Fintech

Legg Mason acquires 82% stake in robo-adviser Financial Guard

Legg Mason, an asset manager with $718 billion under management, acquired an 82% equity interest in a robo-adviser…

Legg Mason, an asset manager with $718 billion under management, acquired an 82% equity interest in a robo-adviser called Financial Guard.

The firm plans to offer the digital advice platform, which will fall under the company’s alternative distribution strategies business, to advisers, record keepers, banks and insurers. Executives said the purchase will help advisers stay on top of technological innovations as well as meet the needs of the Department of Labor’s fiduciary rule, which requires all advisers to act in their clients’ best interests in retirement accounts.

Terms of the deal were not disclosed.

Financial Guard builds portfolios using passive and active funds, and aggregates investors’ other financial accounts. Legg Mason will incorporate its nine independent investment managers onto the platform.

Roger Paradiso, who heads the alternative distribution strategies unit at Legg Mason, said offering Financial Guard to advisers will also expand their reach to the mass affluent client base, including clients’ family members who may have smaller accounts. “This is the ability to expand their universe,” he said.

It is no secret that financial institutions of all sizes and types have eyed robo-advisers and their technology lately. Custodians, broker-dealers, banks and other financial firms are running full speed to pick up this technology so that they can compete with one another and attract underserved clients.

As the fiduciary rule deadline continues to inch up, however, asset managers are jumping on the trend, too. BlackRock had made a big splash of its own when it acquired FutureAdvisor, since sparking partnerships with LPL Financial, RBC Wealth Management and BBVA Compass.

Going the business-to-business route isn’t necessarily the best, or only, way for firms to offer these online platforms, said Laura Varas, founder and chief executive of Hearts & Wallets, which provides retail investor data and research. She said although some investors want to work with an adviser, others do not.

“Asset managers are remiss if they ignore the many signs on the horizon that the direct channel is very relevant to consumers today,” she said.

Financial Guard will continue to serve investors who sign onto the platform directly, but most of the customers they work with have come from smaller financial institutions, a Legg Mason spokeswoman said.