Royal Bank of Canada's U.S. wealth management arm is moving toward a hybrid digital-human advice platform, partnering with BlackRock's FutureAdvisor to add robo tools for its 1,900 advisers.
The deal is the latest move by RBC to upgrade its wealth management capabilities in the U.S. Last year, the Canadian company acquired City National Bank in Los Angeles, a high-end financial institution known for serving Hollywood elites. RBC is piloting a program to roll out City National's banking and lending capabilities to its adviser force.
"We are looking to digitally augment the capabilities, client experience and services we offer through our existing advisers," said John Taft, CEO of RBC's U.S. wealth management business.
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The partnership with BlackRock makes RBC one of the largest brokerages to offer an automated advice platform. It will begin with a pilot program involving an unspecified number of RBC advisers. Taft emphasized the pilot project is focused on adding to advisers' existing capabilities, and in particular empowering them to connect with digitally savvy millennials.
"This is not a direct-to-client or investor initiative. This is about putting on our platform the capabilities of FutureAdvisor, and empowering our advisers to do what they need to do to serve their clients," Taft said, declining to disclose terms of the deal.
Bo Lu, co-founder and CEO of FutureAdvisor, and Taft have known each other for a while. Lu said the partnership is a big step forward not just for his firm, but also for the industry.
"I think you are seeing the evolution of the technology as it meets the market and as we understand client concerns. Over time, you will see a continuum of digital plus human, and in particular engagements, you'll see more digital and less human, or more human and less digital," Lu said.
Lu added that the pilot program is just the beginning, and that there's a long road ahead.
"There's a whole bunch of getting the pipes to line up, to get regulatory departments to line up – there's just a lot of work. You can't do these things overnight," he said.
Bearing Fruit
The deal allies FutureAdvisor with a major U.S. brokerage firm that has more than 1,900 advisers and $273 billion in total client assets.
BlackRock's $152 million purchase of the Silicon Valley startup FutureAdvisor last August is quickly bearing fruit, noted A.T. Kearney's Uday Singh, a consultant and co-author of a report on robo advisers.
In early January, BlackRock and FutureAdvisor reached a deal with BBVA Compass to provide it with digital advice capabilities. By the end of the month BlackRock had another robo agreement, with the Danish investment bank Saxo Bank. Terms of those deals were not revealed.
"It's bearing out the viewpoint that BlackRock had, that with a big name behind a fintech player you can create a lot of value," said Singh, a partner in A.T. Kearney's financial institutions practice.
Singh and other analysts were in unison that the RBC-BlackRock deal was one of mutual benefit.
"It gives RBC an opportunity to establish relationships with younger potential clients, who may be comfortable with digitally grounded advice to start, but who will eventually want a relationship with a human adviser," said Sean McDermott with Corporate Insight's Consulting Services. "For FutureAdvisor, this further reinforces the brand's legitimacy and position as a leader in the digital advice space."
Singh said the value proposition in FutureAdvisor's offering is bolstered with BlackRock's name and resources, making it hard to pass over for any financial firm considering a digital platform.
It also puts pressure on other competitors to work out deals. Recently, the asset manager Invesco made its own deal to acquire the robo platform Jemstep.
"The big companies want to do a transaction with a stable player," Singh said.
