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Envestnet Inc
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Good day and welcome to the Envestnet fourth quarter 2019 earnings conference call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Mr. Chris Curtis, Division CFO and Head of Investor Relations. Please go ahead, sir.
Thank you and good afternoon. I am joined today by Bill Crager, Interim Chief Executive Officer, Pete D'Arrigo, Chief Financial Officer and Stuart DePina, Chief Executive of our Data and Analytics business. Our earnings press release and associated Form 8-K can be found at envestnet.com under the Investor Relations section.
During this conference call, we will be discussing certain non-GAAP information including adjusted revenue, adjusted net revenue, adjusted EBITDA, adjusted net income and adjusted net income per share. This information is not calculated in accordance with GAAP and may be calculated differently than similar non-GAAP information for other companies. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appear in today's press release.
During the call, we will also be discussing certain forward-looking information. These discussions are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause them to differ materially from what we expect. Please refer to our most recent SEC filings as well as our earnings press release, which are available on our website for more information on factors that could affect these matters.
This call is being webcast live and will be available for replay for one month on our website. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. We will take questions after our prepared remarks.
And with that, I will turn the call over to Bill.
Thank you Christopher. Hello everyone. It is great to be speaking with you again this afternoon. For Envestnet, 2019 will always be remembered. It was an extraordinary year with strong results but was also the most difficult year. We experienced a great tragedy. The company though stood up, moved forward and remained committed to building the leading financial wellness network powered by our data infrastructure which enables financial advisors and their firms to help millions of American households achieve their goal.
While this call is about our 2019 results, it is also about the future. We believe that Envestnet is the best positioned provider to drive the future of advice. Here is why. Envestnet has grown by driving the rapid evolution of the wealth advice space launching a platform that leveled the playing field for all financial advisors, expanding that platform to become a broader holistic advice engine, including the market's leading financial planning software.
And in 2020, with the adoption of our financial wellness network accelerating and its long term impact will become recognized and more important. Not only is our addressable market expanding, but our ability to create new integrated solutions that provide essential value for our client and also new revenue opportunities for investment, they are growing.
Take data, it essentially was an aggregation source when we acquired Yodlee, is now emerging as a key source of information for a decision engine that will help recommend next actions for our clients to guide consumers to better achieve their goal, this with quantifiable results. It is these opportunities, we believe, that differentiates Envestnet. As I said on our last quarter's call, we are executing against our vision and the company is not taking its foot off the gas.
In 2019, we achieved the important milestone of serving more than 100,000 financial advisors and more than 5,000 firms. Also in 2009, we acquired PortfolioCenter and also MoneyGuide. More than 150 PortfolioCenter clients signed on to the higher value Tamarac offering during the year. We are also actively supporting 1,000-plus emerging RIA using PortfolioCenter Hosted offering. We are thrilled to have MoneyGuide as part of the Envestnet family.
MoneyGuide was named the number one financial planning software by the 2020 edition of the T3/Inside Information Survey and astonishing 12 years in a row to earn that recognition. MoneyGuide's popularity remains consistent among firms of all sizes, all experience levels and all business models, including 10 of the top 12 custodial platforms and eight of the top 15 broker-dealer platforms.
Most recently, Morgan Stanley licensed for an additional three years MoneyGuide's entire planning offering including MyBlocks. Both PortfolioCenter and MoneyGuide are performing well. Financially and in terms of progress each has made in delivering on the strategic rationale for acquiring them.
During 2019, we also launched the Envestnet Insurance Exchange and the Envestnet Credit Exchange. Both are making important progress. The Insurance Exchange has eight carrier onboard and 40 annuity products on the platform with many more on the way. So far, we have 10 advisory firms, partners signed and they are in various stages of implementation. Our Credit Exchange has four lenders in the process of deep integration and they are actively processing loans today.
On the distribution side, five advisor partners have signed and four are currently onboarding with additional 10 firms evaluating proposals. That will represent access to over 15,000 of our financial advisors. This is tremendous progress on both fronts in a very short period of time.
Just a few weeks ago, we announced the formation of the Advisor Services Exchange in conjunction with our investment in Dynasty Financial Partners. Feedback from our clients has been extremely positive as we work with Dynasty to provide access to growth capital, business management tool, full marketing services and outsourced CFO services for advisor clients.
In terms of financial results for the fourth quarter, adjusted revenue by 15% from last year, adjusted EBITDA grew 30% and adjusted earnings per share grew 13% from a year ago. These results were driven by solid performance in our wealth solutions business. Operating activity for that business remains very strong. Gross sales of $34 billion, asset base conversions of $8 billion and another $32 billion in subscription based conversions. It also benefited from favorable market conditions as we headed into the New Year.
Investment management continues to be an area where we are innovating and adding value. Assets using our ESG impact platform as well our tax overlay solution grew 74% compared to 2018. And our custom direct index portfolio more than doubled. In the index based low cost asset management environment, these are value-added growth areas that Envestnet is powering.
