at the top comes as part of a broader change in direction, he wrote, allowing whoever replaces Crager to outline a new strategy. It is likely Envestnet would only be providing additional information regarding the year ahead when they report their fourth-quarter earnings.
Doug Fritz, co-founder and CEO at F2 Strategy, said while no one had the exact timing of this news on their “Who’s The Next CEO of Envestnet? Bingo Card,” he didn’t think anyone was surprised.
“We all knew that at some point it would be coming,” he said. “There’s a gap between expectation and performance for the firm.”
Since Crager took over following Bergman's death in 2019, the company has weathered several storms, including disputes with activist shareholder Impactive Capital, which acquired a 7.5% stake in the company and two board seats in 2022, and layoffs toward the end of 2023. It recently announced it was pushing out its planned foray into the custodian business until later this year.
“He’s great. He’s a phenomenal leader. He’s been there forever. He’s been holding the thing together,” said Fritz. “But, having a different person to take them to the next generation makes a ton of sense. I don’t look at this as, 'Underperformance equals Bill’s out.' It’s more, … ‘We need someone who can be that new energy, that new direction. By default, it can’t be Bill.’”
Because Envestnet is still a fragmented federation of different technologies including Tamarac, Yodlee and MoneyGuidePro, Fritz said these different pieces “have never come together to create the value” Wall Street and “those of us in the industry that select technology would have wanted or expected.”
“This is such a long story. This is not something that just happened,” he said. “There’s been the expectation that they would unify all these technologies and experiences and make a killer app for the industry. It never happened.”
Still, Crager’s focus on Tamarac’s integrations, report customization, system integration and data integrity have resulted in in that business unit becoming a “dominant, industry-leading platform,” said Wally Okby, strategic advisor for wealth management for Datos Insights (formerly the Aite-Novarica Group).
He added Crager and his team recognized years ago Envestnet’s prospects for growth with enterprise RIAs, breakaways and smaller firms looking to grow, as well as private banking and trust arms of large banks and advisor teams affiliated with large broker/dealers.
But while Envestnet’s separate tools are solid, Fritz said other players, namely Orion and Addepar, have arrived in the market to bring a more unified experience.
“There’s a lot of things that Addepar doesn’t or wouldn’t do. Still, the damn thing works,” he said. “They’re investing in it. It’s keeping up with the times. It’s ahead of most of the expectations that people have of it. Envestnet’s tools don’t do that.”
Fritz said Envestnet’s tools are stagnant and continue to fail to be relevant for the future.
“Those of us in the industry that have been working with Envestnet for a long time still are tremendous supporters and cheerleaders for the company,” he said. “But it’s been a while since we’ve seen it be transformative. And the data is starting to reflect that.”
Fritz said he saw two possible paths forward for Envestnet: It can either push for more modernization and integrations to make its current products more relevant to the market, or it can sell off properties “to fund a more focused future.” The first option would require investment.
“Where the hell is the cash coming from?’ he said. “The public markets have already voted with their cash on what they think about the firm.” Envestnet's stock price closed up 6.23%, or $3.01, to $51.29 on Monday following the announcement.
If Envestnet chooses the second option, it would have to narrow its focus and unify internal operations, said Fritz.
“After April, who they pick will tell me which direction they’re going to go,” he said.
Rumors and conjecture have swirled around the company and its future since Bergman's death, most recently, for example, multiple outlets in December reported that Envestnet was yet again shopping around looking for a Yodlee buyer.