BlackRock sells FutureAdvisor robo biz to Ritholtz Wealth Management: Wealthtech Weekly

March 1, 2023 4:49 PM

There's another sudden shift in the world of robo-advice.

This week, officials from BlackRock and Ritholtz Wealth Management announced that the former's FutureAdvisor direct-to-consumer business would be changing hands later this year.

Details of what will become the New York-based Ritholtz Wealth Management's first acquisition have not been disclosed, but both sides say the clients will continue to be served at their new home.

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FutureAdvisor, the robo-advisor that BlackRock made a $152 million deal to scoop up in 2015, had amassed client assets of $1.7 billion and more than 30,000 accounts as of last spring, according to a Form ADV filing dated April 2022.

"We are proud of having served FutureAdvisor clients over the last eight years and are confident that Ritholtz, a national, multi-billion-dollar wealth management firm, has the ability to meet the demands of clients seeking digital solutions for their investing needs," said a statement provided to Financial Planning by a BlackRock company spokesperson. "BlackRock will continue to serve wealth management firms with our Aladdin Wealth technology offerings."

Officials from Ritholtz, which managed more than $2.8 billion in client assets as of November 2022,said things will be business as usual for FutureAdvisor clients as the direct-to-retail business makes the transition.

"Ritholtz expects that FutureAdvisor clients will seamlessly transition to Ritholtz, where they'll receive access to dedicated goals-based financial planning and cutting-edge technology," a Ritholtz company spokesperson said. "Ritholtz advisors and support staff are looking forward to helping them achieve success in all aspects of their financial lives."

David Goldstone, the manager of investment research at Condor Capital Wealth Management, which publishes the annual of the Robo Report and Robo Ranking, told Financial Planning that FutureAdvisor initially pivoted to a B2B robo advice provider years ago, noting that U.S. Bank's automated investor was launched through a partnership with FutureAdvisor in 2016.

For Goldstone, the sale signals that robos lacking more in-depth services may not be cut out for the current market environment.

"FutureAdvisor abandoning direct-to-retail is another sign that stand-alone robo advice products have proved to be a difficult business model," Goldstone said. "Servicing small accounts with rock-bottom fees is difficult to make profitable, even when most of the servicing, advice, and trading are automated."

He added that FutureAdvisor suffered from the same problem many robo advisors have: Costs to acquire customers have been persistently high across the industry.

"And with razor-thin profit margins, it has been difficult for robos to attract enough clients and assets to achieve attractive profits," Goldstone said. "The direct-to-retail product at FutureAdvisor has long languished after the acquisition by BlackRock, and there have been few, if any, product improvements in the past few years."

The FutureAdvisor sale is the second major happening in the world of robo advice to break during Black History Month. Just two weeks prior, Betterment announced that it would be laying off 28 employees and closing its Philadelphia office.

A spokesperson for Betterment, the nation's largest independent robo-advisor, said the decision resulted from market volatility and record levels of inflation that caused operating costs to climb.

The spokesperson added that the company took steps to "adjust to the new economic reality" throughout 2022, including a reduction in spending and hiring.

Scroll down to get caught up on other recent fintech news you might have missed in our Wealthtech Weekly recap. And check out the previous edition here.

RBC Clearing & Custody taps Vestwell as exclusive small plan retirement provider

Vestwell, a New York-based recordkeeping company for employer-sponsored retirement plans, is now available to thousands of advisor clients of RBC Clearing & Custody.

The two sides announced the deal March 1, saying Vestwell aimed to deliver to RBC C&C advisors a platform to efficiently scale their retirement plan practice, customize their offerings and "give clients the experience they expect and deserve."

The partnership follows Vestwell closing 2022 by making a number of recordkeeping platform enhancements, including real-time payroll corrections and improvements to the saver experience.

"After the passing of SECURE 2.0, we've seen 401(k) solutions increasingly become a priority for small business owners across the United States. This demand, with the right platform in place, creates a natural pathway for our advisor clients to rapidly expand their wealth practices," Brett Thorne, President of RBC Clearing & Custody, said in a statement. "We're thrilled to exclusively use Vestwell as our 401(k) provider, as they are an innovative firm that shares our values of prioritizing the advisor experience.

"Our advisor clients are now able to customize their offerings, expand into the 401(k) segment, and meet the demand from small businesses that need their support today."

The underlying architecture of the 401(k) offering is powered by Vestwell's cloud-based digital recordkeeping platform.