We are making progress in deploying Envestnet's data cloud solutions and believe we have an emerging opportunity to help our clients adapt to a more agile data environment that will connect them to their proprietary system as well as to the growing FinTech marketplace.
In 2015, we acquired Yodlee with a strong sense of its strategic value. In 2020, it is clear that data's essential value is being recognized. By adapting Yodlee's infrastructure, Envestnet established an important use case that connects an individual daily financial behavior with their long term financial growth goal which is transforming. There are other exciting opportunities for our data platform that include expanding its ecosystem into areas that will empower individuals to achieve flexibility, control and success in their integrated financial life.
As we stick with last year, there are short term revenue growth challenges as we have competitive pressure in our Envestnet manager analytics business, the impact of U.K.'s open banking changes as well as the shift from professional services to integrated offering for our financial institution client. That said, our core aggregation business with financial institutions continue to do very well.
Last quarter, we announced a bilateral agreement with JPMorgan Chase governing direct data feed. There is full pipeline of similar agreements we are in the process of executing with other institutions. This is important. It is important for the consumer. It is important for our industry. It is important that consumers' financial data be transferred, be stored and be aggregated in a way that protects the consumers' privacy and that firms follow standards for how to operate in a world where data is essential to driving financial outcome. We are pleased to be on the leading edge of this important industry change.
We are also seeing growth in our FinTech component of our data business as we rollout our enhanced developer platform. We continue to modernize our solution set which will allow third-party developers access to our solutions from which they will build out new enhanced long term financial products. Longer terms, it's clear to us that there is tremendous value in the capabilities, infrastructure and scale of what we have built in our data and analytics business. We connect to more than 21,000 data sources and aggregate hundred of millions of accounts which we believe is more than any other provider in our space.
Aggregated data provides the fuel to unified financial wellness networks driving optimal decisions that advisors and their clients can act on to achieve their financial goals. More practically, it helps consumers manage their daily financial lives. Envestnet is executing and we see tremendous opportunity to continue investing in our business, both in wealth and also in data. It is clear that individually and collectively, there is meaningful value to be unlocked as we position ourselves and we do the work to capture more and more of the market opportunity before us which we believe is in the tens of billions of dollars from a revenue perspective. As an industry leader with about $1 billion in revenue today, we have a long runway for growth and value creation. Value for customers, value for employees and value for our shareholders.
I will turn it over to Pete at this point. I will be back in a few moments with a few closing comments.
Thank you Bill and thank you everyone for joining us this afternoon. I am going to review our results for the fourth quarter and full year 2019 as well as our guidance for the first quarter and full year 2020.
Envestnet's overall results for the fourth quarter 2019 beats our guidance expectations set out in November. Briefly summarizing these results compared to the fourth quarter of 2010, adjusted revenue and adjusted net revenue increased 15% and 18%, respectively to $242.5 million and $177.1 million. Recurring revenue, which comprises asset-based and subscription revenue was 96% of adjusted revenue. Excluding the contributions from PortfolioCenter and MoneyGuide, adjusted revenue grew 9% from the prior year period. Adjusted EBITDA was $61.5 million, a 30% increase over last year. Adjusted earnings per share was $0.69 in the fourth quarter, $0.08 or 13% higher than the fourth quarter of last year.
For the full year 2019 compared to 2018, adjusted revenue increased 12% to $909.4 million. Excluding the contributions from PortfolioCenter and MoneyGuide, adjusted revenue grew 7% from the prior year period. Adjusted EBITDA was $193.3 million or 23% increase over last year. Adjusted EPS was $2.15 for the year, $0.23 or 12% higher than last year. Adjusted earnings per share grew at a slower rate than adjusted EBITDA reflecting a higher fully diluted share count, interest expense and depreciation expense.
In December, we settled our maturing 2019 convertible notes through a combination of cash on hand and a draw from our revolving credit facility. We ended the year with a net leverage ratio of 2.8 times EBITDA, slightly lower than the prior quarter.
Moving on to our outlook for the first quarter and full year 2020. You will find our guidance detailed in full in the earnings release, but I will give a few highlights here for 2020's first quarter. We expect total adjusted revenue to be between $242 million and $242 million, up 21% to 22% compared to the prior year. Asset-based revenue between $134 million to $135 million, up 23% to 24% compared to last year, implying an effective fee rate on our end of December assets under management or administration of roughly 9.8 basis points.
Subscription based revenue on an adjusted basis, between $102 million to $102.5 million, up 22% to 23% compared to 2019. Professional services and other revenue between $6 million and $6.5 million. Similar to prior years, we expect operating expenses to increase sequentially from the fourth quarter to the first quarter due to the seasonal nature of certain items, particularly personnel expenses, like payroll taxes and other benefits, all of which are significantly higher in the first quarter compared to the fourth quarter.
