FutureAdvisor says it will continue to serve existing clients with no fee changes.
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“As demand for digital wealth management grows, we believe that our combined offering will accelerate our partner firms’ abilities to serve the mass affluent in a convenient, scalable way”, said Tom Fortin, BlackRock’s head of retail technology.
BlackRock, the world’s largest asset manager, just made an unusual purchase: a startup called FutureAdvisor, which offers low-priced, algorithm-based automated portfolio management.
The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2015.
FutureAdvisor CEO Bo Lu said that the company will continue to offer identical products to users after acquisition, as it now offers free and paid products.
Through the acquisition, FutureAdvisor will keep its brand and be part of BlackRock Solutions, the firm’s risk management and technology platform.
The move marks another progressive step in BlackRock’s efforts to enter the robo-advice space and gives credence to claims that robo-advisers pose a threat to the traditional wealth management industry.
“BlackRock Solutions has a history of offering technology and advisory services to a broad range of institutions”. Wealthfront and Betterment are two major young competitors, while giant Charles Schwab launched its own service to compete with the upstarts earlier this year. “More offerings will be available to advisors, but advisors have to adapt to those strategies”.
The acquisition comes on the back of recent initiatives from BlackRock in Europe, including partnerships with IG Group in the UK and InvestBanca in Italy to create ETF model portfolios.
“The days are numbered for $1 million asset minimums and working only for high-net-worth individuals”, Winterberg said.
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Porcelli continued to say that “wherever the advice market goes, BlackRock wants to be there, and one thing we know is that five and 10 years from now, there will be more people using digital advice platforms than do today”.
