BLK BlackRock Inc

By Sarah Krouse 

The world's largest asset manager hopes to sell more investment products to Main Street with one of the oldest strategies in business: the freebie.

BlackRock Inc. is coaxing financial advisers to upload their client holdings to a complimentary BlackRock website that tests how those portfolios perform under different economic scenarios and compare them to peers. About 20,000 financial advisers have used the "BlackRock Advisor Center" tool since October.

Advisers receive free access to a website powered by a version of BlackRock's technology called Aladdin that big Wall Street firms and insurers use to assess risks.

BlackRock's hope is that financial advisers will in turn buy more BlackRock funds. A spokeswoman said the technology "helps advisors manage their practices in a more efficient and scalable way."

The New York money manager sells a more extensive version of its Aladdin technology to brokerages that have larger networks of financial advisers, like UBS Group AG and Morgan Stanley. That service is meant to give those companies a view of the risks within client portfolios across their branches.

BlackRock is under pressure to find new ways into wealth management because of changing regulations in the asset-management industry as well as a move by price-conscious investors to push down the cost of investing.

A new Labor Department rule that went into effect in April 2016 required brokers who work on retirement accounts to put their customers' interests ahead of their own. That has meant fewer funds make it into brokers' lineup of products, a danger for firms like BlackRock that rely on financial advisers to sell their products to everyday investors.

The Labor Department rule was thrown out by a U.S. Circuit Court in March, and the Securities and Exchange Commission is now working on its own version of a best-interest rule that would apply to brokers.

An initial goal of the Advisor Center was to help turn BlackRock into a hub of data on wealth management akin to what Facebook is for information on relationships and Amazon.com Inc. is for commerce intelligence, people familiar with the matter said. Gathering data on wealth-management portfolios would give BlackRockan indicator of potential fund-buying behavior and where it might be able to sell more of its funds in addition to improving its relationships with financial advisers.

BlackRock, which manages $6.3 trillion in assets, has historically had to collect this information through individual meetings with wealth advisers or rely on external data providers because it doesn't sell mutual funds or exchange-traded funds directly to retail investors as rivals Vanguard Group and Fidelity Investments do.

Here is how the free Advisor Center website works: Financial advisers can test how a portfolio would do if, say, oil prices rose 35% or stock-market volatility increased by 20%. An adviser researching a certain type of fund would initially be shown BlackRock's version of it.

Typing in the ticker for a rival fund from Vanguard Group or Charles Schwab that tracks the performance of the S&P 500, for example, results in a link to the landing page for the iShares Core S&P 500 ETF, a BlackRock product, according to financial advisers that have used the free version of the technology.

A recent update to the site allows financial advisers to compare a customer's portfolio to about 7,000 other adviser portfolios, according to documents reviewed by The Wall Street Journal. That data comes from portfolios BlackRock's wealth-advisory staff saw during meetings with advisers and through the online tool during a six-month period through the end of February.

Providing a free platform where financial advisers voluntarily input portfolio data can yield big profits if it leads to more fund or technology sales. Other firms including JPMorgan Chase & Co. also offer free portfolio-analysis technology to financial advisers.

Some observers say potential conflicts of interest for financial advisers are possible if they compensate BlackRock or another fund firm that offers technology by putting that firm's funds ahead of other products that may be better suited for their client.

"For me, where the rubber meets the road is how advisers are using the service and whether the advisors' recommendations are in their clients' best interest," said Arthur Laby, a professor at Rutgers Law School and former official at the Securities and Exchange Commission.

Such tools could also raise the prospect of privacy risks for customers, depending on what information their adviser shares, Mr. Laby said.

BlackRock's terms and conditions make advisers acknowledge that they are responsible for getting customers' permission to enter information related to them.

"Advisor Center has purposefully been designed with an eye toward model portfolios and keeping an advisor's clients anonymous to BlackRock. We do not require advisors to use their clients' personal information when using Advisor Center -- in fact, we say we do not want it, nor do we have any need for it," a spokeswoman said.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

June 18, 2018 07:14 ET (11:14 GMT)

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