As BlackRock becomes the latest provider to buy a robo-adviser, the Association of Professional Advisers admits robo-advice is more suited to investment advice and that it is harder to do broader holistic financial planning with robo-advice.
“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”. The financial terms of the deal has not been revealed.
It will link to BlackRock’s multi-asset model portfolios and investment products but will also be able to recommend other products.
It will operate as a business unit within BlackRock Solutions (BRS), the firm’s investment and risk management platform, and will provide financial institutions with high quality, technology-enabled advice capabilities to improve their clients’ investment experience.
Since its founding in 2010, FutureAdvisors has raised $21 million in financing from investors including Sequoia Capital and Y Combinator. “I have two 20-something boys and I don’t know, in an age of texts and chat, that they are going to sit down with a financial adviser”. Big banks like Chase, UBS and Wells Fargo are possibilities, but they can afford to start their own automated advisory services to integrate with their current platforms, says Alois Pirker, research director at Aite Group, a research and consulting company that focuses on wealth management.
The deal, expected to close in the fourth quarter, reflects Wall Street’s established players buying their way into robo-advisory services that are popular with millennials and those with less than the $1 million minimum often required by traditional money managers. But BlackRock is most interested in selling FutureAdvisor’s automated advisory services to the banks, securities firms and insurance companies that are customers of BlackRock Solutions. “We are all going to have to have it”. FutureAdvisor now manages $600m in assets compared with more than $2bn each by Betterment and Wealthfront.