A new partnership between UBS and BlackRock will give the wirehouse's advisers access to a digital risk management system traditionally reserved for the asset manager’s institutional clients.
UBS will become the first U.S. advisory firm to analyze individual investors’ portfolios on BlackRock Solutions’ Aladdin Risk for Wealth Management platform, the two companies announced Monday. UBS Wealth Management Americas plans to begin the rollout this summer.
The partnership reflects the broader debate around passive and active investments, as well as new technologies forcing companies to compete by offering more types of products, according to Lex Sokolin, the global director of fintech strategy at Autonomous Research.
“Aladdin is a deep institutional system, and its delivery to financial advisers shows just how much technology is being democratized and customized for all sorts of new use-cases,” Sokolin says in an email.
FROM INSTITUTIONAL INVESTORS TO ADVISERS
Aladdin, with a staff of more than 1,000 developers and 800 analysts, boasts 25,000 investment managers worldwide as clients, according to BlackRock. The program uses factor-based analytics to assess the mix of stocks, bonds, mutual funds, ETFs, options and structured products in a portfolio.
The arrangement with UBS will place “some of the world’s most advanced technology, normally the domain of large institutional investors, into the hands of leading-edge home offices and financial advisers,” BlackRock COO Robert Goldstein said in a statement.
The two firms did not disclose the terms of the deal.
The two sides are merging the Aladdin platform onto the UBS dashboard in a way they say is aimed at allowing advisers to track the risks across individual clients’ portfolios. Advisers managing discretionary portfolios will get Aladdin first this summer, followed by more advisers and home office staff.
“Aladdin will enable our home-office to better understand the risks in client’s portfolios, and to enhance their guidance to advisors by deploying this sophisticated, multi-asset analytics engine,” Brian Hull, head of the UBS WMA Client Advisory Group, said in a statement.
RISK MANAGEMENT OVER RETURNS
UBS last made fintech waves earlier this year, buying an equity stake in fintech startup SigFig. Experts view the SigFig deal, which led UBS to launch an advisory technology and research lab, as a barometer on how robo advice has made the transition to more traditional firms from its early adopters.
Robo advisers’ success, along with the popularity of low-fee index funds, have altered firm’s approaches, according to Sokolin. More “institutional capability and smarter risk analytics” help UBS provide justification for its fees, he says.
“A more critical view would be that the mere impression of a more institutional offering would have a positive impact on brand and pricing power,” Sokolin says. “Showing sophistication on risk management is more believable these days than on expected investment returns.”
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