Envestnet's Bill Crager on the Future of Financial Planning

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Welcome to Barron's The Way Forward podcast. I'm Greg Bartolis. What will the future of financial planning look like? Envestnet co-founder and CEO Bill Craiger is here to tell us. Bill has his finger pressed firmly on the pulse of the advisory world as Envestnet's wealth management platform supports more than 100,000 advisors who collectively oversee more than $5 trillion in platform assets. Bill will describe what he sees ahead and explain what advisors must do to adapt to a fast-changing and ever more complex business environment. He also will talk about Envestnet's efforts to be a one-stop shop for advisors and discuss the tragic, sudden, and heartbreaking loss of co-founder Judd Bergman. Bill, welcome.

It's good to be here.

Well, thank you so much for joining us. Um, can you start just Tell the listeners a bit about yourself and the firm's journey from 1999 to the present day.

Yeah, it's hard to believe, right? 1999, that was a different age in so many ways. Started the company with my dear partner, Jud Bergman, and a few others, and we thought we could use this emerging technology, which was the internet, to help level the playing field for all financial advisors so that they could deliver better advice to their clients. And believe it or not, we believed we could do that, and our connection to the internet was a 288 modem. You know, all these years later, 21 years, what a period of time when you think about what's unfolded since those days to today, you know, with the boom in the dot-com, the tragedy of 9/11, the contested, you know, the hanging chads, and we could go all the way through to, you know, the historic moments that we're experiencing monthly in this period of COVID All through that period, how many people's lives have transformed in their daily interaction with almost everything, including money, and how our industry has evolved and adapted to it. So 21 years later, Envestnet is a company that thinks a lot about that advisor and their practice and how they're engaging with their clients, but also their client and how that client's life can be really made more secure with the advice that an advisor offers.

And how would you distill the corporate mission in a sentence or two?

That our purpose is to help advisors serve more and more households to achieve financial security.

Okay. And let's talk a bit about the brands that you have and how they all fit together.

The journey from those dial-up days to today, we've grown. You know, you cited the $5.6 trillion in assets that we, we serve, and we serve over 100,000 financial advisors. That's a long way from that first account that I remember getting in the mail and opening that account. So that journey really has been an evolution of how we've seen advice evolve. And during that period of time, we've built quite a bit of technology and using data to power that technology. And we've also acquired some companies. So we're deep into the RIA market with our Tamarac offering, which really enables that RIA to provide their investment strategies to their clients, do that at scale. We've acquired businesses like Placemark and WMS from Prudential and other types of TAMs so that we can bring those portfolio strategies into more of an integrated set. And today we serve several, you know, we host several thousand asset managers on our platform. And then, you know, MoneyGuide being the financial planning engine, I think is kind of the decision-making tool, right? So, it's really so helpful in helping families understand the path they're on and the progress that they're making. And so, those are all bits and parts of what we do. And over the last couple of years, we've been working very hard, Greg, to bring those pieces together. And as you thread them together, you get a powerful interaction between the data And the data could be a person's daily financial life and the things that they're spending, what they're earning, and how that incorporates itself with the goals that they have. Where do they want to go? So if you can balance those two parts, you can really build strategies to help that household, that individual in a much more powerful way than ever before. And so the theme at Envestnet NOW is how those pieces come together. Data that powers technology, technology that is helping in engagement and creating a strategy, and that's connected back to a network, a pretty vast network of solutions. And solutions are investments, they're insurance, they're credit, they're those sorts of things.

I just want to go briefly back to 1999. What was the eureka moment and who was involved and how did that play out? Was it an email exchange or a bunch of you sitting in a room having a beer? What was that epiphany or when you said, "Let's do it." And what was that vision at the time? Because clearly the company is vastly different than it was back in 1999.

Yeah, it was kind of fun and just this, look, the internet's going to change the world. We understood the technology and then we were sitting at the epicenter. We come from the asset management world, Judd and myself. It was Jim Lumberg and Brandon Thomas. Co-founders with me. And we really were raised out of the asset management world, so we could see where asset management was headed more towards these, you know, bespoke, custom, security-led investment strategies that not all advisors could access. And the way the access, the ability to create access, was through technology. So we drew it on a napkin in a bar And that became the beginnings of Investnet. And, you know, we early days bootstrapped it, but then, you know, raised capital and really managed our way between that point, that date in December '99 to 2010, you know, with a series of fundraising and things like that. But Greg, one of the memories, indelible memories of my my time is the Wired magazine that month, that last issue in 1999. And it was an archangel jumping from a ledge, and the sky above was bright blue and the chasm below was filled with clouds. And I think if there's a metaphor for all that we've experienced in that time, it is the COVID of that magazine. That's—

yeah, that's amazing. And do you guys, by the way, have that napkin, or is that Lost?

