Crager has been involved at the business that now has $5.4 trillion in client assets and a big part of the North American wealth chessboard. Recent years have not, however, been kind to the business, bringing pressure for a change of course, as explained by our US correspondent.

Envestnet CEO Bill Crager may have officially announced his resignation as the company’s head in January 2024, but November 2022 was likely the true beginning of the end.

That was when activist hedge fund Impactive Capital sent a scathing open letter to Envestnet’s board of directors, blaming the company’s “dismal [stock market] performance” on “an especially strong elixir of management incompetence and lack of effective board oversight.”

Impactive’s co-managing partners, Lauren Taylor Wolfe and Christian Asmar, cited Envestnet’s “long-term underperformance, lack of shareholder alignment and poor board governance.” The “high-quality business,” they wrote, was “not achieving adequate margins, returns and its full potential value.”

Not exactly a ringing endorsement of Bill Crager’s leadership.

Highs and lows
To be sure, Crager has had a storied career. He co-founded Envestnet with the late Jud Bergman in 1999, riding the wave of the fast growing independent advisory business. Envestnet became the industry’s leading TAMP [turnkey asset management program] as well as a powerhouse provider of  fintech-driven back office services, working with more than 103,000 at 4,900 firms which have a combined $5.4 trillion in client assets.

But the last four years have not been kind to Crager. 

Bergman, the company’s visionary and CEO, died in a tragic car accident in 2019, thrusting Crager, the longtime Robin to Bergman’s Batman, into a role that may not have been a natural fit. What’s more, Bergman was not only Crager’s business partner but a close personal friend. 

Covid, of course, hit the following year, and competitors, most notably AssetMark and Orion Advisor Solutions, began making inroads. Top executives, including Stuart DePina, seen by some as a rival for the top job, eventually exited the company. 

Under Bergman’s aggressive growth strategy, Envestnet went on a buying spree, buying hot – and expensive – companies like FolioDynamix, MoneyGuide and Yodlee. Once regarded as an industry innovator, Envestnet post-Bergman was increasingly seen as playing catch-up with industry trends, coming late to fields such as direct indexing and tax loss harvesting.

Mounting problems
Profit margins slipped, the stock price continued to drift down, layoffs followed and in 2022, presumably to cut costs, Envestnet abruptly moved its headquarters from Chicago, its base for more than two decades, to Crager’s home turf in suburban Philadelphia.

Acquisition integration problems mounted, and last year Envestnet briefly flirted with selling itself to a private equity firm and leaving the public markets. Meanwhile, Envestnet’s board cut Crager’s pay by more than 36 per cent to $4.4 million for 2022 from almost $6.9 million in 2021.

That was bad enough, but the nadir may have come after last year’s disappointing Q3 earnings report, when the company’s faltering stock performance prompted a UBS analyst to ask Crager if “something is broken” at Envestnet. In November, the company lowered its revenue guidance for 2023. To stem losses, Envestnet may have to sell off data aggregator Yodlee at a steep discount. 

Skating on thin ice
The Envestnet press release claims that Crager himself “made the decision” to transition from CEO to senior advisor, but the news hardly came as a shock to the industry. As Family Wealth Report noted last week, Crager’s tenuous tenure has been a matter of speculation going into the new year.

As one veteran industry executive put it: “It’s clear that Envestnet hasn’t done a good job integrating their various acquisitions. This has caused expenses to increase while damaging the client experience. Not a good combination.”

Despite his managerial missteps, Crager is well regarded within the wealth management industry. As longtime industry analyst Alois Pirker observed: “Bill Crager stepping down is an end of an era. Together with Jud Bergman, Bill worked tirelessly to put Envestnet on the map and to advance wealth management as a whole.”

Sipp seen as front runner
Envestnet’s board of directors will begin a search for a new CEO, but company insiders think that EVP Tom Sipp, who will continue to lead Envestnet’s business lines, is the front runner for the job. Meanwhile, board chair James Fox will serve as interim CEO.

Crager, who will step down in April, is expected to bring Sipp, who has a finance background, up to speed on client and partner relationships and strategic initiatives.

Crager said he will have “a front-row seat” for Envestnet’s “next chapter.” Which, with Impactive Capital now holding two board seats, is bound to have even more surprises.