BlackRock’s FutureAdvisor Sale May Boost ETFs

BlackRock Inc.’s decision to sell its roboadvisor arm may provide a boost to the exchange-traded fund industry thanks to ETFs’ liquidity and cost features that make them a natural fit for computerized advisor platforms, a certified financial planner said.  

“Robo-advisor technologies—especially the rebalancing and tax-loss harvesting features—are dependent on the intraday liquidity and low transaction costs offered by the ETF structure,” Craig Toberman, founder of Toberman Wealth Management in St. Louis, told ETF.com in an email.  

New York-based BlackRock, whose iShares unit is the biggest issuer of ETFs, is selling its FutureAdvisor business to Ritholtz Wealth Management, the companies announced this week. FutureAdvisor will close its retail-facing business and transfer all clients to New York-based Ritholtz, which was founded by financial blogger and author Barry Ritholtz. 

The sale price of the advisor unit wasn’t disclosed. 

FutureAdvisor may fit well at Ritholtz, which sells through a complex, effective marketing arm that includes podcasts and social media generating customers and leads, Toberman said. Ritholtz has 22 dedicated financial planners and manages more than $2.9 billion in assets under management, according to InvestmentNews.    

“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,” the firm said in a statement. 

FutureAdvisor was purchased by BlackRock in 2015 for more than $150 million, when it had $600 million in AUM, the InvestmentNews article said, adding that as of last April, the firm managed $1.76 billion in 30,600 accounts.  

At the time, financial firms were rushing to build or acquire digital investing capabilities for the public. FutureAdvisor had moved away from retail investors to offering technology to financial advisors before the acquisition, according to InvestmentNews. It held on to a small book of retail business. 

Toberman, who follows roboadvising and ETFs, said without ETFs, the latest roboadvisor technology wouldn’t exist. Roboadvising, while shunned by some in the financial planning industry, is a benefit to the industry, because the low fee structure allows early investors who may not be able to afford fees charged by financial advisors to start investing. Early investors grow into more mature ones who may then seek out financial advisors later as their budgets and sophistication grow, he said.   

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