Acquisition of robo-adviser by BlackRock

Acquisition of robo-adviser by BlackRock

The future of automation is bright after news of robo-advisers being expected to invade the UK wealth management space last month and it has been reported this week that the world’s largest fund manager, BlackRock, has acquired robo-adviser FutureAdvisor.

The Financial Times highlights that the benefit of implementing a robo-adviser is that it is cheaper than a broker or financial adviser. It can also collate customer information in order to generate automated portfolios with investment goal, income and tax situation data.

Valuing at between $150 million and $200 million, FutureAdvisor will merge into BlackRock Solutions which will begin to sell products to brokers and financial advisers, according to the FT. This arm of BlackRock is separate from the company’s $4.7 trillion asset management business.

The acquisition comes at a time when financial advice is a hotly debated topic due to the increase in regulation and as we move into a future where UK and US millennials find it easier to use smartphone applications rather than consult an adviser.

Head of BlackRock’s US wealth advisory unit, Frank Porcelli, has the similar attitude. “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. They might prefer digital advice,” Porcelli said as quoted in the FT.

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.

This is a new way that tech companies are providing asset allocation advice as FutureAdvisor does, and the company was founded in 2010 by two former Microsoft engineers Bo Lu and Jon Xu at the Y Combinator start-up programme in San Francisco.

The company also mentioned that FutureAdvisor will remain as an “open architecture” platform.