Adjusted EBITDA should be between $46 million and $47 million, up 35% to 38% compared to 2019. And we expect our normalized long term effective tax rate to be 25.5% consistent with 2019. Assuming approximately 55.6 million diluted shares outstanding, this translates into adjusted earnings per share of $0.45 compared to $0.39 a year ago.
For the full year 2020, we expect adjusted revenue in the range of $1,018 million to $1,028 million, an increase of 12% to 13% compared to 2019. Contributors to this 12% to 13% growth rate for the year include the first three or four months of acquired revenue from PortfolioCenter and MoneyGuide. When those acquisitions anniversary, our organic growth rate is expected to be between 10% and 11% for the year.
Asset-based revenue should grow in the mid-teens, aided by overall strength in our wealth solutions business as well as the carryover impact of the strong equity market in 2019. Subscription-based revenue should grow in the low double digits. Stronger growth in subscription revenue within our wealth business, including MoneyGuide, will be partially offset by low single digit growth in revenues in our data and analytics business, driven by the factors Bill discussed earlier.
Personnel services and other revenue is expected to decline in 2020 as we onboard new business with less of an implementation revenue component associated with them. As professional services goes down, our recurring revenue should go up to about 97% of adjusted revenue.
We expect adjusted EBITDA for the year in a range of $220 million to $224 million, reflecting growth of 14% to 16% and this is consistent with the 1.2 times relationship we discussed in the past between our targeted adjusted EBITDA growth rate and our revenue growth rate. Finally, we expect adjusted earnings per share in a range of $2.22 to $2.27. As we saw in 2019 Q4, fully diluted shares increasing year-over-year, interest expense and depreciation expense are the primary reasons EPS growth is lower than EBITDA growth.
Thank you for your support of Envestnet. Now at this point, I will turn it back to Bill for his closing remarks.
Thank you Pete. The year 2020 represents our 20th year but it also represents the beginning of the next transformational age of advice. We have grown our business from product to platform to today in network. And data is fueling everything from service to integrated applications and now into the network to drive better decisions that advisors can act on, on behalf of their client to help them to fill their financial goals. Envestnet is uniquely positioned to power this next stage of advice.
We are moving forward very purposely with our vision and mission in mind. We are focused on expanding the definition of unified advice and continuing to launch services and tools that help advisors grow their businesses and serve more clients efficiently. As we began the call, I said we believe Envestnet is best positioned in the best positioned provider to do just that, investing along the way to help our clients continue to grow and to create shareholder value.
Thank you again for your time this afternoon. Thank you for your support of Envestnet. With that, Pete, Stuart DePina and I are happy to take your questions.
[Operator Instructions]. We will take our first question from Will Cuddy at JPMorgan. Please go ahead.
H. Good evening.
Hi Will.
Hi. So first, can you just walk through some of the moving pieces in the 2020 guide? I am trying to understand a little bit walk down from EBITDA to EPS. So what assumptions are you using for interest expense and G&A and share count? That would be helpful.
So instead of getting into details on this call, why don't save some of those detailed modeling questions for follow-up.
Okay.
There is going to be a lot of calculations there. I don't want to get into that level of depth.
All right. And then I guess turning to the elephant in the room on the media reports on some potential buyers approaching Envestnet for the sale of Yodlee. Could you frame for us how you think about selling parts of your business? And what framework should we be thinking about that you will be using to consider divestitures if there is a right price?
Thanks Will. This is Bill. As a public company, we don't comment on rumors or any of the speculations. That said, I would say that there has been tremendous activity on marketplace in late 2019 and early 2020 with some pretty profound announcements whether that was Schwab and TD or that is Visa and Plaid or that is even today Morgan Stanley with E-Trade or Franklin Templeton and Legg Mason. There is activity in our space that I think is essentially very validating of the strategies we have been pursuing and really recognizes the value of the pieces that Envestnet has strategically invested in.
You go back and think about the history of our company in areas that we have anticipated, we did make an acquisition to enter the RIA space when we acquired Tamarac and now have a very substantial position in the RIA space, especially with the $1 billion-plus RIAs with Tamarac. We did last year make the acquisition of MoneyGuide, the leading provider of financial planning. We believe that planning is going to power, be really the engine that help us power this future unified advice marketplace.
In 2015, we acquired Yodlee, ahead of the market's understanding of the value of data. And as I just kind of outlined in my comment, data is the power of fuel on much of our platform and becomes, creates the intrinsic value beyond just the data business. It really creates a value within our entire ecosystem. All of these were very strategic steps with an understanding where the market is headed and we believe that we continue to have a very good outlook on where the market will go and we will continue to assess each component of our business. We will continue to assess the ability to invest in every component of our business and the opportunity that we want to invest deeper in for the next strategic move in our space.
