In a new episode of the Financial Planning Podcast, Dana D'Auria explains why the right tech is an advisor's best friend in a rapidly changing industry.
D'Auria, co-chief investment officer and group president for Envestnet Solutions, brings more than 15 years of experience managing and implementing investment solutions for wealth managers to this week's episode. At Envestnet, she is responsible for wealth and asset management solutions across Envestnet's ecosystem, including its research, overlay, direct indexing, sustainable investing and retirement services.
She also takes the lead on partnerships with exchanges and other wealth solutions providers, and serves as a chair of Envestnet | PMC's Investment Committee.
Prior to joining Envestnet, D'Auria was most recently a managing director of Symmetry Partners. She also served as president and a portfolio manager of Symmetry Panoramic Mutual Funds, the firm's multifactor family of funds.
D'Auria joins the podcast just two months removed from her
During her conversation with FP Podcast host and lead editorial producer Justin L. Mack, D'Auria discusses the top issues advisors are facing today, how tech is working to solve those problems and provides some insight on Envestnet's recent leadership changes.
Listen to the new episode — as well as all future and past episodes — by subscribing to the FP Podcast on
Transcription:
Justin Mack: (
Good morning, good afternoon and good evening. Welcome to the Financial Planning podcast. I'm your host, Justin L. Mack, Wealthtech Reporter for Financial Planning, and it is my pleasure to introduce this week's guest, Dana D'Auria, co-chief investment officer and group president for Envestnet Solutions. Dana, thank you so much for joining us this week.
Dana D'Auria: (
Thanks so much for having me, Justin. It's great to be here.
Justin Mack: (
Absolutely. And as group president, Dana is responsible for wealth and asset management solutions across Envestnet ecosystem, which we all know is a pretty big ecosystem, including its research overlay, direct indexing, sustainable investing and retirement services, as well as partnerships with exchanges in other wealth solutions providers. Dana is also chair of Envestnet PMC's investment committee. Prior to joining in Envestnet, Dana was most recently a managing director of Symmetry partners, where she also served as president and a portfolio manager of Symmetry Panoramic Mutual Funds. The firm's multifactor family of funds. And if you already know the name and voice, it's because she's very comfortable in this format being a regular contributor on places like CNBC, Bloomberg TV and radio, Yahoo Finance, NASDAQ Trade Talks, you name it. And this week on the FP pod, we're gonna go deep on some of the top issues advisors are facing today and how fintech solutions can fill in those gaps.
Justin Mack: (
We'll dabble a bit in tax and ESG and touch on some news that we've had the chance to report here at Financial Planning not that long ago. That being Dana's appointment as the head of one of Envestnet's three streamlined business lines as the company restructures. And Dana, I think that's a perfect way to start. As of the time of this episode's recording we're about a month removed from the big news and that new appointment. So tell me a little bit about what the change is like and how it's kind of altered your day-to-day and what you're excited about with the new restructure over at Envestnet.
Dana D'Auria: (
Absolutely. I think the biggest excitement for me is really just the opportunity to have a mandate over what I had already expressed as the vision I came in with as co-CIO. To bring what Bill Crager, our CEO, talks about in the intelligent financial life to the asset management side of the business. So I'll back up for a minute and talk about the IFL for a minute. It's really a vision around turning what was a turnkey asset management program and became an integrated platform into truly a set of services that allows the advisor to provide a holistic look at the client's finances. So I know words like that are thrown around a lot. I think the best way to understand it is to think about all these pieces of the puzzle that Envestnet has assembled over the years, whether it be investments, insurance, credit, retirement, trust, alternatives, structured notes, et cetera. And say, OK, any one of those pieces can be an on-ramp to a connected ecosystem for that client.
Dana D'Auria: (
And it extends out further because you think about financial planning and data aggregation, really, when you think of where the client interacts on a daily basis, you know, picking up their coffee or going to do yoga. All of these places are now potential places where embedded finance can take place, and they can also have sort of an on-ramp to that ecosystem. So it's a matter of really trying to make the financial transactions that clients have leverage the best possible for them in the rest of their financial lives and connect in a way that hasn't been before. So how do you do all of that? Well, one of the ways of course is on the wealth and asset management side, which is what brings me to the, the reorganization that you discussed and just, you know, looking at things from a business line perspective.
