In a move that appears to solidify the place of robo-advisors in today’s investment advice landscape, investment manager BlackRock announced Wednesday that it has acquired FutureAdvisor, an online advisor that directly manages $635 million for roughly 4,500 clients.
Robo-advisors are a relatively new group of mostly automated online investment advisors. FutureAdvisor offers a combination of services, including direct management of IRAs, taxable accounts, college savings plans and 401(k) plans held at Fidelity Investments. The company helps investors analyze their existing holdings for free, and charges no management fee for direct management of college savings plans and eligible 401(k)s. Other accounts under management are charged a 0.50% annual fee.
In the announcement about the company’s purchase, FutureAdvisor stressed that there will be no immediate changes, saying it will “continue to draw on the best products to meet your needs, regardless of which fund family provides them.” The announcement noted that the service has always used BlackRock’s iShares ETFs, along with ETFs from other fund families, and that it will continue to do so. FutureAdvisor operates as a fiduciary, which means it has an obligation to put clients’ needs first.
In its own announcement, BlackRock said FutureAdvisor will become part of BlackRock Solutions, the company’s investment and risk management platform. Under that umbrella, FutureAdvisor will provide its technology to financial institutions to improve their clients’ investment experiences.
“As demand for digital wealth management grows, we believe that our combined offering will accelerate our partner firms’ abilities to serve the mass affluent in a convenient, scalable way,” Tom Fortin, head of retail technology for BlackRock, said in the company’s statement.
The robo-advisor space is currently experiencing rapid growth: Research from management consultancy A.T. Kearney projects that these online advisors will manage $2 trillion in U.S. assets by 2020. FutureAdvisor’s assets under management make it a mid-size advisor in a field led by Wealthfront and Betterment, which manage over $2.5 billion each.
The acquisition is expected to close in the fourth quarter. FutureAdvisor said its offices will remain in San Francisco, and clients should continue to contact its customer service with any account questions.
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