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.
FutureAdvisor, the robo-advisor that BlackRock made a
"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
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,
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.
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