BlackRock is putting greater focus on making the super-computing power that drives its asset and risk management business available to financial advisors.
BlackRock’s Aladdin risk management platform, which helps manage about 7 percent of the world’s wealth, is increasingly used by financial advisors, says Woo Fung Kwong, managing director and head of Aladdin Risk for Wealth Management, the branch of BlackRock Solutions responsible for delivering Aladdin’s risk analytics to financial advisors.
“We’re seeing a shift away from the brokerage commission-based transaction models and more into a fee-based advisory model,” says Kwong. “We wanted to bring Aladdin into this space to work with financial advisors, and I think we’ve been able to accomplish that over the past few years.”
Aladdin, which stands for Asset, Liability, Debt and Derivative Investment Network, is at its core a risk analysis system that it has used internally and with institutional clients to help them stress-test portfolios. Kwong is responsible for bringing portions of the platform to financial advisors. He describes Aladdin as an operating system that links investment managers with a massive amount of information to help manage money in real time.
BlackRock manages $5.1 trillion, all of which is handled directly by or with the assistance of Aladdin. For more than a decade, institutions have also accessed the platform. Over the past several years, BlackRock has pursued advisors and retail investors as well. Aladdin is available to advisors through the Aladdin Risk for Wealth Managers division, launched last summer, and to retail investors through BlackRock’s FutureAdvisor robo-advisor.
“We’re excited to take the abilities of Aladdin directly to financial advisors to help them to think about how they analyze risk and to decide when and if they want to make changes in a portfolio,” says Kwong. “Aladdin will help them determine what are the potential tradeoffs in risk and return that they might have to take.”
Aladdin’s functionality and output are so specific and detailed that they were difficult for smaller wealth managers to employ previously. Big data powers the system—information from governments, credit monitors, Fannie Mae and Freddie Mac, social media and satellites paint a vivid, real-time picture of the economy.
Kwong says that around 10,000 advisors have used Aladdin in the past two years.
“We’ve been working with financial advisors on portfolio analysis and portfolio restructuring,” says Kwong. “Our goal is not to touch all 300,000 U.S.-based financial advisors all at once. Our goal is to focus on those who are acting within the portfolio.”
Aladdin Risk, a subset of the Aladdin platform available on a standalone basis, combines the platform’s risk analytics and processing capabilities with BlackRock’s subject matter expertise to offer advisors a comprehensive risk solution, the company says.