The Advisory Industry’s Inconvenient Truth: Envestnet’s Custody Gamble

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Envestnet’s Custody Play

Envestnet’s recent foray into the custody space raises questions about the company’s core business and the viability of selling technology to RIAs.

Envestnet’s substantial investment in Yodlee, which has yet to yield significant returns after several years, casts doubt on the company’s ability to successfully penetrate the B2B advisor market.

The B2B Model: Limited Success

The advisory industry’s B2B model has historically been successful only for the largest players, such as Schwab and Fidelity, who have supplemented it with a B2C business.

Envestnet’s lack of a strong B2C presence diminishes its chances of success in the advisor custody space.

Lessons from Envestnet for B2B Startups

Startups targeting the advisory industry should consider the following lessons from Envestnet’s experience:

  • The advisor pie is smaller than anticipated.
  • The B2B model requires a strong B2C foundation.
  • Targeting the B2B advisor space without a clear value proposition is likely to result in failure.

Envestnet’s Path Forward: Rethinking the Industry

Envestnet should reconsider its strategy and focus on funding external B2C investment advisory organizations that can leverage its technology to compete with the industry leaders.

This approach would provide Envestnet with valuable insights into the industry’s economics and enable it to build a more robust and profitable business.


John Smith


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