Is BlackRock Quietly Building a Wealth Management Colossus?
Worried about Amazon entering wealth management? "Don't sleep on BlackRock," tech blogger Kyle Van Pelt says, following news of its $1.3 billion purchase of eFront.
With its recent move to buy alternative investment software maker eFront for $1.3 billion, asset-manager BlackRock has taken yet another step to become one of — if not the — giant on the data side of wealth management.
The deal comes less than four months after BlackRock bought a stake of nearly 5% in wealth-platform provider Envestnet, which recently said it was buying the MoneyGuide suite of financial-planning tools for $500 million and purchasing Schwab’s PortfolioCenter reporting technology.
In addition, the $6.4 trillion asset manager — which also bought robo-advice platform FutureAdvisor several years ago — holds stakes in iCapital, a alternative-investing platform for RIAs and similar businesses, and in the micro-investing app Acorns. Plus, it is working with Microsoft on a retirement platform for mass affluent investors.
“To everyone who is afraid of Amazon entering the Wealth Management space… don’t sleep on Blackrock,” said tech blogger and executive Kyle Van Pelt on Twitter. “They are running a very similar playbook with much deeper domain expertise.”
The plan in buying eFront, BlackRock says, is to merge it with the asset manager’s Aladdin investment network and create a new investment and risk management platform. (HSBC just inked a deal to offer Aladdin’s investment management software to its wealthy clients.)
“Blackrock is acquiring LOTS of ‘land rights’ for data,” Van Pelt explained in a tweet. “This all feeds [its] AI lab in Palo Alto and the Aladdin engine while providing them information advantage vs. competition. Extraction is next.”
With $9 trillion invested in alternative assets under management worldwide, there is “an unprecedented need for risk and investment management capabilities spanning both public and private asset classes,” according to BlackRock COO Rob Goldstein.
Alternatives “seem to be the only investments providing alpha currently and they are largely illiquid,” added Van Pelt.
But the real value to BlackRock in its eFront acquisition is data: “Data is very much like oil,” he said on Twitter. “You must focus on acquiring the land rights, then figure out how to drill it and extract.”