Shirl Penney Opens Up About Envestnet Deal

AdvisorHub CEO and Publisher, Tony Sirianni, recently had a chance to sit down with Dynasty Financial Partners CEO, Shirl Penney, in NYC in the wake of his firm announcing a strategic partnership with Envestnet (ENV) to build an Advisor Services Exchange (ASx).  As part of the announcement, Envestnet is also making an undisclosed minority and non-material investment in Dynasty.

Tony: Shirl, Happy New Year; good to see you.  Lots of news out over the last week on your JV announcement with Envestnet.  Congrats on it by the way.  Tell us about it. I know up until now, you had not taken any outside investment from anyone other than your BOD and employees.  Why now and why Envestnet?

Shirl: Thanks Tony, Happy New Year to you as well and great to see you too.  We are very excited about our announcement that Dynasty is building an Advisor Services Exchange (ASx) for Envestnet clients.  More details will be released as we get ready to launch later in the year, but essentially it will be a place where advisors can go to get value added services to help them run better, more efficient, and more profitable businesses – and ultimately free up time and resources for them to take better care of their clients.  Services like OCFO, OCIO, marketing support, and access to capital to grow the business that we feel advisors will have interest in.  As the needs of advisors change and evolve, so too will the menu of services.   In terms of why Envestnet, we have worked with the principals and team at Envestnet since before we launched Dynasty.  I feel that loyalty, relationships, positive history, and shared experiences still matter in our business.  We have been long-term clients and users of Envestnet technology across the firm, so it made the conversations on how to build a partnership around an exchange for advisors flow much more easily – given the history and relationships.  They have over 100,000 advisors now using their platform and have emerged as a clear leader in the wealth management fintech and data space.  The opportunity to support them on providing value added services to their clients given their size and scale is significant.  This deal is really about the ASx not the investment.  While I am appreciative and it adds even further validation to what we are doing at Dynasty, it was done to help further align our firms around the ASx.

Tony: What services will be in the ASx?  When do you envision the exchange will be live?  How will it be run between the two firms?

Shirl: We plan to launch the exchange later this year and both teams are knee deep in the work now.  As I mentioned, I believe access to capital for firms will be in demand, as we currently provide both a loan product and a revenue interest product to RIAs to help fund M&A, the launch of a new firm, succession planning, etc., and both products have been popular.  Given that Tamarac has such wonderful existing relationships with RIAs, we can likely be helpful there.  Broader M&A services could be a fit, and we believe there will be demand for OCFO, marketing, and OCIO services as well.  We have a few other services under consideration, but will start with services that Dynasty does and does well and grow as need and demand grows.  The ASx team, structure and services will be announced officially later this year. Both firms are very excited about the potential here.

Tony:  I know you were close with Jud Bergman, Envestnet’s late Chairman and CEO, and my condolences for how his passing must have touched you personally.  Our industry lost one of its finest.  I also know that you have said that Bill Crager was there even before you launched as a supporter of Dynasty.  How much of this partnership is about the long-standing relationship between your two firms?

Shirl: Thanks for that, Tony.  I have not yet spoken publicly about the loss of Jud – I think it’s still hard to comprehend for many of us.  He was an amazing person and his contributions to both this industry and this life will continue to ripple throughout.  Thanks, again, for your condolences.  Bill Crager, in my view, is one of the most talented people in the advisory industry, and to your point, I have known him a long time.  At the end of the day, we all want to work closely with people we admire, like, trust, and respect.  Additionally, Bill’s and Envestnet’s values align very well with Dynasty’s.  At our core, both firms are unapologetic advisor advocates. The advisors and their firms they work for are our clients.  We are both exclusively B2B firms.  We both care deeply about financial wellness in this country and want to do anything we can to help advisors improve their outcomes for their clients.  I’m thrilled to add Bill’s perspectives to our very engaged Board of Directors at Dynasty.

Tony: I would imagine the exchange will start by working with many of Envestnet’s or Tamarac’s RIA clients, but do you see the exchange being helpful to Envestnet’s IBD clients as well?