Dana D'Auria: (
If we look at all of our solutions holistically, the asset management side of solutions, there are obviously opportunities for advisors to combine these. And so you talk about, OK, for example, I have a managed account investment. I have my 60/40 with my public market equities, my public market fixed income. But then, you know, it's very ubiquitous in our industry that the advisor also has an annuity for guaranteed income for that client. So how do those two things combine together? Are those very separate decisions and I buy the annuity for guaranteed income, and then I separately manage that public market equity and fixed income? Or do I want those managed with the knowledge that I've got an annuity? Maybe it changes the duration of my fixed income, or it changes how I rebalance that over time. So that kind of thinking where we look at the asset management side across these solutions that I think really will be benefited by where my position is now in the organization.
Justin Mack: (
Absolutely. And, and what you touched on too, kind of provides a perfect example of, I guess, all the things that advisors have to juggle and how tech is going to be necessary in juggling all of those things successfully. And like you said, the whole, the holistic financial plan is something we hear a lot. It's thrown around. It might be sometimes seen as a buzzword, but it is, in the example you just gave, a perfect way to understand how planning and wealth management and the whole thing is really regarded by consumers now, too. They're expecting a lot more from an advisor than just a money manager. They're expecting something that is seamless and frictionless. And like you said, holistic from the point that I can handle all of these things at this one source, and it should be easy, and I should have tech that enables that. So with that, I would love to talk about some of the top issues advisors are facing today with all that they're juggling and, and trying to manage, what are you identifying as at Envestnet as solutions that need to be handled now? Top of mind, things for advisors and for their clients.
Dana D'Auria: (
I think for the advisor, it's kind of a double whammy right now, right? Because no, not only are they being asked to do more, they're being really asked to, you know, look at that fee. We we've been looking at commoditization in the industry for a long time. Advisor fees, I think, have remained somewhat more robust than some of the other places in the chain. But at the end of the day, the advisor has to look at that fee too. They have to really justify the value that the client is getting. And a lot is getting commoditized. The good news is the advisor has an opportunity now to provide hyperpersonalization at scale. So the tech can be brought to bear. That is going to empower that advisor. You think about something like the travel industry. I know this is an example. That's probably out there a lot, but I think it's a pretty good one.
Dana D'Auria: (
What happened with travel industry is, you know, the best travel agents learned to use the tech that displaced maybe some of the ones that were, you know, not able to kind of leverage a better engagement. But I think advisors who are able to look at the tech now and say, okay, the stuff that a machine can do, let me let the machine do it. Right? So what's a case in point. Tax optimization. You have a lot of advisors who traditionally would do tax lot allocations themselves. So literally at the end of the year, they're looking for any losses they can possibly harvest in order to rebalance that client's account back to its target. That's not ideal, right? That's clearly best done by an algorithm. That's gonna be doing that throughout the course of the year. Whenever you have the client, you know, taking fees or taking withdrawals or adding contributions, et cetera, and you're gonna get better tax optimization that way. And you're also gonna take out of the hands of the advisor and do for them something that increases their value prop dramatically, but also it enables them, it frees up their time. So they're not trying to manually do this kind of stuff. So I think that when I look at the landscape for the advisor, the ex expectation of this hyperpersonalization and doing more with less is going to be facilitated by tech like that.
Justin Mack: (
Mm-hmm, and I do love the comparison between, you know, the travel agent being phased out by tech, but the advisor being empowered by it. And it's, you know, something that is always a concern, especially in the early stages, when we see more advanced tech and we've written a lot about AI, for example, and the fear that, oh, is this going to change or maybe minimize the advisor? And what we've heard time and time from advisors is what you just said. No, let the tech do this so I can focus on that. And that personal touch really can't be replicated. And the interesting duality of clients who are expecting tech to almost be the first point of contact or the most frequent point of contact, but they still want a human touch. And I think that almost goes with the change we've seen just in our country.
