Wealthtech giant Envestnet plans to up investment in platform modernization and leverage AI alongside its own data to manage costs and drive adoption of its technology. 

The company is well positioned to capture opportunity in the wealth management market if it continues to do so, Chief Financial Officer Pete D’Arrigo said during Envestnet’s second-quarter earnings call on Thursday.

“We’ve been exactly right [in the past quarters] in our focus of modernizing and expanding our economic ecosystem of intelligent data, integrated technology network to the broadest set of solutions,” D’Arrigo said. “We’re able to move to AI-driven insights that drive greater adoption for our vast set of solutions.” 

THE BIG PICTURE: Envestnet is also looking to leverage machine learning and AI to provide a hyper-personalized experience for its customers, Farouk Ferchichi, group president of wealthtech giant Envestnet Data & Analytics, previously told Bank Automation News.  

Other major financial institutions such as Citizens Bank, NatWest, Barclays, and JPMorgan recentcly announced they, too, are also using AI to drive efficiency in their operations. 

BY THE NUMBERS: In Q2, Envestnet reported: 

• Adjusted revenue of $312 million, up by 2% year over year; 
• Adjusted net income of $30 million, down by 5% YoY; and 
• Direct expenses decreased to $123.5 million in Q2 from $126.5 million in Q2 2022. 

STATE OF PLAY: Envestnet is looking to capitalize on the datasets it has built to power its AI and reduce time to market for its products, D’Arrigo said. 

AI and cloud technologies help keep expenses flat while driving efficiency, he said. 

“Our onshore headcount is lower year to date by 5%,” D’Arrigo said. Envestnet is “able to do more because of the AI and the cloud work that we’ve done with fewer personnel costs to serve the business,” he added. 

Envestnet has acted “by restructuring, combining teams now joined by the unified technology” and will use data and analytics to drive additional efficiency in the second half of the year, he said. 

The company’s operating expenses were down by 7% YoY in Q2 to $327 million, according to the company’s earnings supplement. 

NOTEWORTHY: The company is facing macroeconomic headwinds with low market as interest rates continue to climb, D’Arrigo said. 

“The leaders of the market are concentrated in a couple of stocks, and the broader market really hasn’t participated along with that narrow group,” he said. “The government’s debt issue was there in the quarter along with kind of this recessionary overhang that certain banks continue to talk about,” which has been impacting investing in the market. 

WHAT THEY ARE SAYING: According to Zack’s Equity Research, demand for personalized wealth management services is “creating solid market opportunity for Envestnet’s technology-enabled solutions and services.” 

Envestnet is expected to scale operations in the coming quarters as “technology adoption is likely to increase significantly with increasing need to interact with clients who prefer guided advice in a cost-effective manner,” Zack’s report said. 

FUTURE LOOK: The company aims to continue investing in technology and AI, D’Arrigo said. “We benefit from strong secular tailwinds that are powering the industry, in quarters and years ahead,” he said. 

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