Bloomberg's new venture: Online advice

May 5, 2013 @ 12:01 am

By Andrew Osterland

An 800-pound gorilla is wading into the market for online investment management and financial advice.

Media giant Bloomberg LP is quietly testing a “premium” wealth management service, BloombergBlack, aimed squarely at mass-affluent investors. For $100 a month, users of the new service will have access to account aggregation, personalized investment advice and a vast array of financial and editorial material already produced by Bloomberg. The service is currently in trial with a limited group of users.

“This is a big deal,” said Grant Easterbrook, a senior research associate at consulting firm Corporate Insight, who has reviewed BloombergBlack's newly launched website. “The financial services industry is a me-too industry. When a big player like this does something, others copy it.”

For its part, Bloomberg is being tight-lipped about its ambitions in the advice arena. In the company's initial November ADV filing, John Michel, who developed and oversaw Merrill Lynch Direct, the wirehouse's internet brokerage offering (now known as Merrill Edge), is listed as president of the organization.

Bloomberg spokeswoman Binna Kim declined to make an executive available to talk about BloombergBlack.

'A unique approach'

Although Bloomberg has not identified its target market, there are currently 28.4 million households in the U.S. with financial assets of between $100,000 and $1 million, according to Tom Wynn, research director at consultant Spectrem Group.

In a statement, Bloomberg described the initiative as “a new premium service with a unique approach to helping long-term investors take control over their wealth.”

That said, it's unclear how comprehensive the financial planning component of the new service will be or how much access to investment advice users will be given.

Based on the limited material available on the BloombergBlack website, Bill Winterberg, chief executive of technology consultant FP Pad, doesn't see Bloomberg's move as a category killer in the industry.

The company appears to be focused on investment management, as opposed to broader financial planning, he said. In its ADV filing, Bloomberg listed portfolio management, publication of research and education as the advisory activities it intends to undertake. It did not list financial planning services.

“They have a premium brand and profile, and will attract consumers, but I see them on par with websites like WealthFront and

Betterment.com in the investment management market,” Mr. Winterberg said.

Nor does he think the proprietary research and news content that Bloomberg will make available to users give it a big leg up on competitors.

“Consumers can get that from Motley Fool,” he said.

Financial adviser Michael Kitces doesn't see BloombergBlack as a competitive threat to fiduciary financial advisers.

“It looks like they're going to roll out a package of quality research services, investment insights and analytics. This is competition in the do-it-yourself space,” Mr. Kitces said. “I take Bloomberg seriously, but this is competition for Schwab or E*Trade, not for me.”

Dismiss at your own risk

Ric Edelman, who recently launched his own online advisory platform for clients with as little as $5,000 to invest, thinks differently.

“A lot of financial advisers have their heads in the sand,” he said. “If they think they can dismiss BloombergBlack, they are in trouble.”

Mr. Easterbrook doesn't dismiss Bloomberg as a potentially formidable competitor in the online investment management and advice arena. The market is still small but expanding rapidly, he said.

“We're starting to see the potential of online wealth management tools,” Mr. Easterbrook said. “Bloomberg is the next step in the evolution of those tools.”

Even so, Mr. Easterbrook, who has tracked the development of 37 online investment management websites, is dubious of the $100 monthly fee Bloomberg is considering charging for the service. Learnvest, a site that focuses on financial planning, has a beginner offer of $69 upfront and $19 per month. Portfolio management tools from investment-management-oriented site Jemstep are free for accounts less than $25,000 and range from $17.99 to $69.99 per month for larger accounts.

“Bloomberg is coming in at a high price point,” Mr. Easterbrook said. “I expect they're directing it to pretty-high-net-worth people.”

Bloomberg is not the only media company eyeing the online wealth management landscape. Yahoo Finance and USA Today have a relationship with SigFig, an online platform that aggregates accounts and gives free access to analytical tools.

Mr. Easterbrook expects that large brokers and banks also may feel compelled to compete — and surmises that some of the existing online firms might be acquisition targets.

“This could really get the ball rolling,” he said.

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