Okay. Thank you for that. And a quick follow-up. Do you need to own the data? Or is it possible to still benefit from the data without actually owning the underlying pieces?
There are absolute value for owning the data itself. As you know, we have grown a pretty substantial analytics business. We think that over the last several years, we have optimized to create a very powerful integrated environment for wealth. And then when it comes to other areas of the use of the Yodlee infrastructure and platform, we have decided to partner. In areas of credit, last quarter we announced and we spoke about the partnership with Equifax and we will continue to contemplate those sorts of partnership and each case, Will, we are utilizing components of that data infrastructure inside our wealth business that we have optimized. And so at the end of the day, I think that represents kind of a great use case for the power of data in wealth and there are these emerging use cases as in credit with Equifax and there are other areas that we think there is a great utility for our data property in the future.
Great. Thank you for taking my questions.
Thanks Will.
We will now take the next question from Peter Heckmann at Davidson. Please go ahead.
Hi. Good afternoon everyone. Thanks for taking the call. Can you talk about some of the different drivers for positive and negative on margins for 2020? And how you think about the mix shifts going on?
Yes. So one of the bigger drivers of mix shift is the strength of the market in Q4 which increases the growth rate in terms of our revenue breakdown into the asset-based bucket compared to the other buckets. So we will see a little bit more mix toward asset-based which of course comes along with the cost of revenue. So margin on that revenue is not as direct of a flow-through to the bottomline. That's a little bit more weighted again towards asset-based in 2020 and towards subscription-based and we kind of highlighted in the prepared remarks some of those challenges and why the blended sub-base is probably closer to low double digits than the growth rate we are seeing in the asset-base.
Okay. And then the non-GAAP tax rate that you are using in 2019, did you say that was 25.5%?
The tax rate is 25.5%, yes, same in 2019 and 2020.
Okay. So that's use for 2020 as well, okay. I will get back in the queue. Thank you.
Yes. Thanks Peter.
We will take our next question from Chris Shutler at William Blair. Please go ahead.
Hi guys. Good afternoon. So maybe first, an update on the executive leadership team and bill, you still having the interim tag. I guess I would have thought by now there would be a decision.
Thanks Chris. I have been working closely with our Board of Directors and they are being very deliberate with respect succession, very good conversation with them, very deliberate process. We will make an announcement as soon as we have further information, but the important thing to note is that the company is very good hands,. We continue to lead the company and drive the company. I think we are creating more and more opportunity for investment and we are collaborating more closely, I would say, with the Board, who are supporting us and supporting our clients and really supporting our execution of our wellness vision. So it remains a process and the Board is being very disciplined in that process.
Okay. Got it. Let's see, on the Yodlee low single digit growth. Could you just reiterate what you felt the incremental headwinds were versus what you were experiencing in the back half of 2019?
Yes. So I highlighted them. Chris. And I will have Stuart to add color to this. But really, you know, they are three-fold. One is that the data analytics business has become a more competitive environment and we are keeping our renewal rates pretty high, but at reduced renewal contract. That's one.
The other component that is we are delivering more and more of the integrated Yodlee solution into Envestnet's wealth clients. There is a reduction in our professional services to support the implementation. And so that has a bit of an impact. And as the U.K., we have good presence over in the U.K. market. They transition to an open banking environment at the end of the last year. And with that, a lot of the FinTech clients that we have in the U.K. weren't necessarily prepared and that has had a little bit of a headwind in our ability to, it's been a headwind in that particular component of our U.K. market.
But Stuart, any color that you would provide?
Yes. I think the only thing I would add to that, Bill, is that, probably just to elaborate a little bit more in terms of our growth patterns. We are actively recognizing that there is a lot of activity beyond just wealth. Clearly, that's where we have invested heavily over the course last two to four years since we have owned the Yodlee asset and we have done, frankly we have made a lot of stride and progress in getting and bringing to market for the financial advisor universe that we support tools and outputs that helps them manage their more effectively.
But areas where we have been not as active have been in credit and payments and in analytics. And those areas, we are recognizing that there is a substantial amount of opportunity. So from that standpoint, I am going to add on to what Bill said about professional services. We have been very, over the course of our deployment with a lot of our clients, working with a of large financial institutions, our models have been very heavy on the profession subscription-based to professional support-based model to go into those firms and kind of customize those offers for those firms as the marketplace as it's shifting more to working with other clients that are outside of the traditional financial services environment with FinTech firms who want the ability to do it themselves.
We have deployed and are deploying tools for them and we are trying to capture more market share. So from that standpoint, we are seeing a bit of a shift, if you will, in the ecosystem because if a FinTech is offering and we are being more opportunistic to grab more market share, if you will, with a lot of those firms. So that's part of what is offsetting, if you will or I guess, probably putting some pressure on our revenue growth rates, we are trying to recognize more market coverage, if you will, in some of the deals we are putting today. That's probably the other element that I would add to what Bill just mentioned in terms of our growth rates are, at least, in 2020.
