Ep. 142: Connecting the Dots by Acquiring the Right Data with Bill Crager

Come on in, sit back and relax, you’re listening to episode 142 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting, and this podcast features interviews, news, and analysis on the trends and best practices all around wealth management technology.

This episode I was at the Envestnet Advisor Summit in Charlotte, North Carolina where I managed to get ahold of Bill Crager. I’ve known Bill for quite some time, he’s been on the show before, we spoke about how he got into the industry and what makes him tick. This time we really wanted to talk about strategy, where the company is going, what they’re working on, and find out what’s up next for Envestnet.

The way data is delivered and consumed in the wealth management industry has changed dramatically over the years. These changes have made it more difficult for enterprise wealth management firms to maintain their data infrastructures. Over time, they have deteriorated and have been duplicated and made obsolete through multiple acquisitions, until no one in the organization is quite sure how all the data pieces fit together.
That’s why Ezra Group launched our Data Assessment Service to conduct in an depth review of data sources, downstream consumers, data utilization analysis for enterprise wealth management firms and deliver a comprehensive strategy and roadmap to get your data architecture under control. For more information on Ezra Group’s Data Assessment Service go to ezragroupllc.com
Be sure to check out our sponsor, the Invest in Others charitable foundation at InvestinOthers.org.

Companies Mentioned

Topics Covered

  • Connecting the Dots
  • M&A Data Plays
  • The Shift to Financial Wellness
  • Open APIs
  • The Exchanges
  • Bringing It All Together
  • RIA Valuation Data

Episode Transcript

Craig: We’re here at the Envestnet conference and my guest is co founder and CEO Bill Crager. Bill, welcome

Bill: Craig. It’s good to see you. Thank you for being here. It’s pretty awesome.

Craig: It’s awesome to be here it is, after three years.

Bill: Lots of energy to I’m excited about it. I’m so so thrilled to be back in person with so many of our clients, it’s awesome.

Connecting the Dots

Craig: It’s great to be on the road again. It’s great to see clients. It’s great to have everyone together. It just want to jump right in. And in your keynote, which was fantastic, really, really good. You really kind of summarized everything we’ve missed the past three years. But one thing you mentioned was, you spoke about connecting people who are passionate and vital, curious and caring. So how do you see your platform connecting all the dots and advisors business?

Bill: I mean, the advice business is a human business. It’s not a technology business. It’s not a data business. And people matter. And so those connections between people are the essential element of advice. Now, the future model I believe, is what we call this hybrid. human expert plus machine is where the power comes from, because the data plus technology creates scale. Creates the ability for personalization at scale to do more for more people, and do that on a continuous basis. So the future that I see in what we’re trying to engineer is to drive the humanity, but power it with more data and technology.

Craig: Drive the humanity, that’s a good way to put it. You mentioned personalization at scale. So I’ve heard that many times and it’s sort of a buzzword, hyper personalization. I heard Brandon call it a dynamic personalization. Are you doing anything different about that? I want to kind of lead into your data conversation. So data really drives personalization?

Bill: Yes. So data is central to the strategy and Envestnet has a very unique dataset because we serve over 30 million individuals with our Yodlee application every day. We’re the leading financial planning software, and then we are serving nearly 20 million investor accounts every day. You bring that dataset together, Craig and that is the most robust data information about people’s money really in the country. So okay, how do you bring that together, so that you can surface that area of personalization. So it’s different for you than it is for me. And the scale of the data really drives that.

M&A Data Plays

Craig: One thing I’ve written about your acquisitions is that I thought there were all data plays, especially Yodlee, which is obvious data play and that got some bad press but I know I wrote about how the opportunities they are tremendous and where we’re going with the business and when you when you purchased MoneyGuidePro, I also said that was a data play, because no one’s really getting into all that data, 2 million plans created but no one has looked at that across and analyzed it and done any kind of peer analysis. That’s something you could feed into Yodlee, feed into Wheelhouse Analytics.

Bill: That’s correct. So it’s exactly how we think about it. And that’s the underpinning that’s the foundation and then upon that foundation, okay, how do you make that data layer smarter? And that’s the work we’re doing and I talked today about today we make 11 million insights a day that are helping advisors identify opportunities, understand and forecast risks, meaning are clients unhappy and then make more efficient the way you’re doing things. So we’re providing 11 million of those suggestions a day. How are we doing that? It’s happening through our intelligence in our data, it’s AI, and the AI is derived from the Yodlee business and we’ve kind of crossbred it across the entire enterprise. What you’re beginning to get a sense of here at Envestnet, is the Yodlee acquisition, fully integrating that into advice, and it’s a game changer.

