As a colleague Andrew Osterland put it back in May, “An 800-pound gorilla is wading into the market for online investment management and financial advice.” He was referring to Bloomberg LP's venture into the online wealth management business, called BloombergBlack.
But less than three months later, Bloomberg announced yesterday in a prepared statement it is pulling the plug on the yet-to-reach-production new service.
It appears the gorilla has stumbled or has decided to sit down before it stumbles.
The service was slated to provide wealth management tools to the do-it-yourself mass-affluent investment crowd with accounts held at various online brokerages. At a pricetag of $100 per month, users were to have access to account aggregation, personalized investment advice and a stream of related financial news siphoned off and shared by Bloomberg's editorial side.
“It seems like there is definitely room for these disruptive companies,” said Sophie Schmitt, senior analyst for Aite Group's wealth management team, referring to other do-it-yourself investment offerings.
“But Bloomberg is a big, big company and there were a lot of skeptics within it who found it strange that they were going straight to the end client and cutting out the intermediary when they have so many intermediary clients,” she said.
Other observers were still surprised at how little time the firm gave the project.
“I'm a bit surprised that they pulled the plug as quickly as they did, given that they surely have enough capital to incubate it and give it a chance to grow,” said Michael Kitces, a partner and director of research at Pinnacle Advisory Group Inc.
Mr. Kitces has closely followed the rollout of several similar services over the last few years, including those of
Betterment.com and
Wealthfront Inc.
While he said he has no evidence to back it up, one theory is that the folks at Bloomberg finally started to create some Venn diagrams and found that the necessary market might not be there quite yet.
“You need people who are sophisticated enough to utilize the kind of metrics they are creating, and affluent enough to have enough dollars that it matters, and who are savvy enough to compare and engage with a service like this,” he said.
With the last point he meant going the extra mile required, beyond engaging with their own do-it-yourself online brokerage and its possibly less-sophisticated tools to add another layer of complexity and cost.
“By the time you have drawn that diagram, I suspect you had very few potential clients at this moment,” said Mr. Kitces.
And hence the immediate outlook appeared rather dismal.
One thing that Mr. Kitces did find disappointing about Bloomberg's early withdrawal from the market was that some of the tools being employed looked very promising.
Principally he said that the offering was already supporting some form of rebalancing, even to its smallest clients — something that only
Wealthfront Inc. is offering to all its clients, though the latter service in addition also provides its customers with higher levels of assets under management tax-loss harvesting as well.
“There really was actually a level of embedded technology in the BloombergBlack program that is still not available in a direct-to-consumer solution,” Mr. Kitces said.
Despite all this Aite's Ms. Schmitt theorizes that the end could be as simple as internal politics and a desire to cut losses early and keep them to a minimum.
She put forth the theory that perhaps the firm had not provided enough resources to the group working on the project to adequately finish the necessary tools.
There is also the possibility that those testing the product in its pre-production state thought it needed too much additional work to be competitive with what was already available.
Attempts to contact Bloomberg LP and analysts at several research firms for comment had not been returned by press time.
Related stories:
Wealthfront and the rise of the machines
Theme park? New offering lets advisers build portfolios around motifs
Motif provides investors with investment themes, advisers should take note too
[Motif Investing Update, second half of column]; Schwab plans product review site for advisers
New logo, new biz dev chief, now giving advice under their own name
FutureAdvisor, another advice site for the mass market
Personal Capital launches iPhone app
A tool for your clients and their kids [Hellowallet]
A better(ment) mousetrap for the mass affluent?
A different approach to high-tech planning
