Envestnet to Rollout Retirement Savings Program

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Envestnet publicly announced on Tuesday it has been working for the last two years on a collaboration with retirement services provider Empower.

While it will not be available to advisors for a few more months, according to company officials, the new retirement savings program already has a name: Envestnet Retire Complete.

Complete will be used by employers in providing 401(k) plans. As part of the program, Envestnet assumes the responsibility of ERISA 3(38) fiduciary and investment manager, and provides recommendations, according to the company.

Sean Murray, head of retirement at Envestnet Retirement Solutions, said this collaboration with Empower and rollout of Retire Complete was the logical next step after Envestnet acquired 401kplans.com in 2022.

Murray said availability will be “within the next quarter or two,” and that it will be cheaper than most other options in the marketplace. And as part of the program, advisors will be able perform plan pricing comparisons through Empower’s digital proposal tool.

The SECURE 2.0 Act, which went into effect at the beginning of the year, has introduced a tax credit for employers who offer a defined contribution plan. As a result, Murray said they foresee an increasing number of advisors being asked by their small business owner clients for assistance with creating these plans. Chris Doucet, vice president of national accounts at Empower, said Envestnet Retire Complete will allow more participants and plan sponsors to take advantage of these changes.

“We’re trying to … create an ‘easy button’ for retirement,” said Murray. “When a business owner client asks them questions, they can come to one single place.”

Lisa Asher, a wealth management analyst at Datos Insights (formerly the Aite-Novarica Group), said retirement plan advisors that serve as 3(38) fiduciaries are designing plans and selecting and maintaining an investment lineup on behalf of the sponsors, “but this isn’t where their services necessarily end.” She said plan participant education is an important part of the value these advisors deliver. Without digital tools, participant education must be done in person and with workplaces being geographically scattered.

“This is tough for advisors,” said Asher.

In June 2020, Empower acquired online registered investment advisor Personal Capital in a deal totaling $1 billion. Asher said this combination of Envestnet’s plan management capabilities with Empower’s client-facing app “offers a total solution that retirement advisors can use to scale their retirement plan services to plan sponsors.”

William Trout, Javelin Strategy & Research’s director of wealth management, said the workplace has emerged as a focus area in the contest for client assets. He said firms including Morgan Stanley have understood the defined contribution business, and related areas such as equity compensation, are an entry point to a broader relationship with the client.  

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 “Now the historically underpowered 401(k) space is heating up as well,” he said.

Trout said enhanced scrutiny by regulators, combined with an accelerating battle for employee talent means the stakes will continue to rise, while the dominant position of plan providers including Fidelity and Vanguard will be increasingly contested. He said Envestnet understands the importance of helping advisors support the needs of both sponsors and participants “and a partnership with powerhouse recordkeeper Empower will give it an extra dose of credibility as it seeks to unseat the incumbents.”

This news comes at a particularly challenging time for Envestnet. Under CEO Bill Crager’s leadership, Envestnet has been navigating choppy waters, from co-founder and CEO Jud Bergman’s untimely death in 2019, to disputes with activist shareholder Impactive Capital, which acquired a 7.5% stake in the company and two board seats in 2022. In September, news leaked that significant layoffs were imminent. After last week’s quarterly earnings call, Envestnet’s share price fell sharply from around $38 to just over $34.

Trout said the timing of this Envestnet Retire Complete launch was “propitious” for Envestnet, “given ongoing pressure from shareholders.” He said it represented another milestone in the firm’s evolution from a TAMP to an end-to-end provider of technology and related services.

https://www.wealthmanagement.com/retirement-news/envestnet-rollout-retirement-savings-program

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