And one of the things that Stuart and I are both very encouraged by the progress we made in that developers platform and how we will be able to, where we will compete in that FinTech space. And so that's all that out there in the future, Chris. So as we look at the year, we realize we have got a sales cycle, we have got an adoption cycle and then you know that will help to restore our growth rates as we are successful in deploying that.
Okay. Thanks. And then maybe lastly, just on that same topic with Yodlee, sort of going back one of the prior questions. But what do you feel are the main benefits of owning Yodlee for the wealth business specifically? And do you see those changing? And the reason I ask now is with Visa owning Plaid, I would think there would be more of an accelerated move towards KPIs and away from screen scraping. So maybe there is going to less need down the road for all the data scrubbing and all the work that it takes to get the data clean? So any comments there would be great.
Yes. And I think that's kind of a two-fold. Because I do think the reconciliation and data cleanup, all that process that we do has extraordinary value. And that we have levered the Envestnet chassis and platform to bring investment accounts reconciliation rates on aggregated data from the 60%-something up to the mid-90%. And that is competitively differentiated and very advantaged as look at the work we have done to optimize the wealth environment. And so again that work has been done and we are leveraging the Envestnet infrastructure to do that reconciliation. All of that then, all that data then sits in cloud based services that can then be utilized through micro services and APIs to be pumped out to different applications.
Let's use an example of an announcement that we made at Schwab's IMPACT conference last fall in which we are taking the Yodlee dataset through the Envestnet platform, highly reconciled into FinApps. Those FinApps are part of now the MoneyGuide ecosystem and delivered to our client. So that's a great example of how that ecosystem or process is working and optimized absolutely in the wealth business. As we continue to look at other opportunities for our data business is notable that we announced our partnership with Equifax last quarter from a credit standpoint. And Stuart and I and the team continue to evaluate other partnerships that are available to the Yodlee business.
But Stuart, I don't know if you want to add any color or any other comments to that?
I don't think I have much to add as well. I think you covered all those relationships.
Okay. Good.
All right. Thank you.
Thanks Chris.
And we will now take our next question from Chris Donat at Piper Sandler. Please go ahead.
Good afternoon. Thanks for taking my questions. I wanted to ask another one around the Yodlee business, Bill. When you mentioned what the agreement with JPMorgan, the bilateral agreement, do you expect to do other bilateral agreements? I guess two-part question. One is, can you give us sort of the historical context because I think that JPMorgan years ago was being somewhat critical of third-party data aggregators and it seems like you, I don't know if you persuaded them, but can you give us sort of a sense of what's changed over time? And then just let us know if there is any financial implications from these kind of bilateral agreements? Does it change anything? I think I heard that you expect data and analytic to grow sort of mid single digits. But anyway, I am just wondering if there is any implication on the financial side from them?
No. And Chris, it's a great question and I think it's an important question because the way the data will be collected and then utilized by financial institutions, we believe, is going to change materially. So I think that the JPMorgan announcement is very progressive around data use. And so I think, again, it's a validation of the Yodlee platform and our ability to create the unilateral kind of connectivity to JPMorgan and serve that data in a way that's protected and use from a privacy standpoint that are close to the standards that JPMorgan, the high standards that JPMorgan has. I believe, again, it is and they have been very exclusive, JPMorgan, about account aggregation and to the point, I believe, Jamie Dimon announced in the last earnings update that they are turn off aggregators at some point in 2020. So this is the beginning of a new highway system that is going to connect all financial institutions with data providers and really enable a new ecosystem for the way data is utilized by firms. And so there are other firms that in that same process. But again, I think it's notable and important that JPMorgan has been a leader here.
Stuart, any update or comment about that?
Yes. I would add a couple of things. First of all, we do have several and over dozen other agreements, like agreements that are literally in sights and where we actually took a finish line here. And we will announcing some of those over the course of next several months. But a lot of this, from a trend standpoint, is really driven by some factors in the marketplace.
The biggest one of which, we, Yodlee, are the only data aggregator in this space truly regulated, who is regulated, period, end of sentence. We have substantial regulatory bodies, federal, who monitor our actions and what we do in terms of privacy and security. We are aligned with the financial institutions, primarily large banks. In that regard, we have 200 audits on an annual basis against our platforms and systems, from a security and privacy perspective, both at the federal level, state level and then with the individual institutions that we partner with. So we are in the aligned ecosystem, if you will, in that sense because the movement of data and all the elements that go into this, I would make that as a real core point of, we know from our conversations with financial institutions and they look at us, they look at us a partner in that sense. And so that's one element.