Vestwell leaders said legacy technology stacks have become too costly and cumbersome for financial advisors to scale their businesses, especially in the small to mid-sized retirement plan market.

"We're seeing tremendous demand from U.S. business owners, which is greatly contributing to the growth in the 401(k) industry. There is a great opportunity for advisors to scale their businesses through an integrated workplace savings program," Aaron Schumm, Vestwell's founder and CEO of Vestwell, said in a statement. "We are excited to be the exclusive 401(k) provider of RBC Clearing & Custody and bring their thousands of advisors clients the ability to deliver a white-labeled offering that's right for them including modern interactions, real-time communications, and transparent costs."

Riskalyze partners with Opto Investments to expand Access to private market investment solutions

New York wealthtech startup Opto Investments continues its sprint since breaking out of stealth mode last fall, by securing another notable partnership. 

The firm, which specializes in providing financial advisors greater access to private market investments. has entered a partnership with portfolio risk assessment software firm Riskalyze.

RIAs using the Riskalyze growth platform now have access to exclusive private market investment opportunities to serve high net worth and ultrahigh net worth clients.

As a featured partner on Riskalyze's model marketplace, Opto will offer access investments spanning private credit, private equity, real estate, venture capital and infrastructure.

Riskalyze CEO Aaron Klein said the deal with Opto is consistent with his firm's mission of "empowering the world to invest fearlessly."

"Opto's unique servicing structure, fund partnerships, educational materials and high-touch service resonate with advisors seeking income and diversification outside of traditional stock/bond allocations," he said.

The partnership is another big move for Opto, which last fall had a$475 million valuation and Series A funding round that brought in $145 million with participation from 8VC, Michael Dell's MSD Capital, Clocktower Ventures, FinVC, HOF Capital and others.

Earlier this month, the firm announced that it was partnering with financial services operating firm Merchant Investment Management to provide its services to Merchant's network of more than 60 partner firms collectively managing more than $140 billion in assets in 30 states and across three countries.

Opto was co-founded in 2020 by Addepar, Palantir, and OpenGov founder Joe Lonsdale, and is led by CEO Mark Machi, n who was most recently CEO of the largest pension fund in Canada, CPP Investments.

"We're pleased to partner with Riskalyze. Together, we share a commitment to simplifying advisors' lives and helping them meet clients' needs," Lonsdale said in a statement. "Its growth platform is already helping firms win new business and retain clients, and we look forward to adding further value to those that are seeking new ways to preserve and grow client capital."

Software veteran makes the move from Amazon to Advisor360°

Advisor360° SVP Mat Mathews

Advisor360°

Weston, Massachusetts-based wealth management technology firm Advisor360° has a new face heading up its product management and user experience teams.

Mat Mathews has joined the organization as senior vice president of product. The enterprise software veteran was most recently general manager of the Amazon Web Services Transfer Family, where he oversaw all aspects of the managed secure file transfer service for AWS cloud customers.

In the past, Mathews was a vice president and general manager for Hewlett Packard Enterprise.

"We're excited to leverage Mat's deep expertise in software, data integration, e-commerce, and his overall experience working at Amazon Web Services, a company that has one of the best (software development life cycles) anywhere. He will play a critical role in helping our clients on their path to achieving digital transformation," said Advisor360° President Darren Tedesco. "His addition is another example of how Advisor360° is committed to being the best technology partner in the sector, bolstered by our unique combination of world-class enterprise software and wealth management industry expertise."

Earlier in his career, Mathews co-founded Plexxi, a software-defined networking start-up that was later sold to Hewlett Packard Enterprise. In addition, he held management positions in the technology enterprise space for companies such as Crossbeam Systems, Convergent Networks, Xylan and Bay Networks.

"I'm enthusiastic about the opportunity to build an enterprise software product team that defines and builds the world's best software for the wealth management industry," Mathews said in a statement. "I'm here to ensure that Advisor360° continues to make the advisor and home office more productive through better use of solutions that address specific business needs, such as seamless reporting or digital onboarding. I am passionate about building great teams and delivering great software to our clients."

Mathews' appointment continues a busy 2023 for Advisor360°' which started the year by closing its first-ever M&A deal. The firm acquired the digital technology and related wealth management assets of client onboarding automation software developer Agreement Express.

The deal includes the transfer of technology, intellectual property, clients and professionals from Agreement Express's wealth management business. The team that supports Agreement Express's existing wealth management business and clients will continue in their current roles at Advisor360°.