Leveraging a digital dimension to portfolio advice
Damien Mooney of BlackRock
Aug 15, 2017
Despite its scale, BlackRock is increasingly agile in how it is adapting its platform to deliver digital capabilities that can help wealth managers in Asia shift from product selling to portfolio advisory, explains Damien Mooney.
A confluence of factors is encouraging BlackRock to develop new tools and adapt existing platforms to become more nimble and relevant in the way it adds value to private banks and other wealth managers in Asia.
The catalyst for the world’s largest asset manager to add such new services to its existing product offering is regulatory-led change across the industry. This is shining a spotlight on the need for transparency in relation to the manufacturing and distribution of funds, putting pressure on fees and, in turn, encouraging a move from commissions to fee-based advice.
At the same time, investment and wealth managers alike face the continual challenge of low rates and generating income-oriented outcomes. Further, there is the ongoing disruption via technology and innovation, as well as the changing investment needs of a younger generation of clients.
Against this backdrop, the private banking and wealth management industry continues to grapple with how to deliver portfolio advice to address the many challenges the current environment presents.
And playing its role in responding to these trends, BlackRock is extending its capabilities in the digital space to this community.
The aim, says Damien Mooney, head of the firm’s retail and wealth advisory business in Asia Pacific, is to work more closely with various banks and advisers to help them build the right types of portfolios to match the needs and risk profile of their clients.
It is doing this via an array of relevant and flexible tools and platform-based services that were previously only available in the institutional space.
“We have a number of proprietary technology platforms that we are making available for firms in the wealth space also,” he says. “These firms now have a need that wasn’t there four or five years ago…. So we want to help these clients be positioned for a world where advice is delivered both face-to-face and digitally.”
Partnership approach
In short, BlackRock is looking to help wealth management firms of all types to transition to a new way of creating and managing client portfolios.
In line with this, it is working with many clients to provide them with the capability to wrap or build investment products which are more transparent, flexible and cost-effective. “This helps wealth managers derive meaningful growth by delivering scalable portfolio solutions,” adds Mooney.
The end goal for both sides is increasing the proportion of business in managed investment solutions.
Whether this is through BlackRock selling or renting its own technology, the focus on helping clients in the wealth space has multiple dimensions.
This includes elements such as digitising the sales processes; looking to ways to digitise distribution; and being able to deliver advice in a digital format.
This is in sync with what every large wealth manager has been looking to do for themselves – namely, evolving their business model to make greater use of technology to help design, manage and distribute investments, whether they build this in-house, outsource it, or collaborate with partners.
“We are aiming to ensure that our wealth clients see us as a firm that is not only focused on money management,” says Mooney, “but also able to digitise their portfolio construction and advisory capabilities, and deliver advice.”
Strategic shift
The emphasis on digital tools and platforms for a firm that manages roughly USD5.47 trillion across a range of actively managed funds, ETFs and index-tracking funds, is testament to the growing influence of technology and automation on the investment and advisory landscape.
BlackRock’s push into Asia is just acknowledgement of this reality, along with the fact that technology is an essential tool for rational and consistent investment selection. And it is simply the next step in the evolution of the firm’ approach over the past couple of years.
In June 2017, for example, it made its first foray into Europe’s robo-advisory market by taking a stake in Scalable Capital, a digital investment manager that uses low-cost exchange-based funds and online distribution.
That deal followed the purchase in mid-2015 of US-based robo-adviser FutureAdvisor, to operate as a business within BlackRock’s investment and risk management arm.
Since then, the asset manager has put more emphasis on licensing its proprietary technology platforms to big wealth managers to offer through their own advisers, typically to lower-tier clients who they might otherwise not retain.
Providing practical tools
As well as FutureAdvisor, BlackRock's digital wealth management business includes Aladdin Risk for Wealth and iRetire, both of which have until recently been available solely for US-based clients, but are now being introduced to clients in Asia Pacific.
Aladdin is an operating system for investment managers that seeks to connect the information, people and technology needed to manage money in real time. This combines risk analytics with portfolio management, trading and operations tools on a single platform to make decision-making more informed, effective and efficient – and on a greater scale.
It is delivered as a hosted service, backed by BlackRock’s data and analytics ‘factory’ of 600+ professionals.
The real attraction to a wealth manager, explains Mooney, is having a complete view of their entire book of business from a risk standpoint. At the same time, they can also slice-and-dice the analytics, to review individual client portfolios if they prefer, or segment by country, branch, client type, individual RM books – or any other criteria.
“This is also important to ensure firms are meeting their fiduciary obligations and performing adequate scenario testing, in a scalable way,” says Mooney.
iRetire, meanwhile, provides investment solutions across a range of diversified, risk-weighted asset allocations, from conservative to aggressive.
“It gives clients the processes and technology to drive portfolio-based conversations with investors, in a white-labeled format,” adds Mooney.
In terms of BlackRock’s role in digital sales enablement and communications, involves providing wealth managers either with bespoke content solutions or working with in-house teams to deliver a mix of audio, video and text-based information in a form that clients can use and syndicate or through social media and other channels.
Managing Director, Head of Aladdin Wealth Tech for Asia Pacific within BlackRock Solutions at BlackRock
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