What's Really Behind the Envestnet-MoneyGuide Deal?

The deal "makes perfect sense from Envestnet's perspective in their quest to own the advisor desktop and client experience," said Gavin Spitzner, president of Wealth Consulting Partners. "They already had fairly deep integration with MoneyGuidePro, and now they'll clearly tighten things even further across planning, proposal generation, data analytics, client portal and aggregation."

What's Next?

At least for Kitces, MoneyGuidePro users have "nothing to 'fear' here." It wouldn't make sense for Envestnet to pay $500 million and then "ruin" MGP, he said on Twitter. "They paid to get it and grow it further, and bring more tech synergies to bear (especially with Yodlee)."

Craig Iskowitz, head of the fintech-focused Ezra Group, sees the tie-up differently.

It isn't aimed at "cross selling or better integration — this was 100% a 'data play,'" according to the consultant. "MGP is No. 1 in market share of financial advisors, and Envestnet now has access to assets by custodians, by tech provider, [portfolio] positions and tons of customer demographics."

But William Blair equity analysts point out that Envestnet will likely deploy "parts of the MG code base into its insurance, retirement and credit platforms," and that over time adoption rates for its Yodlee technology "will benefit as advisors come to realize benefits of creating a financial plan that updates in real-time, (easier to do by owning both the planning and aggregation)."

As Iskowitz points out, there is much to "unpack" with the deal.

For Baird analysts Chris Shutler and Andrew Nicholas, the PIETech merger carries some execution risk "for a company that already has a lot of balls in the air, including the integration of FolioDynamix and PortfolioCenter, [the] launch of the Envestnet Insurance Exchange, opportunities around credit," according to their recent report on the deal.

Though some advisors would like Envestnet to prioritize integration of what it's acquired before the PIETech news was announced, the analysts say, "with only a few scaled assets in the financial planning space, it makes sense in our view to seize the moment."

In addition, they point out, the deal further positions Envestnet to benefit from trends like "the movement of advisor assets from commissions to fees, greater outsourcing of investment management, the unification of advisor and end-client experiences across bank and brokerage channels, and increasing importance of data and analytics throughout the financial services ecosystem."

— Related on ThinkAdvisor:

• Envestnet to Buy MoneyGuide for $500M
• Envestnet Aims to Open Its Insurance Exchange in June
• Orion to PortfolioCenter Users: Try Us for Free!