Further evidence that the use of robo-advice has gone mainstream: the recent acquisition of Future Advisor by BlackRock. What’s behind the decision? With just $600 million of assets, Future Advisor will hardly make a difference to the bottom line for BlackRock, which advises on $4.7 trillion.
While Future Advisor offered digital advice to consumers, BlackRock plans to integrate it into its risk management and investment platform to business partners like banks, insurers, BDs and other advisor firms at no additional cost, in order to build and solidify relationships.
For BlackRock, it was a buy-versus-build decision in an area of increased focus. The firm came to the same conclusion that Fidelity reached when it partnered with Betterment, that Northwestern Mutual realized when it bought Learnvest, and that drove Schwab and Vanguard to build their own robo-advisors.
BlackRock has emerged as a leader in the DCIO market by leveraging two of the biggest trends: the move to TDFs and low-cost passive strategies. Integrating robo-advice into their arsenal could further strengthen their relationships, not just with big teams but also with other plan advisors that may be looking for an automated solution for lower-balance accounts — accounts that will only become more difficult to serve if the final DOL fiduciary rule is promulgated as is.