The napkin is in a box in one of my— so it's in the archive in my office, and you know, we've got lots of souvenirs from this extraordinary period of time. Lots of drawings and lots of announcements and lots of little tokens that we picked up along the way.

Well, let's go back to the current day and talk about how your company has been adapting to COVID.

You know, it's been such an extraordinary experience, and you know what's amazing about it, Greg, is that we've all experienced it and we all have our tale to tell. Some of those tales are incredibly tragic, and they've been so dislocating, whether people have suffered losses or deep illness or lost jobs. I mean, you know, it has been profoundly disruptive. Others have had the ability to catch their breath and recognize what they want to do with the rest of their lives. They found a deeper purpose. We've used the time to really hone what we believe is the future of advice and build towards it and really begin to evangelize what we see ahead. I call that the intelligent financial life. We have worked remotely since March 12th, 2020. You know, we have 4,000+ employees and have handled more activity, more transactions, more accounts, more advisors during that period of time and done it very effectively. That is the miracle of technology. And and the resilience of people. So, you know, it has been extraordinary. Again, we all have our tale to tell, lots of lessons learned, but the deepest lesson for me is that, you know, you've got to— you can't rely on the way things are. Transition disruption is going to occur, whether those are big and they affect everybody, or they're tiny in your life. You've got to be able to adapt to that, and you need to be very resilient as you work through it. The second one is that technology has created so much noise, so much speed, but it has also fundamentally changed the way our world operates. And there are such wonderful things that are part of it and also troubling things that I think each of us recognizes is the clamor of the great voice of all.

Yeah, for sure. And tell me a little bit about digital engagement, the importance of UX, what consumers are looking for today, things that might be more applicable to advisors who are listening, like maybe some things they can learn from or enact.

Yeah, I think COVID, one thing that happened is all of our lives became so much more digital. You've lived in a Zoom-based world and you're interacting with people through different means of communication, connectivity. Clients are looking at their money in a much more digital environment and looking to get information at their fingertips whenever they want it. And so, our industry has been a very person-to-person, very kind of investment-centric engagement, and that has been disrupted during the period of COVID So as we go forward, because we've all been conditioned to ask any question that we, we have and get an answer from this thing called Google or the, you know, in the internet, financial services has to do the same. And so to me, the superpower that advisors have on the horizon is to bring a very powerful digital engagement that's available to their clients that helps harmonize and connect all the parts of a person's financial life while it is supported by the experience, the empathy, the understanding, the knowledge of the financial advisor who can add all that value in those life-changing decisions that people have along their financial journey. But, you know, 7 days a week, 365 days a year, you don't need that conversation with that with a human, but you may want to interact digitally. And I think that's really what the future of our business will look like. The superpowered digital environment connected to that highly informative, understanding financial advisor.

And tell me about client expectations, because I imagine that Amazon, given its ubiquity and ease of use, has made life hard for many firms regardless of industry in terms of matching expectations, because I think people get spoiled by Amazon. They take it, the user experience, and think, if they can do it, everyone else should make it this clean and easy. And on one level, it's great that it's kind of a North Star of sorts to aspire towards, an ideal, if you will. But it's also not as easy as they make it look. So how do firms maybe who are not so deep-pocketed bridge that gap of not really having deep pockets, but making it a wonderful experience for users? What can they do?

Yeah, and that's just it. You take that Amazon simplicity for granted while you're walking or doing something, you slide and you use your thumb and you order new furniture and it shows up that same week. It's kind of extraordinary. But I think the industry overall and the world, the economy overall is going to really be challenged by a deficit of technology expertise and data expertise. And so, it's unrealistic to think that every firm and every advisor can build out an infrastructure that is going to be that engagement model for their clients. That's where a company like Envestnet is really focused. How do we use our scale, our R&D, the assets that we have, meaning our data that connects to our technology, and then make that very client-focused? Friendly. We have no ambition to be engaging with the consumer themselves, but we want to power our advisors to have that Amazon-like experience and available with their brand, the advisor's brand, to their clients and be available to answer more and more of the simple kind of transactional or simple information update questions. 365, 7 days a week, whenever, while those moments of real financial impact are the conversations that advisors will have with their clients. So, I do think that this leaning on this outsourced model will accelerate not only in the back office, not only in that investment strategy and kind of that turnkey asset management environment, not only in reporting technology, compliance technology, But in the consumer engagement is an area that is essential digitally and something that Envestnet is working really hard to power our clients with. And, you know, so it's something that we're very excited about.

What else are consumers looking for? I mean, they clearly want, if you will, one-stop shopping, everything at their fingertips, but are there any trends you're seeing, things that there's a budding interest in or waning interest?

