BlackRock is buying a stake in Envestnet as the companies announce a new technology-driven partnership.
As part of the deal, the two companies will integrate BlackRock Digital Wealth’s technology into Envestnet’s platform for financial advisors, according to an announcement by BlackRock.
Both firms offer wealth management and investment technology for advisors, and the new relationship is intended to broaden the solutions available via Envestent's platform. BlackRock has bolstered its digitial wealth managment chops in recent years via acquistions and by leveraging its in-house expertise, and its offerings now include the robo-advice services of FutureAdvisor, which it bought in 2015; iRetire, a retirement income planning technology offered to financial professionals; and Aladdin, a risk analysis tool.
“As wealth managers shift to fee-based advisory relationships, they are asking for new technologies to help them scale their business and build better portfolios,” said Venu Krishnamurthy, BlackRock global head of digital wealth, in a released statement. “Through this strategic relationship, we aim to bring BlackRock Digital Wealth’s solutions to Envestnet’s clients in a modern, highly integrated way.”
In addition, BlackRock is acquiring a 4.9 percent equity stake in Envestnet through the $122.8 million purchase of 2.36 million shares at the price of $52.13 per share. Envestnet is also issuing to BlackRock a warrant to purchase 470,000 Envestnet shares at an exercise price of $65.16 per share, exercisable at the option of BlackRock four years from the date of issue.
"At 4.9 percent, it [BlackRock's equity stake] is meaningful but not significant, said Envestnet president Bill Crager in an interview. "But I think it indicates Envestnet’s position in the marketplace and that we’re growing. We and BlackRock believe this combination will accelerate that growth, meaning more advisors will open more accounts on the platform because of that integrated technology."
Envestnet is a publicly traded company that has worked with hundreds of asset managers on its platform. Crager said BlackRock is the first asset management company to make a direct investment in Envestnet, and he doesn't see this as a conflict of interest that gives BlackRock a leg up versus other providers on the platform.
"This deal isn’t focused on the asset management or investment product part of BlackRock, but it’s very focused on wealth technology," he said. "I see a clear delineation between those two. We’ll continue to partner and integrate with firms that have great technology that benefits advisors. In this case, we recognized the value that BlackRock had developed, and integrating that gives advisors utilizing the Envestnet platform an advantage."