Big news today that BlackRock, which looks after more money than you can POSSIBLY IMAGINE, has bought the robo-adviser (and I might be sitting in New York but Iâm still going to spell âadviserâ correctly) FutureAdvisor for an undisclosed sum which the FT reckons is between $150m and $200m.
OK, so a takeover, no biggie. Robos are big news here and everyone gets it. Theyâre massive and a world away from what we have in the UK.
Ah, but wait. FutureAdvisor currently hasâ¦$235m on its platform. Thatâs about Â£150m. And itâs just sold for (if the FT is right) about Â£125m. Â£150m AUA, Â£125m purchase price.
Well now. If weâre now valuing advice businesses at 83p on the pound then I know a lot of advisers who are going to start getting very excited. Stick âroboâ on the front of your firm, rename it to something funky with a capital letter halfway through, and boom! Riches result.
Except, of course, thatâs not quite whatâs going on. For a start, FutureAdvisor has built a bunch of its own technology, so BlackRock is buying intellectual property rather than assets (it has plenty of those already). How do you value (relatively) early-stage businesses in a sector which is as hot as fintech? Generously, it appears.
(Just a point â a number of adviser firms are starting to offer âroboâ type propositions in the UK, which are powered by third-party technologies such as Parmenionâs Interact simplified advice system. Just so weâre clear, the big valuations are for those whoâve developed the tech, not for those whoâre licensing it and using it. Sorry.)
Second, the story here is that brand matters. We know this from Schwab, who launched its âIntelligent Portfoliosâ in March, and now has over $3bn AUA. Was some of that rewritten from Schwabâs own book? Sure. But who cares? That’s $3bn since March. March. Even Betterment, the robo AUA leader, only has $2.5bn to show for a good couple of years effort.
Vanguardâs Personal Advisor Services is a hybrid service, and has $21bn on it. In May, according to Ali Malito of Investment News, that stood at $17bn with $7bn of that being new money. Put in GBP, thatâs Â£13.5bn. Vanguardâs been at this for about 5 months officially, and has taken $4bn during that time. In the 2 year pilot preceding that, it took $7bn of new money.
So BlackRock is coming to the party, on the bet that a nice system (and FutureAdvisor does look nice) added to its very powerful brand, will quickly add billions to its AUA. Donât forget as well that over here there has been no RDR and no PS13/1, so asset managers and platforms have lots and lots of ways to generate margin from what it is that they do.
Itâs getting exciting, sports fans. Coming up soon â âis the fintech bubble about to burst?â storiesâ¦