I think another aspect I would call out is, our reach, our simple reach because we have been in the marketplace for over 20 years and by the way, I should come back and say, what we have been doing from being regulated isn't a new occurrence. We have been, when Bill and the founders of this business built the business, they crossed that threshold years ago and we have been in this environment for quite some time. But for the last 20 years or so as we have kind of been working and adapting the team and building out our ecosystem, when you heard Bill talk earlier, we have got 21,000-plus different interfaces both from large and small and medium sized institutions, many of who have capabilities to have automated APIs for us to access data. There are many who don't. They don't have the infrastructure. So they look at us as being, if you will, to partner with them in that context as well. So that's part of the reason why the financial institutions are migrating and gravitating towards us as well.
And then the last thing I would say is, aggregation is certainly key. It's a critical element for our financial institution partners and they recognized the value of that. But because of the legacy of the organization, the things we have been able to add to aggregation, the value-added components that we built in terms of having a platform that these financial institutions can use to manage their world and own consumer relationships is a critical element and that has come over a very long period of time. So we have added the ability to enrich the data that we get and then create analytics and tools and help manage the institutions to serve their customers better.
So I would say that those are the components that really are kind of bomb that Chase and others are gravitating and embracing with us. And the answer to the last part of your question, does it impact the economics? There aren't different terms, per se, but there is a broader use case. I would probably say it puts in, we are getting more deeply integrated into the banks and more broadly deployed in these banks because we are going from the retail side to the institution side. So there is lots of different pockets that we are working with a lot of the large banks. So the unit economics aren't changing as much as the reach within the institution are changing, which are giving us more upside. That's how I would answer the question.
Got it. Thanks very much Stuart. And at the risk of asking the questions that I don't think you can answer, I will try it anyway.
Sure.
You guys were singled out by two senators and a member of Congress for asking for a Federal Trade Commission investigation. Is there anything you can say on that one? Or I don't know how to put it --
Yes. Chris, you know, we obviously received a letter and been very responsive to lawmakers and the commission with any questions that they have. And most of those questions are centered around the terms and conditions, the understanding of the consumer as that data is being utilized. And as a B2B provider, it's really up to us to ensure that our customers have the proper terms and conditions and they have a pretty comprehensive process and understanding how are terms and conditions that are being published to those consumers. So again, they are having a conversation with lawmakers about that.
The others issue has to do with identification of an individual data. And really what we do is the data is de-identified. So it goes from personal data to non-personal data and we built the de-identification process. And in the regulation or oversight of data, from a national standpoint, there isn't a single standard. And what Envestnet has done is, we are complying with what we believe and I think many believe is the most aggressive standard in the United States and that's the California Consumer Privacy Act, CCPA, which we just instituted here at the end of the year on protecting an individual's data and identification. So we are having engaged conversation with Washington. I think there is lots of education that goes into it. I think at the end of the day, it's good to be having these conversations. I think that it's good to be driving towards a standard. I think that standards will help the industry and standards will certainly help the consumer. And that's something we are continuing to push and advocate for.
Got it. Thanks very much Bill and Stuart.
[Operator Instructions]. We will take our next question from David Grossman at Stifel. Please go ahead.
Thank you. Good afternoon. So I think you have answered to certain extent most of the questions I have. But just getting back to Yodlee, perhaps you could just anchor all of this. You have talked about a lot of tailwind starting that business but also some headwinds. And I am just trying to get my head around, when the growth rate of that business should normalize and the timing of when some these factors either roll off or start to accelerate the growth of that business?
Sure David. Good to speak with you. So as we began to indicate, I guess this was mid-year last year, it was Jud who indicated that we are going to face some headwinds. And again it's in that data and analytics business. I will ask Stuart to update on some of the innovative things we are beginning to develop there. We had some regulation coming through our European business in the U.K. and then it was a business decision to reduce our use of professional services and are implementing to large financial institutions. When you take those, they really created a strain on our overall growth rate. What we have done, David, since then is we published our developers portal for the FinTech space. We are putting in place these agreements with large financial institutions. The JPMorgan Chase is a good example of that. We are making progress that again Stuart will speak to you on the analytic front. We are integrating more deeply and improving our reconciliation rate of aggregated data in the wealth market. So I think all of those things begin to concentrate Yodlee in a way that we will have resumed strong growth in that business. But it required environment, couple of environmental things that were occurring and a couple of business decisions that we made to make sure that it was the long term grower there.
Stuart?
Actually before Stuart kind of adds his comments, Bill, when you roll all that up, when doe some of those headwinds diminish enough that some of these growth initiatives start to supersede then that we would a more normalized growth rate? And what is the normalized growth rate in view, when all this stuff settles out?
So I think in our guidance, we are indicating low single growth in 2020 for subscription in the Yodlee business. So we think this is a year of kind of working through. And towards the back half of the year, we are anticipating that we are going to begin to get some traction. We are also going to see our relationship with Equifax begin to kind of gain traction toward the latter part of the year. So David, I think this is a 2020 story. I think that the work that we are doing positions our data business to help the growth rate that contributes to the overall objectives that Envestnet has to maintain, be a strong grower, ahead of our peers as the business that we are.