Craig: Oh, indeed. And you’re sort of a victim of your success. It’s the innovators dilemma. In order to reach the levels you have in your market share penetration, which is the number the number one in all areas, you’re going to build tech debt, because it takes time to get there. And then you also have startups that are coming out that have unique ways to build the things and are starting on new technology. They have an advantage, but they don’t have the data you have. So investing in data is a tremendous value that it builds a moat around your client base.

Bill: When I look at the competitive set, it is the data that is such a differentiator for Envestnet and it’s very hard to replicate. I’m not going to say it’s impossible to replicate, but it’s going to be very hard for somebody pull those pieces and that data set back together. And you know, we’ve been at it for 22 years. So I was I was a young guy back then and but but look where we are right, extraordinary, extraordinary success. I’m so in awe of it and proud of it.

Bill: But what we’ve spent the last two years really focused on is executing. To bring the environment into the cloud on top of that cloud created layer, I’m not gonna get too technical, but we’re API’s can power these experiences. So the data sits in the cloud. We’re powering experiences that can be a client portal, groundbreaking what we’re doing there. It could be the advisors dashboard groundbreaking what we’re doing and we’re moving more and more into this advisors business and connecting all those parts. I think we’re groundbreaking there. It’s using the data experiences and make a difference to the end client to the advisors advice and then to the advisors business and trying to do that empowering that across the board.

The Shift to Financial Wellness

Craig: One thing I noticed a number of years ago, even as I was going back through all my keynote notes back to 2015 is when Judd started talking about, he didn’t use the word financial wellness, but he was he was talking more about financial planning becoming the centerpiece of advisors business and then every year it started getting more and more that came to a financial wellness, then where you are now so how do you see that driving how you make decisions?

Bill: Well, the crazy thing is, and this is the truth, we envisioned and what we’ve been building in the parts we’ve been investing in, have been to bring a person’s financial life together. And when you do that, we believe that you create more understanding more confidence, that elevates into something that’s ultimately being financially well, whatever that is. But the way we’re defining it today is calling it the intelligent financial life. What is that? Connecting your daily financial ins and outs and all the transactions and everything all the confetti of your money that goes everywhere each day, hard to understand, bringing that together, then connecting it to your long term goals. That’s data that drives both of those parts. There’s planning, Yodlee, connected by solutions in between those are the rails. And in really, that’s the work we’ve been doing, Craig, put it in the cloud, connect them to experiences and then bring them back through an execution engine that trades more than anybody that has more accounts that we’re opening that is connected to more asset managers, insurers, credit providers, etc. And that’s the work that we’ve been doing the last two and a half years to deliver it and I am so excited with the progress we’ve made. And I think I can sense the energy and folks here at the Advisor Summit, how energized they are seeing what we’ve done.

Craig: And also your business is so diverse and so large coming here might be the first time some people see everything in one place, all the different parts and pieces of what you do. And the intelligent financial life, if I put my marketing hat on, is a great tagline. Even financial wellness was a good title on at the time because it changes the conversation away from well you guys just manage our investments to no, we’re looking at the entire holistic view.

Bill: Right and people don’t have it. So when you say to someone, I can show you the entirety of your financial life and help you make sense and balance these things. The money you’re spending today and where you want to go in the future. People say no, that’s a mess. It’s a black hole. And if you look at where our client portal is, and some of the other environments that we’ve launched, that’s the bringing together and to me, it is so powerful. I told the story in my speech today about that advisor, who sat back there and he said it was so funny, because he said, what is this amazing thing? This isn’t software as a services it’s relationships as a service. I mean, that’s incredible and what the potential for that is, I think is just so significant. We’re excited about it.

Craig: Well, it all links back to your insights which all links back to data. And if you can provide value to advisors more than just snappy technology or great UI, but real advice to them, that says here’s what you should be doing next. Here’s the client you should talk to today. Here’s the investments you should put them in, and here’s why that endears you to the client.

