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Shad Besikof on Independent Advisors and Lending

Featured on Financial Planning on October 16, 2019

Can Envestnet’s credit exchange compete with online lenders?

Envestnet is leveraging its tech ecosystem to get on top of what’s been a costly and burdensome process for advisors — securing consumer loans for clients.

The leading turnkey asset management provider is set to debut its credit exchange by the end of the year, opening up access to prequalified loans for clients in need of extra cash and simultaneously offering another avenue for advisors to provide additional services.

Doing so could position advisors to expand their business into lending, a critical tool as digital lenders increasingly bundle investment advice into their own offerings.

The challenge for Envestnet will be a highly competitive marketplace. Digital lenders more than doubled their market share in the past four years, with consumers across the credit spectrum increasingly turning to fintechs like LendingClub and Social Finance, according to a study by Experian.

Fintechs now provide 49.4% of unsecured personal loans as of March, compared with just 22.4% in 2015, according to Experian.

SoFi offers personal and mortgage loans to retail clients on a platform that also serves up digital advice products. The San Francisco-based startup offers two- to seven-year terms with rates between 5.99% and 18.07% APR on loans of up to $100,000, according to its website.

Envestnet will be one of the first major TAMPs to offer credit products on a single platform, lining up clients with consumer loans backed by collateral like securities, real estate, fine art and other assets, according to the firm. It remains to be seen if the Envestnet service will gain traction in a crowded lending landscape.

“It takes managing both sides of the balance sheet to build, manage and protect net worth,” says John Yackel, head of strategic initiatives at Envestnet. “At the end of the day, it’s the net worth that helps meet each client’s goals — buying a home, sending kids to college, enjoying retirement and leaving something for the generations to come.

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