And again, Stuart, you can elaborate and kind of be more specific than I am.
Yes. I would just say, on your question, I see that part of the headwinds and maybe headwinds isn't the right word to use but we never really set that bar, so to speak. The headwinds I would probably characterize more in terms of the business that we have which we call analytics which is where we have more of the headwinds. We are seeing more opportunity and tailwind in the sense of gaining more adoption of our solution and feel that bit of a bottleneck for us to gain that adoption has been the fact have not had the platform which enable FinTech companies specifically to easily integrate our application into whatever offering that they want to deliver.
We refer to this phrase we use, the developer experience, which is a set of intelligent APIs that any firm can use to deploy their platform whether it's payments, credits, wealth or otherwise. So that has really been in my view, a bit of a bottleneck for us to get to that. And as I mentioned on our last quarter's call, we were behind because I would honestly tell you in full candor what we have learned from Plaid is that they were able to, here is a bad analogy, if you will, but I will use it anyway, we at Yodlee have been working with a lot of large banks primarily over the course of last 20 years and in building those relationships and delivering the service, we were working on 1G, if you will, for lack of better term, really in technology.
But Plaid was able to come to marketplace with a 5G solution which really was a bit more modern platform. And we have adopted, if you will and we watched and saw what they have done. So we have adopted and modified our platform to frankly not only mimic but we believe in certain areas certainly in wealth, revolving credit, we believe that we have a solution that's in place. It's going to be more impactful for the clients that are in those particular channels. So I would say that having been behind the eight ball for the last 12 to 15 months is Plaid has really kind of planted themselves in the payments space primarily as having the market share and that grew to a much more modern technology.
We believe that we knew we had to make up some room and we made up that room. So I think that we are now at the breaking through that bottleneck. So that's a long way of telling you that we think that we are at the position now and over the course of, I would say, 18 to 27 months, as we get more distribution and capture more market share, not only in our traditional wealth space, but also in credits, payments, conversation AI and other channels, if you will, we think that we are further adoption.
And I would also say that we believe that a normalized growth rate looks more like a double digit growth rate. It's probably a low double digit growth rate. As to when we get there, I am not going to forecast as to when that will be because a lot of that is going to be how the market matures. That's how we see things when we play things up over the long term.
In terms of answering deal specific question, we are doing a lot of things obviously on wealth side. I won't bore you with that because I think everyone on the phone is well aware what we are doing in wealth. But I am really interested in what we are doing outside of the wealth channel and the wealth segment by taking some components such as the blocks capabilities through our acquisition of MoneyGuide as well as some of the analytics that we are building to supplement the blocks capabilities for a lot of the retail banks and other non-wealth management firms that are using those tools.
And we are creating some really very effective dashboards so that a non-traditional financial advisor can support end consumer to give them insights into their spending habits, their spending pattern, to help them understand as they get raises, where should they putting the incremental dollars that they have as credits gets more challenging for them where there are better opportunities for them to get better decisions from a credit perspective, whether that's on a retail credit perspective or mortgage or otherwise, insurance capabilities and frankly what's yet to come but there are opportunities for us to kind of bridge, if you will or bridge into capabilities for insurance offerings, whether that's health perspective or life perspective.
And you are aware of what we are doing around the insurance exchange. But we see an ability to advance, if you will, for what we call next best action for consumer to get insights into their daily personal life to understand that regardless where they are an the economic ecosystem, whether they are starting out their careers and they don't have a lot of money or they have a lot of money and they are looking for an Envestnet advisor, we believe we are working with non-traditional wealth firms who are leveraging our technology that we can provide through technology insights that gives them analytics to help them make better decisions. And those are the areas where I think that we can supplement in a meaningful way what we are doing in wealth ultimately to drive more consumers into the wealth channel to help advisors have more access to more potential investors and more clients themselves. So I will leave it at there.
Very useful insight. Thanks very much for that and that explanation. I just have one follow-up. So in the context of you kind of getting back to an equilibrium, is it more the platform from a technology standpoint has to get there? Or is the gating item right now really more what you said, I think you said channels and market awareness. So I just want to make sure I understand, so distinguishing between kind of where the gating factory is near term, if you will?
Bill, I will take that. To answer you question, the gating factor for us was the platform. Yodlee was built by working with some large financial banks and financial institutions primarily. We worked with the one of them who had a heavy professional services implementation. And that kind of, it was just a slow roll, for lack of a better term. So the platform was what we needed to enhance it and evolve. So that was the bottleneck that we have addressed.
Okay. But going forward, I think was the question, Stuart. So you feel like you have got the platform where you want it now, if I am understanding you correctly. And the gating factor to be accelerating is really more market awareness and distribution, if I heard you right.
Yes.
Yes. All right. Fair point. Thank you very much.
Yes. Good questions. Thank you David.