Justin Mack: (
You know, we are using tech to connect more than ever, but it's on a personal level. Zoom and just something to simple as that has added a level of humanity to the technology that we're using in our businesses and our practices and advisors seem all in on the ability to take some things off their plate and put, I guess, you know, more nutrient rich food on their plate instead. With that, I wanna talk about that hyperpersonalization. For you. What does that mean when that's done right? We hear a lot of examples of what consumers are investors are looking for in terms of personalization, but for Envestnet, and especially in the business line that you lead, what does that look like? And, and how are advisors able to do that successfully?
Dana D'Auria: (
Sure. I'll give an example of what I think is short term and kind of immediate and obvious where advisors are going. And then maybe what, what longer term, you know, advisors I think are gonna do. By the way, I love the nutrient rich example analogy that you just said, because I think that's exactly right. I think that's a good way to picture it.
Justin Mack: (
Empty calories are not what we want.
Dana D'Auria: (
Right. right. So short term, immediate, what are, what do I see advisors doing to hyperpersonalize? Well, there's the advent of direct indexing and that's pretty well seen at this point. We've had a lot of M&A in the space. You have these direct indexers that have been built up over the course of the last several years, but, you know, were relatively small players for the most part, not withstanding a few big ones like Parametric. But they're all getting, you know, scooped up, right. And the bigger players are scooping them up. And what that should tell you as an advisor is that there's gonna be a shoulder behind that sales process. So, whereas direct indexing at one point was maybe a little bit of a niche product and, you know, high net worth or ultrahigh net worth. You're going to see now with these purchases, these companies are gonna want a return on the investment.
Dana D'Auria: (
They're obviously looking at this as the place where people can personalize and their expectation is gonna be that there's gonna be growth there. So you should expect sales, you should expect marketing, you should expect a push into direct indexing. And just quickly, what do we mean by direct indexing? You know, it's a cross between your ETF low cost access to the market in a lot of cases, but also the customization of directly owning the securities. And, you know, with the advent of fractional shares and commission free trading, it's gonna become more and more accessible. So our expectation is that advisors in this space are going to be expected to have a direct indexing solution for the client. And that allows a level of customization that was, heretofore, really the province of endowments and big pensions and institutions and higher net worth.
Dana D'Auria: (
And now, anyone can call up and say, hey look, I've read this in the press about XYZ company. I don't wanna invest in this. Can you pull it out? And the old answer of, well you're in a package product and would be extremely costly, right? Because now you have to move out of the package product into something that's bespoke. That's not gonna be a good answer anymore because direct indexing is going to become very low cost to the client. It already is. I mean, certainly Envestnet offers a very low cost version of this with our QRG group, quantitative portfolios. You're gonna see that across the board. So that's one way that's immediate right in front of us. Another way. I talked about tax overlay. That's another one where it's just, it's an algorithm. It's kind of an obvious one to put on top of a tax managed account so that you can be managing it across the course of the year, done in a way that's, you know, with a computer and, and not having the advisor having to manually do that still.
Dana D'Auria: (
Another one of course, I would point to is social preferences and sustainable investing. So that's a loaded word nowadays. What's sustainable. What's ESG. What's social. I think a lot of people conflate all of these terms. I'll say quickly, ESG is meant to be additional information, right? If you think about, for years, we've known that governance, good governance can play into the health of a company. The return on that company, think of ESG really as just an attempt to add additional information along those same lines. To extend it out to social considerations. How are you treating your employees? How are you treating the communities that you interact in? Perhaps that too will have an impact on your bottom line. What is your environmental footprint in the landscape where there's an expectation that we become net neutral? Or at least more carbon neutral. There there's the potential of these companies for stranded assets.
