What does disruption mean for asset managers?
MARY-CATHERINE LADER: The technology transformation going on today has profound implications that we believe could be very positive for investors and for asset managers. There’s a huge opportunity for us as managers to harness the power of this technology. One component is artificial intelligence, machine learning and techniques that allow us to harness the explosion of data in today’s world, create new investment products and make operations that much more efficient. It also enables us to really help our clients better understand their portfolios and scale.
But at the core, we really believe that machine learning, whether it’s in investing, operations or distribution, accelerates human learning. It makes the human engagement that a portfolio manager has more effective. It means being sure that they can ask the same classical, fundamental questions, but perhaps have better answers for [their clients].
What are advisors' greatest needs?
The desire to have broader access to portfolio construction tools; to have a shared language of portfolio construction with financial advisors. So one thing that we’re thinking a lot about is: how do we bring some of these capabilities to more and more advisors? We want to make sure that as the financial advisors’ desktop gets more crowded, we can help simplify it. We can help make sure that client engagement tools link to your portfolio construction experience and link to an ongoing ability to answer the most important question for an end client, which is, ‘How am I doing?’
What is BlackRock working toward within wealth management?
One effort is trying to offer an end-to-end platform to advisors. The other is developing lightweight capabilities that can fit into the lives of advisors and wealth management professionals who may not want to adopt end-to-end technology in their practice.
We acquired Future Advisor and believe that digital advice is here to stay. We’re still in the early innings but we’ve seen enormous progress in being able to partner with our wealth management clients and help their advisors build their practices and skills through digital advice. That’s one element.
Another element has been offering portfolio construction tools to advisors through Advisor Center, so they can quickly perform stress tests and do scenario analysis on portfolios for their clients and generate a report.
The third is partnerships with a number of companies that we think are at the forefront of helping further democratize investing. So that’s iCapital in the case of democratizing access to alternative investment. That’s Acorns, which is reaching up-and-coming investors using behavioral economics and science to drive better financial behaviors. [This applies to our] investment in Scalable Capital in Europe as well.
Can you elaborate on BlackRock’s development of its advisor-facing tools?
We have several products. Future Advisor, Advisor Center and iRetire, which allows advisors to have a retirement planning conversation with their client. What we’re focused on is bringing those pieces together and making sure they meet advisors where they already are.
The advisor technology experience can certainly continue to improve and become more connected. As a retirement planning experience, iRetire previously was for users 50 and older; now it’s available to those 40 and older as we’ve broadened the range of model portfolios that it supports. In the case of Advisor Center, we’ve made it open architecture, so it’s not just BlackRock products or model portfolios. We’ve recognized that to get real adoption of these tools and to provide value to advisors, you need to be able to answer the range of questions and provide a broader access to your investment products.
What has been the response to these tools?
With Future Advisor, we’ve been oversubscribed and we expect to continue to be. We have seen an evolution in what advisors think of when they think of digital advice. It’s about empowering the advisor and facilitating a better conversation between them and their clients — allowing them to have ongoing engagement and manage the investors’ journey. It’s really become an enabler for advisors, rather than what may have been perceived as a threat several years ago.
That has been our thesis from the outset — that better investing is a close integration of the in-person experience with technology.
BlackRock acquired Future Advisor and recently invested in Acorns. Are other fintech acquisitions or investments in the works?
We’re always evaluating acquisitions, minority investments and strategic partnerships. Our focus is figuring out what our clients need next. We saw a real need to simplify the process for investing in alternative asset classes. That’s what made us interested in iCapital two years ago. We have partnered with them in growing their business and really working with our clients to understand what clients need for that digital investment in alternatives. We help drive the development of the company and our clients’ opportunity to engage with them as a result.
That was the case with Acorns as well. We are a minority investor, but we saw an opportunity and a need from our clients to understand, how could they incentivize more saving? How could they better communicate with clients about where they stood? There was a need for this kind of engagement with end investors beyond just the portfolio construction experience, and to understand the behaviors of a younger generation. That’s what we’re working with Acorns on.
How is that relationship changing BlackRock’s offerings?
Broadly there was enthusiasm and recognition from our clients that this made sense for us as a strategic investment and partnership. But it’s not changing our offerings. We’re committed to building solutions for wealth management firms and banks. We were doing that prior to our investment in Acorns. We’re doing that now. We’re not co-creating with Acorns. We’re an investor. That’s not the nature of our relationship with them and we recognize that we are going after slightly different users. We closely work together on portfolio construction and we are an active participant as an observer on their board. But we are focused on driving the right investing behaviors, irrespective of what others are doing.
Is it getting hard for firms to differentiate their value in the market now?
What’s so interesting about the question is that technology is critical to differentiating value today. That means being able to deliver innovative investment products, to do it faster and cheaper through innovation and operations, and to deliver it through digital experiences that meet our expectations as consumers today. That’s why we find our clients are increasingly looking for an asset management partner and a technology partner who can help them navigate this time at scale.
