BlackRock Rules out D2C Launch but Considers Robo Platform
BlackRock, the world’s largest fund management company, has bucked the trend set by several other fund houses by ruling out a direct-to-consumer (D2C) investment platform in Europe.
In a written submission to a recent EU discussion paper on automation in financial advice, the $4.6 trillion asset manager said:
‘BlackRock generally does not engage in direct-to-consumer sales. We do not currently intend to develop our own direct-to-consumer proposition in the EU.’
‘We do not currently intend to develop our own direct-to-consumer proposition’
BlackRock’s decision has surprised some fund distribution experts, who argue that the US firm has the necessary spending power to make a direct retail proposition a success.
Jeremy Fawcett, of consultancy Platforum, believes that BlackRock has ‘a big opportunity to go direct’ in Europe. ‘How to connect with the end investor is a crucial question for most fund managers at the moment, but the answer won’t always be to have a direct sales relationship.’
Mr Fawcett said he believed BlackRock’s products are ‘well suited to direct distribution’, many of which are already used by robo-advisers and are offered on third-party D2C platforms, and that many UK investors ‘want to buy investments directly from the provider; we will definitely see fund managers probing the D2C opportunity this year.’
BlackRock’s decision came as a surprise to Philip Kalus, of research firm Accelerando Associates, who said that while there is ‘a lot of noise’ about D2C platform launches in Europe, BlackRock is a fund group that could make a success of such a proposition: ‘It requires a lot of endurance and deep pockets. To make it a success you have to campaign very proactively and in a punchy way,’ he said.
Holly Mackay, of UK investor website Boring Money, says she believed there is a ‘clear gap in the market for a simple customer offer, which I see as being largely fuelled by passive multi-asset products. This will require a chunky marketing spend to promote and BlackRock are one of the few managers who I think could pull it off.’
However, Bella Caridade-Ferreira, chief executive of Fundscape, says she believed the move is ‘really sensible.’
‘Fifteen years ago fund managers were falling over themselves to sell their back books to platforms because it costs money and resources to look after and service thousands upon thousands of direct customers. ‘We’ve gone full circle and suddenly everyone thinks it’s a good idea again.’
Despite the decision not to launch a D2C platform, BlackRock still intends to roll out a robo-advice offering in Europe following its acquisition of US-based FutureAdvisor last year.
FutureAdvisor, is one of a new generation of digital investment management platforms offering automated asset allocation advice to financial institutions to help them build portfolios for clients.
A spokesperson for BlackRock says the firm is focused on a business-to-business strategy ‘targeting banks, insurers, broker-dealers, pensions and other financial institutions.’
‘the firm is focused on a business-to-business strategy’
‘While FutureAdvisor does have a very small D2C business, our focus is on partnering with these firms as a continuation of BlackRock’s longstanding intermediary strategy,’ adds the spokesperson.
BlackRock’s move not to pursue a D2C approach in Europe comes as other asset managers plan services to directly target retail investors.
Last year Aviva launched an execution-only platform for DIY investors following several months of delays and Vanguard and 7im are soon to enter the space.
In addition Aberdeen Asset Management last year announced a partnership with pensions specialist Hymans Robertson, whereby it will target retail investors with a new online service.
Dutch fund house NN, formerly ING Investment Management, offers its own D2C platform in Europe and Deutsche Wealth Management has announced that it will launch an online investment manager targeting self-directed investors following the creation of a dedicated digital business unit.