BlackRock closes FutureAdvisor's retail business, moves clients to Ritholtz Wealth

FutureAdvisor, the robo-advisor owned by BlackRock, is shutting down its retail-facing business and transferring all clients to Ritholtz Wealth Management, according to an email to clients that was obtained by InvestmentNews.

"We have entered into an agreement with Ritholtz Wealth, who has agreed to purchase our Retail Business and provide investment management advice for our clients that would like to continue to receive investment management services from Ritholtz Wealth," according to the email sent to impacted customers.

Clients will continue to receive investment management services similar to what BlackRock provided, including access to digital tools and an individual financial advisor, the BlackRock email stated.

Ritholtz Wealth confirmed in a statement that it had acquired FutureAdvisor’s direct-to-retail book of business. The firm has 22 dedicated financial planners and manages more than $2.9 billion in assets under management, according to BlackRock's email to customers.

“Ritholtz expects that FutureAdvisor clients will seamlessly transition to Ritholtz, where they’ll receive access to dedicated goals-based financial planning and cutting-edge technology,” a company spokesperson said in a statement. “Ritholtz advisors and support staff are looking forward to helping them achieve success in all aspects of their financial lives.”

FutureAdvisor was acquired by BlackRock in 2015 as part of a rush across financial services to either buy or build digital advice capabilities. BlackRock reportedly paid more than $150 million for FutureAdvisor, which had $600 million of AUM.

"We are proud of having served FutureAdvisor clients over the last 8 years and are confident that Ritholtz, a national, multi-billion-dollar wealth management firm, has the ability to meet the demands of clients seeking digital solutions for their investing needs," a BlackRock spokesperson said in a statement. "BlackRock will continue to serve wealth management clients with our Aladdin Wealth technology offerings."

Though FutureAdvisor had pivoted away from retail investors in favor of providing technology to financial advisors before the acquisition, it had maintained a small book of retail business. According to a Form ADV filed in April 2022, FutureAdvisor managed $1.76 billion across 30,600 accounts.

The company has helped several other firms launch robo-advisor capabilities, including BBVA Compass and RBC Wealth Management. However, the direct-to-retail product has languished under BlackRock, and there have been few, if any, product updates in the past few years, according to David Goldstone, manager of investment research at Condor Capital Wealth Management, which publishes a quarterly Robo Report.

"FutureAdvisor abandoning direct-to-retail is another sign that stand-alone robo advice products have proved to be a difficult business model," Goldstone said. "Servicing small accounts with rock-bottom fees is difficult to make profitable, even when most of the servicing, advice, and trading are automated."

FutureAdvisor joins a growing roster of robo-advisors that have closed up. Principal shut down RobustWealth in 2021, and Motif Investing closed in 2020 before segments of the company were acquired by Charles Schwab, Folio Financial and Goldman Sachs. The market of business-to-business robo-advisors is one of the fastest shrinking segments of advisor technology, according to XY Planning Network co-founder Michael Kitces.

Betterment recently announced that it was conducting layoffs and closing down office space in New York, citing market volatility affecting the company’s revenue.   

"I think FutureAdvisor has suffered from the same problem that many robo advisors have," Goldstone said. "I believe costs to acquire customers have been persistently high across the industry, and with razor-thin profit margins, it has been difficult for robos to attract enough clients and assets to achieve attractive profits."