BlackRock to acquire FutureAdvisor
In a press release this morning, BlackRock, Inc., the world’s largest asset management firm by AUM (source: relbanks.com) announced it has entered into a definitive agreement to acquire FutureAdvisor. Terms of the acquisition were not disclosed.
Let’s hit some fast facts again, shall we:
- FutureAdvisor was founded in 2010 and had raised $21.5 million in four rounds (source)
- FutureAdvisor had a reported AUM of $600 million in June 2015 (source), though their most recent SEC Form ADV from September 2014 reflected $232 million. This lagged online automated investment leaders Wealthfront and Betterment by approximately $2 billion as of August 2015
- FutureAdvisor charged a Subscription Fee for the Premium Service of 50 basis points, making it more expensive than competitors Wealthfront and Betterment
- Assuming a 50 bps fee on all $600 million results in gross revenue run rate, at best, of $3 million (remember AUM of $232 benchmarked in September 2014)
What does this mean for advisers?
Not much. Really. Return to your business.
But here’s the thing. BlackRock is an asset manager. BlackRock does well when its asset base grows. How can the company continue to grow its assets?
One way is to offer a new, simple, and attractive way for investors to automatically add their assets to low-cost, broadly diversified portfolios of funds and ETFs.
Enter FutureAdvisor.
A bonus for BlackRock is if the company can find a way to invest those assets into BlackRock-managed products.
Say, iShares ETFs.
What to do now
You come to FPPad for ideas on what to do with the technology in your business. So here’s what I think you should do.
Number one: Offer your own online, user-friendly interface
If the world’s largest asset manager sees the need to add a low-cost user-friendly online asset allocation tool to its arsenal, isn’t it time you have one for your business?
Prospects are comparing your capabilities to the services they see from Wealthfront, Betterment, FutureAdvisor, et. al., and if you come up short and don’t have an answer to their slick platforms, you’re probably viewed as a laggard.
Number two: Tell clients what you really do
Automated investment management is a commodity.
Anyone can get it from Schwab, Wealthfront, Betterment, FutureAdvisor. You could argue that the first mutual funds were the earliest automated investment management solution!
Sure, tax loss harvesting, daily rebalancing, and instant deposits are bells and whistles for automated investment solutions, and the results of whether or not those features actually result in any additional money in customers’ pockets is highly dependent on each customers’ personal situation.
But for you, as an advisor, investment management is just ONE of the things you do. It’s not the ONLY thing you do.
You do SO MUCH MORE.
So let clients know.
Even better, let your prospects know how much more you do.
You’re not justifying the fees you charge, you are reinforcing the value you provide by giving clients the service they need in ALL areas of their financial life.
You go WAY BEYOND investment management.
So do that. Tell clients what you really do, and why what you do goes way beyond automated investment management.
