RIABiz

Envestnet shares spike, but fundamentals reassure Wall Street, rather than big future annuity profits, gaining 2,300 Schwab RIAs on the cheap and diminished Yodlee pain

Replicating SMA success on insurance side and tripling Tamarac customers is exciting but analysts may be more attuned to earnings growth and billions in 'conversions' to subscriptions

Brooke's Note: It just so happens that Fidelity Investments published a big new study today that endorses the idea of RIAs using outsourcers. As part of the study, a survey found that 43% of RIAs, IBD reps etc. agreed that outsourcing is essential to achieving scale in firm or practice growth.  “We believe the future’s most successful financial advisors won’t allocate their time and  energy the same way they do today,” said Todd Roadman, senior vice president for Fidelity  Clearing & Custody Solutions. My frustration with the study is that it's hard to measure the significance of the 43%-endorsed-outsourcing figure because this study has never been done before. The study's mere existence says something, however, considering that Fidelity isn't really an outsourcer itself -- with an exception like eMoney. A better indicator of the strength of outsourcing might be the success of the largest RIA outsourcer -- Envestnet. We got a much clearer picture on Friday after its stock soared. Outsiders see emerging fresh green shoots... and profits.

Envestnet (ENV) shares are spiking, yet recent jaw-dropping announcements about a Schwab deal and new annuity platform may have less to do with reassuring Wall Street analysts than more mundane news about cash flow and "conversions."

The Chicago outsourcer's shares -- now almost 700% higher than its $9 IPO price in 2010-- rocketed to $61.88 at Friday's close, up 11% from Thursday. Shares fell off Monday to close at $60.68, but regained some lost ground today (Feb. 26) to close at $60.91, despite a down market.

Shares are up more than 30% from its 52-week low of $46.57. The stock's 52-week high is $64.80.

Envestnet CEO and chairman Jud Bergman set an optimistic tone about greener pastures during the company's earnings call Friday (Feb. 22).

He dazzled RIAs with the Schwab news and his vast IBD rep constituency with Envestnet's play on annuities. The move should facilitate the notoriously difficult sales process. See: BlackRock is going big into the annuity business with Microsoft to create a 21st century defined benefit pension system

Schwab Advisor Services also announced the sale of PortfolioCenter to Envestnet on Friday. See: Schwab Advisor Services tosses its PortfolioCenter platform to Envestnet, in what amounts to a 'defensive' deal for both, insiders say

With two jaw-dropping announcements, Envestnet is set to become a profitable annuities platform and will absorb all of the 2,300 RIAs who use Schwab's PortfolioCenter.

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