Arsenio Hall, during his heyday as host of the first incarnation of The Arsenio Hall Show, one of TV’s top-rated late-night talk shows at the time, made a point of saying you know you’re excited about your life when you don’t use an alarm clock to get yourself out of bed in the morning.
Brandon Thomas can relate. His eyes are open and his body clambering off the mattress at 5 a.m. each morning, without the prompting of a caustic buzzer, ocean waves, chirping birds, or even a sunrise lamp. No, Thomas is not a TV or entertainment star, but his role as co-founder and chief investment officer of Envestnet has given him plenty to be excited about.
Envestnet, which pioneered the now-prevalent wealth-management technology platform that offers turnkey products and services to independent financial advisers, is not on the meteoric rise it enjoyed as a startup. Still, the organization continues to reformulate itself in ways that keep Thomas on the razor’s edge of morning slumber.
But that takes us to the end of this story. Thomas went through many paces, both good and bad, before reaching this stage.
For reasons he doesn’t understand with perfect clarity, Thomas started reading The Wall Street Journal during his teenage years, though he suspects the habit was motivated by an inkling that he might one day be interested in the finance business. He was living in a prosperous suburb north of Chicago as a youngster, close to where he lives now. He played baseball as a kid and became a Cubs fan, working summers as a vendor at Wrigley Field during his college years. Thomas would don an apron and meander through the bleachers selling Cokes, hot dogs and peanuts at Cubs’ games, before quitting around the seventh inning stretch and watching the rest of the game.
He was also an avid and skilled hockey player and golfer, good enough to get himself recruited by several Division I schools, such as the universities of Michigan and Wisconsin. But what interested him most was the best education he could access. That’s where Brown University came in. Like the bigger state universities, Brown recruited Thomas to play hockey and golf and, more importantly, was the most highly rated institution of higher learning by U.S. News & World Report, a magazine famous for its collegiate rankings at the time (and that has since been imitated on that count by other publications).
Underscoring his commitment to Brown was the fact that Ivy League schools didn’t (and don’t) offer scholarships to the athletes they recruit, unlike the Michigans and Wisconsins of the collegiate realm. Nonetheless, Thomas headed to Providence, R.I., paid his tuition and earned his degree in economics while hitting slapshots and chip shots on the ice and fairways, respectively.
“The coaches at academically oriented institutions try to sell their schools using phrases like, ‘when you come here you are making a 40-year decision, rather than a four-year decision,’” says Thomas. “That was more of my mindset when I chose Brown. I was using it as a means to an end, rather than an end in itself.”
Jud Bergman was managing director for mutual funds at Nuveen Investments during the latter part of the 1990s when an idea occurred to him, an idea based on three trends that had crystallized in his mind: (1) The independent adviser channel of the financial advice market was growing rapidly; (2) the advent of the internet was giving people the ability to share information and conduct business; (3) separately managed accounts were coming into vogue as investment vehicles for high-net-worth investors.
Bergman saw the trends as an opportunity to provide independent advisers with access to separately managed accounts via a state-of-the-art internet-based technology platform. He recognized it as a game-changing time for independent advisers, one that would enable an organization to provide a one-stop solution for them. Bergman presented the concept to the leadership at Nuveen, which ultimately decided to pass on the idea because it entailed making a bet on the independent-adviser channel, a move likely to upset its largest clients, the wirehouses.
But it wasn’t an idea Bergman could easily shelve, so he decided to leave Nuveen and pursue the idea, inviting three other Nuveen team members to join him in the endeavor — Bill Crager, Jim Lumberg and, of course, Brandon Thomas. Thomas, having earned a law degree from DePaul University, was tapped to write the business plan, as dictated by Bergman.
That plan, which has stood the test of time with few revisions, was essentially the concept formulated by Bergman, a technology platform designed to serve the independent-adviser channel, well known today as a TAMP, or turnkey asset management platform (though the company has since evolved away from being merely TAMP and now calls itself a “unified advice platform, one that offers advisers better intelligence”). The expectation was advisers who signed on would be independent fee-only or fee-based RIAs focused on high-net-worth clients, and unaffiliated with wirehouses or even broker/dealers. Over time, though, the Envestnet platform was also embraced by independent broker/dealers.
“The adoption of the platform by the broker/dealers really changed the dynamic,” says Thomas. “At first we didn’t really recognize that these broker/dealer systems needed the exact same things that the independent adviser needed.”
Bergman’s recognition of those three converging trends cited above proved true, as the Envestnet platform provided advisers seeking to break away from wirehouses with a turnkey option for setting up their own practices, or even to join forces with a larger, independent network. They could literally walk out the door at Merrill Lynch on a Friday and establish a shop of their own across the street on a Monday, replete with everything their competition at Merrill Lynch had at its disposal.
It’s a model scads of Envestnet competitors have since emulated, including the open-architecture investment platform that makes available thousands of ETFs, mutual funds, separately managed accounts and alternative investments.
EDUCATION TO THE THIRD DEGREE
Ivy League colleges, such as Brown, are essentially liberal arts schools, meaning Thomas was not able to pursue a finance degree, so he instead majored in economics because it was the closest he could come to studying finance at Brown. Training in finance came in his mid-20s when Thomas got his MBA in the discipline from the University of Chicago. That was followed by a law degree from DePaul.
