Technology changed the numbers game. We all know the classic tropes (exaggerated though they were): Bud Fox and Gordon Gekko on box-sized cell phones, tracing the financial routes of millions of dollars on green and black screens.
But that was decades ago. Now, technology and finance have become even more deeply entrenched.
Envestnet is at the forefront of finances continual technological evolutions, using their decades-long expertise with cloud-based systems to deliver richer advice in real time.
We sat down with Jud Bergman, Chairman and CEO of Envestnet, to learn about what data means for financial advising, what the next phase of development looks like in finance, and how technology is continually becoming more people-centric.
Chicago Ideas(CI): Data is important when managing your money, but a giant hunk of data is nothing if we don’t know what to do with it. How does Envestnet bridge the gap between data and the benefit of better financial decisions?
Jud Bergman (JB): The key is to ensure that a complete and accurate picture of an investor’s data flows seamlessly across their advisor’s technology stack. When you fuel the critical business applications at an advisory practice with aggregated data (such as their CRM, financial planning, and portfolio management, billing, trading, and reporting software), it can dramatically boost their accuracy, productivity, and ability to deliver a broader range of sophisticated financial advice.
Data is essential to empowering advisors to deliver unified and holistic advice. But the benefits for their clients – the investors – are significant as well. Data can inform and direct the right course of action for the investor to help them achieve better financial outcomes. They get to track their financial goals in real time. They can see if they are on target or if they need to make adjustments. Maybe they’ll take more risk at certain times or convert a certain part of their portfolio into income to meet basic expenses.
CI: How have financial services changed since you first founded Envestnet and were developing wealth management software?
JB: How far the technology options for advisors have come, as well as the level of adoption, is a fundamental difference. Most of the available technology in 1999 was mainframe technology at large financial institutions. However, the speed of innovation and pace of change is much faster in today’s cloud-based fintech world. Envestnet has been a cloud-based Software-as-a-Service, or SaaS, financial technology company since inception in 2000.
A current technology transformation is being fueled by the broad adoption of APIs that enable the exchange of data and functionality of software with host companies’ existing SaaS platforms. APIs enable greater customization and personalization of technology. What we’ll see in the near future is technology ecosystems that combine data and specialized functionality from a variety of providers to solve for specific use cases within wealth management firms. This means more rapid deployment of capabilities and advisors that are more productive.
CI: Envestnet is a champion for independent financial advice. How do you see your technology supporting what is a human interaction – that of an advisor and their client?
JB: Advisors who embrace technology do so to enhance their ability to provide human advice. It’s paradoxical, but the better the technology, the more human the advisor can become. We’re big believers in what I call the Kasparov Principle, named after the chess prodigy Gary Kasparov. Twenty years ago, he lost to the IBM supercomputer Deep Blue. Deep Blue could consider ten million moves and positions a second, and it was staffed by a dozen programmers and three chess grandmasters who analyzed his every move. Kasparov pointed out that at that time it was not really a man vs machine test, it was one man vs a team of experts with a machine.
After he retired, he started something called Advanced Freestyle Chess, an online forum that anyone or anything could enter. You could enter as a supercomputer, you could have a team of players supported by technology, you could be a grandmaster, or you could simply be a hack chess player like me. What Kasparov found was that it wasn’t the grandmasters or the supercomputers that dominated; it was the human-computer hybrids. Today’s advisors, powered by technology, are able to deliver something that’s exponentially better than an automated, non-human software solution.
CI: According to the FDIC, 28 of the 50 leading banks use Envestnet to help manage their clients’ wealth. Why do you think Envestnet has become so integral to managing portfolios, developing relationships, coordinating trust services, and just advising clients in general?
JB: Well, I’d point out that of the top 50 wealth management organizations, 42 work with us. Whether it’s banks or wealth management organizations, I think it’s because the technology works well. It does what it’s advertised to do: It empowers advisors and financial institutions to help their investor clients achieve financial wellness. And that’s what drives all of us at Envestnet. Our clients believe that we are a trusted partner, that we put their interests and their clients’ interests ahead of our own. It’s part of our acting as a fiduciary to our clients in delivering our wealth management technology, and we apply those same principles when it comes to safeguarding our clients’ data, which is part of our Data Promise.
CI: What do you love about being a part of the Chicago community?
JB: Chicago is one of the great cities of the world. I love the early part of the summer. I call it ‘the Season of Seduction’ and it goes from Mother’s Day to Father’s Day. I love how everybody comes alive. I love the music scene. I love the restaurants. I love the vitality. I love the architecture. I love being on the lake. I love the people. There’s an honesty and authenticity about Chicagoans that I find terrific.