Dana D'Auria: (
There's potential for bottom line impacts related to this. So ESG at its core is really just meant to be additional information to put into the portfolio decision making process. The fund and company decision making process. Now, of course, a lot of people look at ESG as a social preference. You know, you're making a consumption decision around whether you want to invest in companies like that. That's a slightly different idea, but very related. And what I would say from a hyperpersonalization front is that that too will become sort of obligatory. That anybody can offer that, right? That if you have a social preference or a value, not the province just of endowments anymore. Advisors will have to be able to put that into client portfolios. Those are immediate, Justin. I would say, as you look out further around the customizations, it's more around what I started this discussion on. Which is putting curated portfolios together. Being able to very carefully put together what are the different aspects of my financial life from my annuity to the loans that I have. Whether it's real estate loans or securities back loans I might be using for cash flow purposes. Do I need to trust, right? Am I a high net worth client or ultra high net worth that should have alternatives in the portfolio? How are all these things interacting together? I think that's where hyperpersonalization goes.
Justin Mack: (
Absolutely. And I think that's a great place to take a break. And when we get back into it, we're gonna continue our conversation. Talk about not only what advisors are juggling, but I would love to talk about what solutions providers are juggling as there are so many new ideas and a lot of competition to make sure that advisors are empowered with the tech that is now hand in hand with the way they do business. We'll also, uh, talk a little bit about good vibes and, uh, some things that we'll get into we come back from the break. We're gonna take a quick word from our sponsors. Stay locked here on the Financial Planning Podcast.
Justin Mack: (
And welcome back to this week's episode of the Financial Planning Podcast. I am your host, Justin Mack. And this week we are chatting with Dana D'Auria, co-chief investment officer and group president for Envestnet Solutions. Now, before we went to the break, I kind of queued up something I want to talk about because I don't know if we talk about it enough, frankly. Because when we talk about fintech, we always talk about these are solutions that are being created to empower advisors. And that of course is the focus and the core, but something that stands out to me is just how much is happening in the fintech space. As far as innovation, as far as new ideas, I feel like we're at this point where there are so many emerging technologies. Technologies that are being implemented day-to-day, things that are still very much on the precipice of who knows what they could be.
Justin Mack: (
I recently did an episode, uh, with a gentleman talking about the metaverse, for example, and the potential that might hold. There's so many unknowns. But it's a cool time if you are a wealthtech editor like I myself, because I constantly get to talk to people who have big ideas to help advisors and talk about all the cool tools that they are developing to do just that. However, as a solutions provider, I imagine that's tough too, because there are so much happening and, you wanna make sure you get out there and let people know that, hey, I have something for you that can help. I didn't know if you had any insight on what that's like, what it's been like recently, as far as the level of innovation and how much tech is being brought forward and embraced by the financial planning and advisor community.
Dana D'Auria: (
Yeah. Yeah. Yyou couldn't be more right, Justin. It is a great time for innovation in the space. I think we're gonna see really, as tech really gets brought to bear on financial services. You know, I'll say it's really kind of striking to me how much of financial services and our industry is still operating on, you know, circa 20 years ago-type technology, right. And manual processes. I mean, there's still way more embedded than you would think. And I mean this across the industry. So I think we're ripe for the opportunity for tech to come in and solve problems. Yes, we are constantly exposed to potential new solutions. You know, there are just so many innovators out there who have looked at a problem and thought that, you know, I have a great solution to this. A lot of them overlap. Maybe they look at it from a slightly different complexion. But it's a matter of saying, okay, which of these companies will survive and which of these technologies will survive?
Dana D'Auria: (
You know, so no sooner do you kind of make a bet on one thing and something else kind of can come in and superseded it. So Envestnet has taken the approach, and I think this is key, of being as open architecture as possible. And by that I mean, in most cases, we're really going to try to connect to whatever technology our clients want to use. So we have an open ENV system that's designed to facilitate that. And we obviously, we partner more deeply with some partners than others because we see, OK, this is a, a company that's established. It's got support from clients. There's demand for this cetera. But it's very hard to say going in which technologies and which new innovations are really gonna take off. But that's, you know, to your point, that's kind of, what's great about it, right? I mean, it's a landscape that everybody kind of votes with their feet. And if you're open architecture and you're able to connect over, certainly these companies are able to go out to the different broker dealers, the different registered investment advisors and make their pitch. And if there's a commercial partnership there, that's something that potentially down the line could get integrated with our system.