Bill: I think so. And you said something a little earlier about some of the smaller wealth tax and fintechs they’re doing extraordinary things. We want them in the ecosystem. It’s not like us against them. It is now we’re in a developer environment where our API’s are out on the web. I mean, they’re there, people can begin to engage with us and enter the door into this ecosystem to grow. That’s a good thing for us. And it’s a great thing for our clients. And I think it changes the dynamic in the space because to build that distribution to have that many users is a long, long road. I will tell you it’s a very long road. We’re so fortunate that Envestnet is in that position, but we can grow and enrich that position. Because we’re going to open our doors to everyone.

Open APIs

Craig: Would you allow a startup to leverage your portfolio accounting engine and build on top of that?

Bill: That’s correct.So the thing that I’m focused on from a strategic standpoint, are the rails the underpinning portfolio accounting, trading, things like billing, reporting. There can be choice and reporting and things like that. But it’s some of those fundamental infrastructure pieces are key to us. And everything else is an experience and power that experience whether it’s a risk score, or it’s an ESP platform, a type of performance report, even a rebalancer we want to be open.

Craig: So you’re sort of taking the HP point of view where you’re going to be cannibalizing some of your businesses theoretically if you’re allowing competitors to build on top but better that you do it and gain the the revenue then someone else to do it to you

Bill: Because the scope of what we do, we can’t be the best in everything. We want to be the best in everything. So you do that through partnership and not try to fight every fight Craig and that’s been a couple of lightbulb moment inside Envestnet, I remember when I talked to the PMC team in the early days, I said hey, look, we’re gonna let everybody manage their own assets and have strategists do what we do. It was a revolt, you’re destroying our business well, that was about $5 trillion. So I think this is that sort of same lightbulb, we do not have to build everything here. We need the infrastructure to enable it here. And the data is what really opens that up to us. So you are so ahead of it when you say that data has been the fundamental strategy because that is the truth.

Craig: I think it helped you get to where you are and that’s going to help you defend your business because everyone’s now gunning for you now that you’re the leader, which is what happens.

Bill: Which is funny, card tables, 288 modem and we were going to disrupt financial services. That was the honest truth, what sort of audacity was that?

Craig: Well you know when all the tech guys get together and say, Oh, 288 modem I was in a 144, what’s this 288, we would have killed for 288 modem.

Bill: My ISP, dates myself a little bit.

Craig: I still have my CompuServe address. So they see other competitors copying you like Orion came out with Protect, Live, Dream. So they’re all seeing that. You want to move to that more of a wellness message.

Bill: Look, great people in our industry, and there are great things happening and it is it is a strange experience to be recognized as the the often hear like, you’re the market theory Dominant Player. Well, numbers say so, but I don’t operate that way. I am is leaned in as I’ve ever been in my life, but to continue to drive and I said this in my opening remarks today is we are passionate about advice because the power of advice changes people’s lives. So we’re going to do it. Competitors are going to do it and that’s good. That’s good for the American family. And innovation begets innovation. We’ll do some smart things. They’re gonna do some smart things we’ll learn from each other.

The Exchanges

Craig: Let’s shift gears. I want to talk about the exchanges. Yeah, another move I really liked because back to you, being the leader, once you hit the market share levels you’re at now, every additional incremental percentage point is much more difficult to get. So what’s the natural next step is get more wallet share. So what else can we sell them? So going into the exchanges again ahead of the curve, how’s that going?

Bill: So the whole strategy there was about holistic advice. Once you have the data, and then you have the plan, MoneyGuide, right, then that plan is not saying oh, you need a 60/40 portfolio. It’s saying here’s your household, here’s your life. How are you going to get there? That’s investments that it’s insurances credit and other pieces. We do not have the bandwidth or wherewithal to do it ourselves. So what we decided to do is make investments to accelerate businesses that were subscale, but had really interesting technology Craig, to get us there faster.

Bill: Fast forward to today, the insurance exchange serves $16 billion in annuity policies. So we are the product, all of a sudden, the loan volume are terrific. We’ve got our health care, exchange, Medicare, intelligent Medicare, that is just rolling out to the market and the trust exchange is taking a horrible, horrible administrative environment and modernizing it. Leveraging Truscendent, correct. So it’s true sending its advisor a credit exchange fiduciary exchange that the insurance platform and its health pilot.

Craig: You can’t move fast enough there. People think all that help clean too many things at once, like you’ve got to keep moving fast because once the cats out of the bag, people are seeing that this exchange idea is a great idea. And it’s going to be copied so you got to move fast.

