Envestnet's Clift On How Firm's Platform Connects Advisors & Portfolios

October 18, 2016

Tim Clift is a chief investment strategist at Envestnet, a leading provider of integrated portfolio, practice management and reporting solutions to financial advisors and institutions. The company—among other services—provides the open architecture that allows more than 100 fund strategists to market their ETF and mutual fund model portfolios to investors everywhere using tools such as unified management accounts. Envestnet’s technology is changing the way investors invest, the way traders trade and even the way advisors help clients.

ETF.com: Envestnet, at the most basic level, provides a platform for various portfolios that use ETFs, mutual funds and single securities. These portfolios are built by advisors, and then sold to other advisors who use them for clients. Can you expand on the company’s footprint?

Tim Clift: Envestnet is both a technology platform and a wealth management platform, and advisors use us in lots of different capacities. From a technology standpoint, we give them the tools to be very efficient in their practices so that they can go from profiling their client, to creating an investment profile for them, all the way to investing the client, and then to reporting on it.

But the wealth management piece is that middle piece. Portfolio Management Consultants, the wealth management part of the company, provides research on thousands of third-party managers. We provide tools, guidance and recommended lists and ideas for advisors. They can either build models themselves or they can hire any of the thousands of third-party strategies on the platform. PMC also manufactures some strategies so they can also use those within their practices.

ETF.com: You're not managing money for a client. Is that right?

Clift: There are three ways that a client's money would be invested. First, the advisor creates a portfolio for the client. Generally they're doing that by using the tools on our platform—asset allocation guidelines, recommended lists and those types of things—to build a portfolio.

Or they're using a third-party money manager who’s using mutual funds or ETFs or individual securities in a product, and they can attach the client to that product. The third one is, they're using a PMC-branded product, which we—via our portfolio managers here in-house—have developed. Again, it may be a mutual fund or ETFs or individual securities.

ETF.com: And how does a portfolio get on your platform? 

Clift: We have a business acceptance committee that meets weekly. The ideas or strategies get pitched to the committee. There are some initial steps, from a compliance and operational standpoint, that firms have to validate. They have to submit a minimum track record and minimum assets. A three-year track record on products, or $200 million in AUM, or $50 million in a specific product are the general minimums that they're looking for.

We need to make sure that they can work both operationally through the platform and that there's no operational or compliance issues that make it difficult to work well on our platform.

ETF.com: And then you would take some kind of percentage from the client who's putting money into a portfolio on your platform. Is that sort of the basic business model?

Clift: Exactly. We have a platform fee for onboarding. And then an ongoing fee, because in most cases we're going to have trade discretion. They're going to be uploading new models to us, and we're actually implementing them across the hundreds of thousands, or even millions of accounts that we facilitate.

From an asset management standpoint, it's great that they really just have to provide their intellectual capital to us and not have to worry about any operational scaling issues. We handle all of that.
 

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