Cross-selling craze reaches BlackRock

As funds face fee pressures, the firm is looking to sell clients on other offerings

Cross-selling craze reaches BlackRock
Many financial firms are embracing cross-selling as fund-business profits slowly succumb to revenue pressure — pressure that even the world’s largest asset manager can’t resist.

Well known for its fund products, BlackRock is using its relationships with various entities to sell them on its less popular and poorer-performing businesses, according to the Wall Street Journal. The firm offers a wider range of services than many rivals, and it is a major shareholder and client of many of the world’s largest financial firms.

The company has tripled in size since the financial crisis to reach US$5.69 trillion in assets under management. Enabling that growth was a series of successful acquisitions and a prevailing shift to lower-cost, passive funds among investors.

But the popularity of cheaper funds is also threatening revenues throughout the industry; BlackRock’s revenue fell by around 2% in 2016, and many rivals suffered worse drops. BlackRock actually experienced a 5.7% rise in revenue in the second quarter, reaching US$2.97 billion. Regardless, it is moving to sell existing clients on other businesses where it can collect additional fees.

Unlike many other cross-selling firms, BlackRock isn’t working at the individual level. Instead, it deals with large companies and financial institutions, some of which market its funds to investors. The services it offers to firms it has existing relationships with include technology, regulatory, and risk-management advice.

At the centre of many of these cross-sales, according to the Journal, is a unit known as the strategic partner program. The unit helps manage the firm’s relationships with around 100 of its biggest clients, including sovereign-wealth funds, pension funds, and global banks.

Currently, this core group is being tapped to get new clients for BlackRock’s Financial Markets Advisory Unit, which did well in the financial crisis but has been struggling as the broader markets recovered.

During the crisis, the unit advised the Federal Reserve in managing assets that had been owned by Bear Stearns and American International Group (AIG). It advised Greece’s central bank on the nation’s banking sector during the European debt crisis; the European Central Bank also consulted it with regards to stress testing of the institutions it oversees.

Sources said that BlackRock attempted to reposition the business toward regulatory and other consulting work, specifically bank-balance-sheet reporting. Despite that, the advisory unit missed a US$160-million revenue target last year. With its cross-selling efforts, the firm hopes that the unit can gather US$130 million in revenue this year.

For more of Wealth Professional's latest industry news, click here.

Related stories:
BlackRock ETF inflows reach US$140 billion
RBC stands by profitable cross-selling strategy