Envestnet Primed To Tap Investor Stock Market Wealth
Like a lot of its clients, Envestnet is building financial muscle as the stock market keeps up its strong momentum. Envestnet (NYSE:ENV) provides integrated wealth management software and services to financial advisors.
The company’s cloud-based, integrated platform of technology tools and software provides a wide range of applications for things like financial planning and risk profiling, asset allocation, research and due diligence, portfolio diagnostics, and billing and account administration.
Envestnet works with both Independent Registered Investment Advisors and those affiliated with financial institutions.
As of Dec. 31, roughly 40,000 advisors were using its technology platforms, supporting about $ 713 billion of assets in 2.9 million investor accounts.
Envestnet has been on a roll, adding more advisors to its roster as more of them have gone independent from firms and adopted its services. The company has also benefited from the strength of the stock market, which has helped lift the assets managed by advisors using its platform.
Managing High Profit
Envestnet has logged eight straight quarters of double-digit earnings growth. Analysts polled by Thomson Reuters expect the company will keep up the double-digit pace when it reports first-quarter results May 7 after the close.
Why the strong gains?
“The primary engine of our growth is the growth in the advisors’ practices that have fully adopted our solutions,” CEO Jud Bergman told IBD. “In any given year about 15% of our top-line growth is the organic growth from the advisors using our technology.”
The majority of Envestnet’s revenue is asset-based, meaning it’s from fees charged as a percentage of the assets that are managed or administered on its technology platforms by financial advisors, according to a company filing with the Securities and Exchange Commission. Asset-based fees accounted for about 84% of revenue in 2014.
“Because they generate about 80% of their revenue as a percentage of the investment assets financial advisors place on their platform, the fact that the stock market has (gone up) for almost four years in a row has provided an important tailwind to their asset base,” Avondale Partners analyst Peter Heckmann told IBD. “Their revenue model is similar to that of a mutual fund provider. If the market goes up, their asset base goes up. The fee rate stays the same — but the higher asset balances generate more revenue.”
Envestnet is also seeing organic growth by signing up new advisors and new enterprises, says Bergman. Many times that’s done through “conversions” of an existing book of business to Envestnet’s platform.