By Vasyl Soloshchuk/ Insart
| Site: | futureadvisor.com |
| Established: | Founded in 2010 by Bo Lu and Jon Xu, and acquired by BlackRock in October 2015. |
| Clients: | Enterprise broker-dealers and financial advisors |
| Value proposition: | Digital investment management |
| The executive team: | Kameron Rezai, Managing Director, COO, and Head of Client Strategy Jon Xu, Co-Founder and CTO |
In 2010, Bo Lu and Jon Xu—both formerly of Microsoft—decided to collaborate on a solution to help people invest intelligently and plan for their retirement. Eventually, FutureAdvisor was born. FutureAdvisor leverages a proprietary algorithm for automated wealth management, and does so with the client in mind.
I had the pleasure of visiting BlackRock’s offices in San Francisco, where I met up with Kameron Reazi and Jon Xu. They showed me how the FutureAdvisor platform maximizes portfolio potential, so that each client and each account sees the most benefit in terms of tax deferrals.
Kameron Reazi is the chief operating officer and head of client strategy for FutureAdvisor. He is responsible for a wide range of business functions in conjunction with other colleagues at BlackRock who help support FutureAdvisor across business development, marketing, relationship management, and adoption efforts, as well as platform delivery and operations teams. Kameron has worked for BlackRock for almost seven years, holding different roles at the intersection of technology and wealth management.
Jon Xu graduated from MIT and started working for Microsoft. After almost a decade developing synchronization protocols there, he cofounded FutureAdvisor with Bo Lu. Jon’s background is in software engineering, but he has held multiple roles in product development and engineering. Today, he heads up the product and design teams, perfecting the digital experience and overall product.
Wealth-management outlook
I asked both Kameron and Jon to shed light on the biggest tech and business trends in the wealth-management industry. Kameron explained that the most impactful trends may be the shift to advisory from brokerage and the shift to fee sensitivity on the asset-management side. He also highlighted that those shifts go hand in hand with the rise of exchange-traded funds as a major portion of investments. Another interesting factor that is driving change is pricing pressure, and finding a balance will be a major challenge.
“From a technology standpoint, I think that operational alpha, creating the appropriate economics, is vital to cover the underserved segment. I think that’s certainly something that’s being created now. I also think one thing that’s happening, you see across the board, is that a lot of traditional direct consumer robo-solutions are going after more of a hybrid go-to-market model of technology and human [involvement].”—Kameron
Business model revisited
Fundamentally, FutureAdvisor uses a business-to-business-to-client model. It is a white-label product and is configurable in terms of the investment model, the onboarding and reengagement interfaces, and the marketing. In addition to ensuring more tax-efficient investments for the client, Jon outlined how at FutureAdvisor their concern lies in investment qualities. Far from purely robo-advising, FutureAdvisor uses a hybrid approach and has preserved the human aspect when interacting with clients.
“The critical piece that we continue to see is better engagement because there’s a human in the equation and there’s continuously better engagement, which means we can create a lot of scale for that person [the advisor] by automatically reengaging with [their clients] in our email functionality.”—Jon
From a business perspective, FutureAdvisor is a real end-to-end turnkey solution that is also modular. This gives their target clients—mid- to large-sized enterprises—the ability to choose certain components in order to customize their experience. Subsequently, the platform is able to serve a variety of different users including traditional advisors, call center or branch advisors, operations professionals, and support staff. FutureAdvisor has an open architecture in their investment strategy approach, which means that their enterprise-firm clients can build the asset-allocation model of each individual investment. By employing a glide-path methodology, clients can change and manage the risk profile of their portfolios over time.Say yes to integration
A major part of FutureAdvisor’s integrations are with custodians; as such, their clients can integrate with any custodian they choose. Jon noted that the main question is: “How do I get the money from the client to the custodial platform?” FutureAdvisor has its own enrollment module for these purposes, but at the same time offers integration with enrollment systems from various institutions. FutureAdvisor also integrates with Salesforce for account management and Yodlee for account aggregation.
After being acquired by BlackRock, FutureAdvisor was in the unique position of using BlackRock technologies and integrations to better serve their clients. A great example is iRetire, a tool that leverages BlackRock’s tech innovations to help clients create robust and flexible retirement-focused investment plans. Investment selections are monitored using the analytic power of BlackRock’s Aladdin; the same risk technology relied on by many of the world’s largest financial institutions. BlackRock has been in the enterprise-technology business for over 20 years and now aims to combine FutureAdvisor, its other digital wealth capabilities, and Aladdin into one of the most comprehensive financial technology powerhouses ever created.Company structure
Jon leads the product-management and design teams, which are responsible for defining business and product requirements. The R&D department is involved in large, cross-team initiatives, and all of Jon’s teams can execute a set of product initiatives. The teams are aligned by the different pieces of functionality they build.