Shirl: Yes – good question.  Envestnet is very passionate about all of their clients and they were very clear that they would like our best thinking for the benefit of all clients that feel we can be helpful to them.  We are starting to see many IBDs think about how they might build segmentation strategies and even form divisions for their top advisors, similar to what the wires have done with Private Wealth groups.  Fundamentally, Dynasty is in the PWM platform business, so to the extent our expertise, capabilities, platforms, and services can help Envestnet clients, those things will be explored as part of the partnership.

Tony: Does this change anything about the way Dynasty runs today, services its clients, corporate governance, etc.?  What has been the reaction from your clients?

Shirl: It’s business as usual for both firms.  Nothing changes at Dynasty from a governance or leadership perspective.  We do have more cash on-hand now for building and enhancing services for our clients, hiring more talent to help with growth, and have more capital to help fuel programs for advisors via Dynasty Capital Strategies.  The outpouring of support from our clients has been just awesome.  The Dynasty Community is very special and hard to describe in terms of how close and supportive everyone is of each other.  People are genuinely happy for what it means for our ability to continue to scale and enhance our deliverables for their benefit, but they also know that most everyone who works at Dynasty owns stock in the company, so they are very excited as fellow entrepreneurs and friends for the ownership group at Dynasty as well.

Tony: I doubt I can get you to give me much info here, but going to ask anyhow!  I have heard this is your fifth capital round and it’s your largest one yet.  I have also heard that with your move to FL and recent success, that your cash flow has really increased.  Any comments there and what are the plans for how you will use the cash?

Shirl: Well, you are nothing if not direct, my friend!  You are correct in that we are a private company and don’t disclose our financials or capitalization table.  From Envestnet’s perspective, this was a minority investment and non-material.  That said, it’s true this is our fifth capital raise since founding the business in late 2010.  I am proud to also mention that our current largest investor, who has been with us since day one, also co-invested in the round, which I think is a wonderful vote of confidence for our team, our business, and our community and I am so appreciative of our BOD that has been with us since we launched.  Bill Crager is the first new BOD member we have added, as our current BOD has been so committed to the business. I am biased, but feel we have one of the finest BODs in financial services, and it just got even better by adding Bill.  I will also say, I am so proud of the fiscal discipline and capital stewardship that our team has exercised since we launched the business.  That focus and execution and key cultural aspect of our firm is one of the reasons we are in the strong position we are in today.

Tony: I know you are a big chess player – always liking to think several steps ahead.  Where could this partnership take Dynasty in the future?

Shirl: We are entering a strategic age for advisors and advisory firms.  Technology and services have historically been focused on helping advisors deliver the advice they offer their clients, but with this announcement, Dynasty and Envestnet will extend its support to helping them navigate the strategic landscape.   I think we can agree that the probability of successful outcomes for clients can be enhanced when you combine the increasingly impressive technological advancements and access to quality data with human empathy and understanding that an advisor brings to a client.  The future will belong to the cyborg advisor, who understands the tremendous synergies and benefits to clients that sit at this crossroad.  Layer on top of that, the firms that win disproportionately in this environment are the ones that are the best-led, have strong margins and cash flow, have outsourced non-core functions for synthetic scale, and who have the most time and resources to grow their business and to touch their clients.  Put simply, the best businesses will win.  Dynasty wants to be the firm that lives at this crossroad – at the intersection of technology and data with human touch and empathy – and that partners with advisors and firms of integrity that share this vision to help them win.  We want to help them run better business, which will collectively help us all win disproportionately going forward.  I see it very clearly and am excited to continue to execute across that vision and to continue to find the best partners, like Envestnet, that can help us get there faster and with more impact.

Tony: Thanks, Shirl, for sitting down with AdvisorHub on the record here to discuss this impressive inflection point for Dynasty.

Shirl: Thanks, Tony.  Always great to see you and trade ideas – and congrats on the continued success at AdvisorHub.