BlackRock is developing tools to spur millennial and Gen Z investing

If there’s a threat, some advisors welcome it.

Anthony Badillo, lead planner at financial advisory firm Gen Y Planning, wrote via email that the concept of Acorns is “truly revolutionary,” rather than a “passing gimmick.”

“Everyone understands the concept of saving loose change, but not everyone understands the concept of investing,” Badillo said.

He said while the BlackRock iShares family of ETFs is a dominant force, not many young investors can reach investment minimums which are around $10,000 for managed accounts. “Acorns solves that issue, and most in the industry know about the $30 trillion transfer of assets that will occur between boomers and millennials.”

Gen Y Planning does make sure that microinvesting is right for each client, which in many cases it may not be. If they have credit card or student loan debt, paying that off before microinvesting makes sense. The same goes for building an emergency savings fund to fall back on in the case of job loss or a major medical emergency. And if clients already have an employer retirement plan, that could eliminate the need for microinvesting.

Sokolin said the investment creates a hedge for BlackRock in case millennials rely on apps and chatbots instead of advisors, while BlackRock keeps distributing its product through RIAs or otherwise. The fintech expert added that the economics for these start-ups “don’t really work yet, but applying BlackRock’s scale could fix that. And that’s how you would justify the high investment price.”

Microinvesting sites like Acorns have been dinged for the management fees they charge, but Gen Y Planning’s Badillo doesn’t think that’s a significant issue. “I’m not all that concerned about the $1-$2 monthly fee that Acorns charges. Yes, it will be a higher percentage of the assets that they actually have invested in Acorns in the beginning. However, over time, this fee becomes smaller as their balance grows. … I can think of far worse things that our younger demographic is willing to spend $1 or $2 a month on,” he said.

Fink wrote in his annual letter that broad incorporation of behavioral tools, such as auto-enrollment, which automatically enrolls individuals in workplace retirement plans, and auto-escalation, which can help individuals enhance their savings by periodically increasing contribution levels, will be key to the company’s future.

BlackRock and Acorns said they will be focused on developing investing tools in collaboration to encourage the “savings and investing behaviors of the next generation of investors.”

Acorns is not the only microinvesting app. Another popular one is Stash, which lets investors open an account with $5.

More from ETF Spotlight:

Jack Bogle slams ETF investors (sort of)

What to do if you’re not Warren Buffett and don’t see every stock as a buy

Elon Musk teaches — and learns — a lesson about long-term investing

Story updated to include comment from Acorns that the investment options available on its platform, which come from multiple ETF providers, will remain the same after the BlackRock deal. Comments from financial advisory firm Gen Y Planning on microinvesting pros and cons have also been added.

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