Bill: But make no mistake, Envestnet isn’t doing that ourselves. We brought in people and motivated them with equity to go really fast. It’s like a red carpet startup because what are you building into? You’re building into Envestnet’s distribution underneath the MoneyGuide financial planning, so it is a win/win/win. You’ve got entrepreneurs that are hustling and moving so fast, and they stand to benefit profoundly while our customers benefit as well.

Craig: Like FIDx on the insurance exchange?

Bill: Yeah, it’s awesome.

Craig: And they built all the pipes they run all the paper.

Bill: All the carriers are there and we partner with Simon on some on some pieces to integrate. Exactly. So it all comes together, there has been a long whiteboard session that is becoming absolute reality.

Craig: But I said that when the insurance exchange was launched that Envestnet was the only firm in our industry that could do that. Because insurance companies, insurance carriers don’t want to be compared like that. When you’re building an exchange, you’re saying, here’s the data points I want, you all must normalize. Whereas before they’re like, well, we’ve got this and you’ve got that no one really knows it’s hard to compare. So you have to have serious market share and serious clout to go to carriers and say we’re doing this, you want to be on board or you want to left behind?

Bill: And they’re benefiting you know, it’s a win win.

Craig: Well now they are. But they didn’t see that in the beginning.

Bill: Oh, no, it’s taken us a couple of years. I mean, you want to try to build something complicated? Try our platform, annuities with some really old technology that’s pushed that industry but that’s okay, that’s area for opportunity for us. And for the Fiduciary Exchange team. They’re killing it. They’re doing great.

Bringing It All Together

Craig: And we’re finally seeing, the demo that Brandon just gave, it’s all coming to pass if it’s built out and executed that way because this is the the holy grail that we talked about. When you own MoneyGuidePro, and you can do your plan, you can show them a gap in their retirement expenses, and say, an annuity fits there. And here’s a list of annuities that would be good for you. And now you can buy it all in one place.

Bill: That’s it. So that’s powered by data, creating the insights connected to solutions and the technologies how we render it. And Craig, it has been a long road but if you think about our history, the first 20 years, and I talked about this earlier, we put the parts on the table we got every ingredient in the house, if you will. And now the last two and a half years, we have been so leaned in and focused on bringing it together. There’s still some pieces to tie off, but the progress we’ve made is incredibly meaningful. You just nailed it, that’s exactly what is being done. Now is on the on the cusp of being delivered to our clients.

Craig: One thing I’ve also talked about in the past, like on my blog and the podcast is this data, why is it all siloed? Because it’s always been that way. We have CRM data in the CRM database and financial planning in that database and portfolio management and that database and everything’s a separate database and they don’t talk to each other. So you have the opportunity now to bring it all in one. Is that something you’re working on?

Bill: Yeah, that’s the unlock with the cloud, right in our wealth data platform. So Farouk Ferchichi is our new head of data and analytics. He’s got just tremendous talent and such great experience in this space that we’re bringing disruptive data sense to the wealth business. Our client firms, RIAs and the Tamarac business, I mean, they have data everywhere. And we can get it and we can organize it, and we can clean it, and we can post it to any environment. It’s simple, but it’s a cloud service. It’s like AWS, or Azure or Snowflake. But we can do that at scale. And as we do that, data gets a little smarter, get to know the advisors business better, and we’re working in their ecosystem with their solutions, and their advisors motivations to understand, okay, advisors your outcome, you want to optimize valuation, or do you want to optimize revenue? What’s the priority for you? We can help you do that and drive that through data.

Craig: I want to talk about data, the merging of the databases, so you have Microsoft Dynamics for CRM, and MoneyGuidePro for financial planning, and the Envestnet platform, and then the Tamarac platform will you be merging those into one data source a data lake or some unified data platform?

Bill: That’s correct. So we’re down the road to doing all of that so all that data will be in a environment, institutional sized environments, AWS. And from there, we’re able to learn and we’ve got Apogee as the layer that then gets to the API’s or developer engine today. So our API library out in the market Yodlee, MoneyGuide, Envestnet, Tamarac. Nothing like that, so developers can access that. Third parties can access that other wealthtechs can access that to develop in our environment.

Craig: Which is revolutionary.

Bill: Yeah, never been done.

