BlackRock the world’s biggest fund manager, is buying FutureAdvisor, a company that develops robo-adviser technology, for between $150-$200 million.
FutureAdvisor is reported to have $600 million in assets under management. Among its investors are Sequoia Capital, Canvas Venture Fund, Devonshire Investors, the private investment arm of the owners of Fidelity.
Robo-advisers create automated investment portfolios for clients by asking them a series of questions about their income, investment ambitions and tax situation. FutureAdvisor was set up in San Fransisco five years ago by two ex-Microsoft engineers.
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Having automated advice removes the costs associated with face-to-face contact, and the technology is increasingly being adopted by financial advice and brokerage firms that want to attract a wider range of customers. Last year, Fidelity took part in a similar deal with Betterment.
BlackRock hopes the move will make financial advice more appealing for those with smaller portfolios, currently put off by the high cost of hiring a broker.
The purchase is expected to go ahead in the fourth quarter of 2015.
About four month ago, In May, Larry Fink, BlackRock chief executive, told an audience at the Bernstein Strategic Decisions Conference in New York :
“Robo-advisers would soon become an investment option all major firms would have to offer.
Everyone talks about how robo-advisers can’t connect with clients. I actually believe those kinds of tools are like an ATM machine. We are all going to have to have it.”
Larry Fink
