A (Shocking) Merger of Equals - What are the relative impacts of the Envestnet/FolioDynamix deal?


Like many in the wealth technology space, I spent around 30 minutes finding and re-attaching my socks after reading the ENV/FDx announcement today. It was a stunning and unexpected coupling.

This deal took so many people by surprise. Of all the mergers that could (and should) happen, this wasn’t even on our radar.  These are (roughly) equal firms with sizable overlaps in functionality, client segment and market penetration. Did Envestnet need FolioDynamix? Was there market pressure to acquire your biggest competitor? Was this deal better than any of the potential others which would have substantially expanded client capabilities?  I can’t find the ‘yes’ in this yet. 

To be clear: There are a LOT of great things that come from the two top portfolio management vendors hooking up, not least of which are that the best and brightest minds in this industry segment will soon be under one roof. The new company will be able to pool resources and talent to speed innovation and more acutely address industry needs. It should also create significant gravity to pull even more models and strategies into the universe which will improve portfolios across the industry. 

However, I’m not sure what the average Envestnet or FolioDynamix client will get from this deal.  Both platforms have obvious areas for growth and expansion desired (demanded) by clients that this deal won’t address: Account opening automation, robo, CRM and modern digital client portal (…though ENV’s new portal shows some early promise).  I sincerely hope, for clients of both firms, that this merger doesn’t push back product roadmap timelines or reduce innovation budgets. 

Over the next few months, we’ll be watching to see how this pans out.  My expectation is that there will be additional M&A activity in this space as competitors look to round-out their offering. I would also expect there to be higher scrutiny around how this deal impacts ongoing innovation at the new firm.  Time will tell whether the new company fares and how impactful this will be to the industry. Without a doubt, this news has materially shifted our wealth technology landscape!