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Integration, Schwab-style

Technology continues to be a key driver in the investment management industry, with increasing convergence and blurring of the line between different firms’ offerings. Last Thursday, February 21, Schwab and Envestnet announced that Envestnet Tamarac is purchasing Schwab’s PortfolioCenter, a portfolio management and reporting application. Envestnet Tamarac, which uses PortfolioCenter as its primary portfolio management system and data source, looks to benefit from this acquisition in a number of ways, not least of which is eliminating the licensing fee it must currently pay to Schwab to use the software. In addition, this also gives Envestnet access to approximately 2,000 advisors that utilize PortfolioCenter directly through Schwab, providing an opportunity to market its other products to them. In an article on Financial Planning’s website, Andina Anderson, Executive Managing Director at Envestnet Tamarac, said this represents a significant opportunity to reach the smaller end of the advisor market.   

Sidestep for Schwab?

For Schwab, the story is a little more complicated. Until fairly recently, Schwab was focusing on developing multi-custodial portfolio management tools. This deal continues to signal Schwab’s move away from that based on the evolution of advisor preference for a custodian that allows them to select and integrate in whatever tools and technology they want from a wide array of providers. 

Back to Basics

On the portfolio management system side, Schwab Advisor Portfolio Connect™, “a simplified approach to portfolio management,” will become its core proprietary offering. Free to advisors who custody with Schwab, it is a “streamlined” tool directly integrated with Schwab’s custodial platform, so there is no need for daily downloads, integration or reconciliation, which can be a significant budget drag, especially for smaller advisors. Schwab continues to expand the capabilities of Portfolio Connect, and in 2019 will roll out a number of additional features, including support for Schwab’s Intelligent Portfolios.       

Owning the Dashboard

Schwab is also investing significantly in facilitating connections through the Schwab dashboard to a curated selection of investment and wealth management related applications. OpenView GateWay®, offered through Schwab’s Intelligent Technologies, provides single sign on (SSO) integration with a number of leading providers in aggregation, reporting, trading and rebalancing, financial planning, data analytics, etc. This enables Schwab to serve as the coordinator and consolidator, making it a much “stickier” relationship.