“Because I was single and still in study mode, I decided to get a law degree,” says Thomas. “I was never interested in actually practicing law, but my parents still say education is the best thing you can ever do for yourself because no one can take away your diploma; it’s something that’s always with you, and I figured having a law degree would really help in business. It provides excellent training and discipline in critical thinking and writing, as you analyze cases and are taught to write and formulate opinions.”
It was after receiving his law degree that Thomas was offered a position at Nuveen, where he eventually made the acquaintance of Bergman, Crager and Lumberg.
THE STORM BEFORE THE CALM
Before proof of concept could be established by Envestnet, and before success rained down on its founders, there came the dot-com bust and a near-death experience for the nascent organization. Indeed, well-known Wharton School finance professor and stock market historian Jeremy Siegel told Bergman he could not have picked a worse quarter in financial history to start an investment management firm.
The firm went into business September 1999 — just as the dot-com bubble was reaching its apex — and was in operation little more than a year when the crash struck.
“We weren’t sure that we were going to make it,” Thomas recalls. “We had maybe 20 employees. We were blessed to receive our first round of venture capital funding right before the bubble burst. It was a very exhilarating and fun time, but it was also very scary.”
To this day, Thomas counts the episode as his most formative professional experience. Once the firm got past that period of uncertainty, Thomas says it was very clear to him the decision to start the company was a good one, destined for success.
THE THREE THINGS THAT GO INTO A NAME
The name under which an organization trades can be critical to its success, especially when venturing into virgin business territory. Sometimes it’s a challenge simply to conceive a name people can wrap their tongues around. With great execution and a lot of luck, the imprimatur can become a genuine brand name, the kind a person can mention without requiring elaboration.
Bergman wanted to bring together three key elements that defined the firm — ecommerce, investment and the internet. In parsing the Envestnet name, then, you get “e” for ecommerce, “nvest” for invest, and “net” for internet.
“We got so many questions in the beginning about the name,” says Thomas. “Now we rarely get any questions about it.”
BE CAREFUL WHAT YOU HEDGE
For all the education Thomas had accumulated — the bachelor’s degree in economics, the MBA in finance, and Doctor of Jurisprudence — he would be reminded theoretical classroom lectures were sometimes no match for real-world lessons. Thomas cites the time he approached Bergman about Envestnet starting its own hedge fund of funds, based on the testimony from advisers that there was considerable interest among their clients, who were pining for alternative investments in their portfolios.
The hedge fund of funds was launched in 2005 and its performance was “fairly good,” but Envestnet decided to close the fund after a couple of years because the asset growth in the fund didn’t materialize to its expectations.
“One of the things learned from that failure is that, while clients may express interest in something, that interest won’t always be manifested in actual demand,” Thomas remarks.
A FATEFUL DAY
Envestnet, led by chairman and CEO Bergman, went public in 2010 on the strength of its business model, which has resulted in a firm with about $800 million in revenue, 3,500 enterprise clients, 90,000 advisers and $2.6 trillion in assets under advisement. With the exception of the arguably ill-timed launch of the company, Bergman’s vision of an internet-based wealth-management platform and his future as a force in the private wealth business seemed charmed without end.
Then on Oct. 3, 2019, came tragic news that stunned the industry: During a trip to San Francisco, Bergman, 62, his wife Mary Miller, 57, and two others were killed in a head-on collision. An oncoming vehicle, which was driving the wrong direction on Highway 101, smashed into the taxi carrying Bergman and his wife.
The Envestnet board of directors activated the company’s emergency succession plan and appointed Crager as interim CEO, an assignment later made permanent. Ross Chapin, lead independent board director, issued a company statement lamenting: “We have all experienced a great loss at Envestnet. … Jud was a giant as a businessman and human being. We will miss him immensely.”
Thomas, to this day, refers to Bergman as “an amazing person, a true Renaissance Man — very creative, but at the same time very business oriented. In a self-deprecating way he would refer to himself as a ‘peddler,’ but he was without question always the smartest guy in the room. He was absolutely one of a kind — a great mentor and friend to many.”
Though Bergman is gone, the durability of Envestnet and the leadership team he assembled has spoken for itself. Indeed, while the Envestnet concept and its subsequent success induced a raft of emulators, the Envestnet leadership team is not standing pat, as chief executive Bill Crager and president Stuart DePina are leading an effort to integrate its various brands, which include MoneyGuidePro, PMC, Tamarac and Yodlee.
MoneyGuidePro assists advisers in navigating complex financial elements of clients’ lives. PMC provides advisers, broker/dealers and institutional investors with the information required to construct higher-performing client portfolios. Tamarac is a software product that abbreviates the trading process while adhering to advisers’ investment strategies, custom account settings, restrictions and tax considerations. Yodlee is a data aggregation and analytics platform that gives users access to more than 1,400 financial institutions and fintech companies.
“The idea is to integrate and rationalize those brands by bringing them together in a cohesive solution that advisers can leverage to help their clients achieve financial wellness,” says Thomas. “More specifically, in my world on the investment management side of the business, I’m excited about the work we are doing in the area of direct indexing, portfolio overlay, tax management and impact investing.”
One can imagine that excitement will ensure that Brandon Thomas remains a man who is early to rise.
Mike Consol (email@example.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.