BlackRock To Buy FutureAdvisor

Chris Hannant, director general of the Association of Professional Advisers, told FTAdviser that robo-advice is most suited to narrow investment advice because it is easier to program a computer to design an asset allocation when it is given a risk profile. After all, financial advisory has always been a relationship-driven business that justifies its fees in part with high-touch services.

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. But rather than seeing it as an enemy or a nuisance, managers like Fidelity and Charles Schwab-and now BlackRock-have been adding robo-advising to their offerings.

Instead the firm hopes to use FutureAdvisor to enable banks, brokerage firms, insurers and 401(k) plans to use the company’s digital platform to serve mass affluent investors and millennials, Frank Porcelli, head of BlackRock’s U.S. wealth advisory unit, said in an interview.

The deal values the company between $150 million and $200 million according to The Financial Times. At the top of the list are Betterment LLC and Wealthfront Inc., each of which oversees about $2.6 billion for investors.

In May, Money Marketing revealed LV= was planning to launch an online retirement advice service.

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. 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.

Robo-advising seems to resonate with customers, even if advisors are still skeptical.

BlackRock, which has $4.7 trillion in assets under management, has been increasingly focused on technology. Among the advisors surveyed, 19% said “digital advice could complement” their service, while 27% thought robo-advising was “irrelevant” to them.