Justin Mack: (
Absolutely. And, you know, so much being thrown at the wall, and the stickiness of those different ideas yet to be determined. And like you said, it's hard to know what is going to be the next right thing, but just the fact that the innovation is so varied and so driven by, like what you said, the open architecture at Envestnet. What technology does the client want to use? What is the expectation and kind of focusing there and kind of working backwards in a sense. Instead of we have this solution, this is the one for you. It feels more collaborative even though of course, you know, the clients that we're prospecting to aren't necessarily in the meetings. What their attitudes and their interests are, are very much part of the development process. Would, would you say that you've observed that as well?
Dana D'Auria: (
Oh, for sure. And, you know, to your point too on throwing it at the wall and see if it will stick. Obviously we're coming out of this environment of very low interest rates where growthy companies and the opportunity to get out in the space was a lot easier. I think we're gonna see a natural coming end of that. Right? And decisions will be a little bit harder now on what gets funded and what doesn't get funded and what technologies are supported. So that client interaction that you're talking about, that ability to capture the imagination of a big client is gonna be more and more key because it's not gonna be as easy to float. It's not gonna be as easy to kind of survive in an environment where we're rapidly seeing interest rates increase and potentially even recessionary conditions. Um, you know, if you're struggling to get to a revenue.
Justin Mack: (
Yeah, absolutely. And also wonder, just in your opinion, how much sophistication of the client has kind of spurred that forward or changed things, because like you said, in the environment, we're in high interest rates, a lot of uncertainty. People who are also understanding, thankfully, that you do need a sound financial plan and a planner to help you do it. You might not be able to do this on your own, but there is still a level of, you know, like you said, the concern. The higher realization that I need a good plan and I want to be able to work with my advisor, but people are sophisticated. They understand tech more. There isn't that barrier that maybe used to exist for any age group. I think it's fair to say that no matter what gen you fall in, you are very comfortable with technology in today's world. How much does that play a role in, I guess, how things are distributed or even presented by advisors to their end clients?
Dana D'Auria: (
I think it's a great point. I think it's shifting that role. So, you know, you think about traditionally advisors would sort of target larger net worth. And then the ideas is, well the baby boomers are retiring and we're gonna have to go after these younger clients. How do we do that? So fast forward now to a world where meme stocks are a thing, right? And we think about a few years ago, you know. People using their COVID checks to start directed brokerage accounts. I mean, it's really a different playing field. And we think about how the next generations that are coming up are embracing the equity world and the investment world in capital markets. Crypto. I mean, just think about advisors who have these clients who, you know, crypto is part of their portfolio. But it's part of their portfolio kind of offline from the advisor, right?
Dana D'Auria: (
They're doing it via Coinbase or whatever. And so does that, should that be part of the advisor's plan? Of course it should. So I really think that as technology comes to bear on our industry, a lot of advisors are going to have to shift in thinking around how am I actually being pertinent to clients that are coming up in the next generations? And I think, you know, there's maybe a, something of a knee jerk reaction that we all have to say, oh my God, look at what's going on with GameStop. I mean, I'm on the record saying, oh my God, that looks like a modern day pump and dump to me. Right? Maybe not intentionally, but, you know, certainly that would be what would happen to people in it. Well, you can't stiff-arm it though, right? You're not gonna be effective with new clients who are getting into the game in this way by saying, oh, you know, that was foolish.
Dana D'Auria: (
Talk to me when you're ready to get serious and have a diversified portfolio. I really think you have to figure out how you're gonna reach out to people like that because they wanna be engaged with their investments, Justin. And they don't want the standard, give me the ETF and call it day. And, you know, I'm, I'm diversified across all these stocks and I have no meaningful engagement with any of them. Right? They're looking for something in a lot of cases, that's a little more on point with where they want to invest their money. What causes they wanna support at the same time that they're getting a good return. Again, the beauty of this is that's an opportunity for the advisor. Because they don't know really how to navigate that. Somebody should be helping them navigate that. And rather than saying, hey, this isn't how money should be invested.