Yeah, I think, I mean, the greatest breakthroughs happen when consumers have kind of said, look, something's not working well and it should work better. And I've been thinking so much recently, Greg, about money. You know, money is a technology and it is an ancient technology and perhaps the most significant technology in humankind's history. I've studied quite a bit over the last couple of months on the history of money. But for most people, money is not understandable. It is intimidating. It is complex. It is something that is filled with worry and insecurity. That doesn't need to be the case. The reason that people struggle so much with money is because it doesn't connect. My Venmo account does not speak to my cell phone bill, which does not talk to Amazon, which does not talk to my financial plan. All of those things are actually related to each other. And the idea that you can bring those pieces together is the power of an integrated, connected financial life that I believe is on the horizon. And so that is what advisors will offer their clients is the ability to bring their financial lives together, to intelligently connect them, and then steer them in the path to help them achieve financial goals. The power of that The visibility of it creates security. The power of the progress creates security. All these things are reinforcements towards positivity when most people have a pretty negative outlook when it comes to their finances. I was reading towards the end of the year about how the consumer segment was touching a 5-year low in consumer sentiment. 50% of the US economy is worried about their finances. You know, 1 in 3 are saying that they're very fearful about the future. That is real pessimism and negativity. And what our data tells us, what the data tells us, is that people have actually paid down debt, have increased their savings and investment accounts, and are more financially secure today than they were 2 years ago. So, there's something off. And I really believe that the power of what an advisor can do is create that security, that relief, that visibility, and connect the parts of people's financial life. And that will be very disruptive to the way money is kind of seen and used today to how money will be kind of integrated, connected, intelligent in the future.

And I think it's very interesting how you describe it as a technology because it's, for so many people, they obviously look at it as a piece of paper that enables them to do things, which is technically true, but a bit simplistic. So yes, I think your expansive take on it resonates. We're getting close to the end, and I just wanted to pivot briefly on more to a personal level and ask if you'd like to say anything about Judd your long history with him, what he means to you, the company's employees.

Oh no, you know, Craig, I think about Jud every day, and I don't know how many conversations I have with him, you know, every single day. We were partners for 20 years, and, you know, it's that rare partnership that, you know, really support— was incredibly supportive, and we were pretty complementary to each other. And, you know, so The idea that, again, it goes to this impermanence and the idea that a person with that vitality and that energy, that courage, that curiosity could vanish from this world, and Mary as well, in that instant, that tragic instant, is still breathtaking. I know that we have, you know, definitely mourned quite a bit but also steeled our determination as to what we're doing and why we're doing it. And it's a very purpose-minded effort that we've got. And it is impactful not only to millions of consumers and hundreds of thousands of financial advisors and the vitality of our financial services industry, but it also, for me personally, it is this idea and this, this energy that was created and somehow the permanence of that, I think, can be felt a lot in what we're trying to do. I don't know if that makes sense, but that's really how I feel about it.

No, it does make sense. I've personally never met him or spoken with him, but in what I've read and heard, the impact that he had on people's lives was clearly palpable. I mean, it comes through in a genuine way.

Yep, yep. Miss him a lot. And I appreciate the question. It's always hard. It makes me—

Of course.

But we're working hard to make sure that that legacy and what we do is filled with purpose.

One last thing. It's a Barron's tradition where we ask for an actionable idea, something basically simple and that's easy for the listener to do or implement.

Yeah, Greg, I think just becoming familiar with those consumer digital apps, the bill paying apps or the subscription tracking apps, those sorts of things just tell you so much about where the future of money is headed and what the potential for our industry is. But I think it's so important as well to understand our time, what this period of time means. And it's unclear, it's very noisy. So my biggest advice to everybody is take a step way back, get the context and perspective for what's ahead. It is a transformational period of time that we're living through. And there's historical context to it. There was a book I read during COVID that has meant a lot to me, and it was— the name of the book is The Time of Magicians by Wolfram Eilenberger. And it's a chronicle of philosophers in the 20th century who redefined how we think in between the world wars and then redefine what philosophy means. And it really was the perspective. Perspective of a changing age. And it was enlightening to me because I feel like we're living through one of those times now. And so that would be something that would give you that ability to step way back and then come at it as we go forward in a way that is adapting to the new world that is emerging.

Thank you so much for that recommendation. Definitely appreciate it. Thank you very much for joining us.

Yeah, great. Thank you, Greg.

My guest has been Bill Craiger. Thank you for listening. I'm Greg Bartalus, and I can be reached at greg.bartalus@huffingtonpost.com. @Barons.com. You've been listening to The Way Forward. Please subscribe and check out all of our podcasts at Barons.com/podcasts.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.