We will take our next question from Patrick O'Shaughnessy at Raymond James. Please go ahead.
Hi Good afternoon. So Pete, the guide for asset-based cost of revenues suggests that's going to tick up a decent amount in the first quarter of 2020 relative to the last quarter of 2019. Can you talk about what's going on there? Is revenue share to the third-party management is increasing? What's kind of driving that increase?
As a percentage of the total, I don't think it's changing all that dramatically. But I think the increase [indiscernible], right.
Okay. Maybe I will follow-up with you after the call. And then we have obviously spent a lot of time talking about the data and analytics segment for obvious reasons. But wealth is still obviously pretty important to the company. So a question on that side. Can you talk about the credit and insurance exchanges that you have launched and now you have a couple of quarters under your belt? How are you thinking about the long term revenue opportunity in these areas and the timeline to realize that opportunity?
Thanks Patrick. I hope you are doing well. We are excited about it. And there are a couple of elements that I think are important to recognize. One is that these are pretty comprehensive platforms. They are not just product shelves where advisor is able to pick a solution off a shelf and put in a proposal. They are actually tied back into the insurers and the banks that help us execute on these transactions.
We are really optimizing the ability for advisory growth and plan to execution of the plan, have the product choice and then go transact it and have all data come back up so that we can do a comprehensive planning. So the elements of revenue are to keep an eye on would be the solution providers themselves are providing license fees to be part of our universe of solution. We are doing a rev share as we hit certain sale on many of those solutions, especially on the security backed lending program and then firms, advisor will have a service fee, from a platform standpoint, to have access to these solutions.
So Patrick, they are well thought out, they are very comprehensive components. Think of them each as a platform for that individual product suite, insurance credit and with the adoption, I highlighted advisory firms are beginning to utilize these solution and they have a growing network of solution providers.
I neglected to add that on the credit exchange, we are probably going to pursue a second syndicate of banks. We currently have four banks in the first syndicate. There would be other banks that would be part of it based on needs and feedback from our clients to where they see the opportunities and the profile of banks that we are working with. So we see these as instrumental for the future of this unified advice engine.
The other thing to realize is that it is not an insignificant workload and it's not an insignificant kind of investment of time and resources to build these things. And so, in my mind, they offer a very distinct competitive advantage for Envestnet today. The fact that these platforms are integrated into the Envestnet platform and sit under the market leading financial planning engine and how all those pieces are connected, I think is very competitively advantaged.
Great. Thank you.
Thanks Patrick.
All right. We will now take our last question from Will Cuddy at JPMorgan.
Thanks for the follow-up. I know it is early but could you give just a little bit more on the advisory services exchange? First, could you maybe talk us through a little bit more about the rationale in the minority investment in Dynasty? And second, are there more opportunities for Envestnet to pursue partnerships and relationships like this with RIA firms and wealth management firms?
Yes. Thanks Will. It's a great question. It's something that we are super excited about. And look, I think we have chosen great partner. It's a team that we respected for a long period of time, Shirl Penney, Edward Swenson, who run Dynasty, I think understand this space and their ability to recruit top advisors at a very established infrastructure and bring them to independent environment has really been extraordinary and that important work that they have done. And so we recognize that. And we believe that not only it is a transition of an advisor, say, from a captive environment to the RIA marketplace itself is seeking to network, to acquire, to merge and to grow, both organically and inorganically.
We believe that traditionally the Envestnet platform has been a great tremendous organic growth engine for RIA. We have helped them reduce cost to maintaining, help them to be more compliant and giving the technology and the tools and service support to help them engage their clients at a new level and you can see their asset values and the number of clients grow, the longer that they are on the Envestnet platform. So we help them provide advice with the advisor service exchange which helps them to grow their business. And we are doing that again in helping RIA firms who are very interested utilizing capital to merge with other firms or to make investment to really help their businesses grow, we are providing a suite of business analytics tool.
We are also providing as part of the service exchange, we will ultimately provide outsourced access to CFO services and also some marketing services. As I look at it, it isn't really exclusive to the RIA market but that's an obvious place for our advisor services exchange. More and more, our broker-dealer partners as well are very interested in this thing and they are interested in setting up environment for their top advisors who have the ability to network and grow outside of their firms by making acquisitions and folding into their teams. And so the advisor service exchange really is an enabler of that. And I believe, again, it helps our clients, broker-dealers, banks as well as RIA grow. We do it from a technology and advice standpoint and now we are doing it from a business standpoint.
Got it. Thank you Bill.
Thank you Will.
This concludes today's question-and-answer session. I will now turn the conference over to Bill Crager for any additional or closing comments. Please go ahead.
Thank you very much everybody. We really appreciate you joining this afternoon and we really appreciate your support of Envestnet and we are looking forward to speaking to you in the next quarter. So thank you and I hope everybody has a good evening.
This now concludes today's call. Thank you for your participation. You may disconnect