Dana D'Auria: (
The answer is, yeah, we can invest that way. Here's the pros and cons and the trade offs. Why don't we consider a portion of the portfolio this way? I mean, it's not so different from, what's been done in the past, think about, you know, the high net worth client that would call it the advisor and say, Hey, am I in Facebook? I'm reading all about Facebook. Right? Well, what did the advisor do in that case? They would say, oh yeah, we're gonna take a little sliver here and we're gonna, you know, put it in Facebook. Well, think in those terms of being proactive around how you can help the client be engaged with their investments, but at the same time, they have to have that prudent approach to markets that we all know over time will be the bedrock of how they grow assets. So diversification is extremely important. How do you balance that with them? That's the job of the advisor.
Justin Mack: (
And, and you already touched on too, that ability or the necessity to, to be nimble and flexible and be able to react to things that we can't possibly plan for. Like you said, how can we plan for, or create a, something for the investor who's been empowered by pandemic payments. We didn't know that was coming. So it's hard to develop tech, you know, five years prior, that's gonna be ready to accommodate the pandemic powered investors. So it just shows that that nimbleness and that flexibility is gonna be key, no matter whether you're a solution provider or an advisor or someone who's supporting financial services. You've gotta be able to move. You've gotta be able to kind of roll with the punches a bit. So kind of the last thing, and before the break, I queued up one to talk a little bit about good vibes.
Justin Mack: (
It's kind of my thing here. And something I wanna talk about with any guest that we bring on is pretty much your why. Why you do this and why you love the work that you do. Because I think from the outside, looking at the industry, it's all about money. It's all about transactions. But for the folks that I talk to within it, it's very much about people. So with that, I would love to hear from you, you know, what's your favorite part of the job? What's your favorite part of what you've done throughout your career? And when you look at it, like, yeah, that's the thing that keeps me coming back to this when the world goes crazy and the market's doing what the market does. But it doesn't matter because I've got this. For you, what is that?
Dana D'Auria: (
Yes. Thank you. It's, it's such a nice question to get. And, and it's easy to say, well, I like helping people, right? And I, I like making sure people get the best out of their retirement. But what does that mean? Right? What's the specifics of what I think I'm adding. I have to tell you that there are several things and several areas that I could go to. But I'm gonna pick one for the purpose of this. And I'm gonna say, I'm very excited about the ability for clients to invest, not only for their return and how in the long run the portfolio performs, but also to express their social preferences via that return. I think that, you know, for a long time, you look at the broad middle class. There are there's agreement on a lot of issues.
Dana D'Auria: (
And maybe as a country, we can't come together on a lot of this stuff. But if people can vote with their money and that becomes more and more capable for people, I think we could seriously see the coming together. Right? And when it comes down to, you know, rather than necessarily voting. Political voting yes. But using your money to vote. Being able to just say, yeah, I'm gonna divest from this. I don't support this. I know that my advisor can do this in a way that's very minimal on tracking error. I'm not gonna suffer for my long run return, but I can make a statement with my money that I wasn't able to in the past. That's powerful to me. I see such opportunity there for people. And for people to be better engaged with those investments over time. That's exciting to me.
Justin Mack: (
Absolutely. And I don't think I can follow that. So I'm not even going to attempt to. Dana, thank you so much for joining us this week on the Financial Planning Podcast.
Dana D'Auria: (
Absolutely. Thank you again for having me.
Justin Mack: (
And thank you all for listening to the FP podcast this week. This episode was produced by Arizent with audio production by Kevin Parise. Special thanks again to our guest Dana D'Auria of Envestnet. Rate us, review us and subscribe to all of our content at www.financial-planning.com/subscribe. For Financial Planning, I'm Justin Mack, thanks for listening.