Commentary on Financial Advisor article by Christopher Robbins
BlackRock’s Aladdin risk management platform has been used by institutions for more than 10 years, but the company hopes to also make it more popular with smaller wealth management firms, Financial Advisor writes.
Using the Power of Big Data for Risk Optimization
Aladdin, which stands for Asset, Liability, Debt and Derivative Investment Network, handles all of BlackRock’s $5.1 trillion under management and 7% of the world’s wealth overall, Woo Fung Kwong, managing director and head of Aladdin Risk for Wealth Management, tells the publication.
In the past, Aladdin’s vast output and complexity were simply too hard for smaller advice practices to harness, Financial Advisor writes. The platform is fed by big data from multiple varied sources, from credit monitors and Fannie Mae and Freddie Mac to satellites and social media, according to the publication.
But over the past two years, about 10,000 advisors have used the platform, he tells Financial Advisor. Advisors have been increasingly using Aladdin since BlackRock began offering it to them through its Aladdin Risk for Wealth Managers arm, launched last summer, the publication writes.
Kwong attributes the firm’s ability to attract advisors in part to adapting Aladdin to the transition BlackRock is witnessing from the commission-based model to a fee-based model, Financial Advisor writes.
BlackRock is not in a hurry, meanwhile. Kowng tells the publication. Rather than put all 300,000 financial advisors based in the U.S. onto the platform, the company wants to engage advisors “acting within the portfolio,” he tells Financial Advisor.
Kwong admits that Aladdin’s output can be “very complicated and mathematical” — the platform runs “billions” of hypothetical scenarios daily, according to Financial Advisors. But Kwong also stresses that the idea of risk is intuitive to most, even if they don’t know how to measure it or use it, the publication writes.
“Aladdin is basically a risk engine for analyzing portfolios,” he tells Financial Advisor.
Advisors can use the platform to see how portfolios would be affected by inflation, political events, changes in commodities prices and more, according to the publication. And Aladdin’s investment management and accounting tools can be used by the whole advice practice for its investment infrastructure, Financial Advisor magazine writes.
Meanwhile, Aladdin Risk, a risk solution offering that can be used as a standalone, can measure risk in third-party manager portfolios as well as help oversee client portfolios, the publication writes. And both platforms are sold at a range of prices depending on what’s required, according to Financial Advisor magazine.
But Kwong says Aladdin — which also powers BlackRock’s retail investor-facing robo offering, FutureAdvisor — isn’t meant to replace human advisors, according to the publication. Aladdin is meant to augment the human advisor’s ability to make investment decision — and perhaps bring back some of the trust in the financial industry lost after the 2008 crisis, he tells Financial Advisor.
Source: Financial Advisor
Posted by: The Trust Advisor