Craig: Let’s talk about banking. Do you see banking becoming you’ve got plenty of banks, as clients but on the wealth affiliate? Do you see yourself moving to more bank related products?

Bill: I think ultimately, we want to network to a banking platform. And we’ll probably network to our client firms to help them bring those banking services, e-banking services to our network, under a white label environment for the advisor to be able to deliver those things, again, integrate the parts of people’s financial lives. It starts with the credit card to the savings accounts, checking accounts, and all these things all the way out to the estate plan. There’s no reason we can’t network at all. We’re not going to do it all but we’ll network.

Craig: That could be a whole new green field for you where you don’t have a lot of footprints. You have a lot of feet in the door of all these banks.

Bill: Right and I think, of course, and I just think that again, people look at it and say well, Envestnet’s trying to do too much. The way that architecture is working now is much easier to integrate these applications into our environment than ever before. And really offload a lot of the work back to the third party to do to come into your environment, and we’re building out that partner team, the way we’re doing security there, the way we’re doing due diligence there and the way that we’re offering those and introducing those solutions to our advisors, so it’s coming along. I see an entire column, whole P&L In our business around partnerships that will emerge over the next couple years.

Craig: Why not? It’d be like your own Apple Store your own Salesforce app exchange.

Bill: Yeah. And I think we’re well positioned to do it, and I believe that because of our architecture because of our reach because of our ambition to drive this intelligent financial life, it’s kind of all natural.

RIA Valuation Data

Craig: I want to talk about something you announced today, which is the Truelytics acquisition. And I’ve been following them for at least since 2018, that’s a whole nother part. Again, this fits into the Wheelhouse Analytics to the data analytics business, with business valuation. So why did you make that acquisition? And how is it going to be helping the rest of the business?

Bill: I showed something today, which really tracks how if you if you’re providing advice to a client, what is the impact on your revenue and then the profile of that revenue fee based, outside managed demographic of the client all leads ultimately to evaluation. And so we’re able to connect those data points and an advisor is always thinking, Okay, how do I optimize value of my business? How do I grow top line? How do I do it more efficiently on the bottom line? In the past, we’ve been on the advice side of the ledger. Now we’ve moved to the other side of the ledger, which is how do we help advisors grow and partner with them? So that’s a data exercise. Truelytics has done a good very good job there. We see it helping advisors value their business, but we will take that and grow that for all small and medium sized businesses.

Bill: So think about our client base again, banks, banks lend to small businesses, and we build it a portal powered by Yodlee and our data for small business to understand the borrowability, all their finances or networking, their QuickBooks, and all their other applications into a dashboard. It looks like the advisors dashboard, but helps small medium sized business. So if you’re an advisor, and you have a small business owner, my goodness, if you’re a bank and you want to lend to a small business, oh my goodness. And Truelytics is going to help us build a valuation mechanism that sits under all of that.

Craig: And Yodlee was also helping firms, predetermine mortgages and other loans by doing searches and looking at data.

Bill: We prequalify and we use that technology today on our ACE platform or credit exchange. And then we do that for a lot of banks where we’re helping them to do pre qualification, okay, you can apply that in a lot of different instances inside our ecosystem.

Craig: And the whole ACE exchange helps with this as well because you’ve already got that experience, understanding how lending works and building all the old all the pipes.

Bill: All the preapproval kind of happens in our dataset and we’re able to what’s kind of cool is each day you can publish a borrowability for that client so you know what you can borrow.

Craig: And also, I know Truelytics they were downloading a QuickBooks data from the RIAs and that’s a tremendous data switch you can mine for peer benchmarking.

Bill: Absolutely, but also returning back to them business intelligence, that blows you away. I mean, you know, and then you get a real good sense of what’s driving valuations out there and get a better understanding of the actual transactions that are happening in the advisor space and what’s being valued. And how those being structured.

Craig: There’s just more and more work to do. You’re creating more work for yourself.

Bill: I told you earlier, it’s been an extraordinary couple of years. Of course, we had the tragedy in October of 2019, it takes your breath away. And, you know, there’s a determination that comes with it, though, because Judd and myself and the team, for 20 years had built the business the last two and a half years. We’ve been dead focused on bringing it all together. And I am as linked in as I’ve ever been, and more excited about the future than I’ve ever been.

Craig: Bill, thanks for being here I appreciate it.

Bill: Yeah. Craig. It’s great. Always love talking to you. You’re wonderful. Thank you.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com