18 months in the making, UBS’s robo advisor finally launches

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UBS was never in a rush to launch a robo advisor. Despite being among the first wirehouses to commit to digital advice, its platform is only rolling out now, nearly two years after partnering with tech developer SigFig.

In that time, competing wirehouses, broker-dealers and even fund giants have introduced their versions of a robo advisor. But the delay was strategic, UBS says. There is more riding on the platform’s release for the firm than just offering clients a new investment tool.

“We didn’t view this as a pure digital solution. We stopped and paused to get feedback from advisors ... we needed to be out with the right solution,” says Richard Steinmeier, head of Digital Strategy and Platforms at UBS Wealth Management USA.

UBS is now performing the tricky act that its peers will have to follow: balancing its commitment to advisors while preparing for a future of digital advice customers, and experimenting with how best to introduce new capabilities into the advisor-client relationship.

“What you are seeing is everyone’s first release to move down the road to hybrid. The more complex work is happening right now,” says Kendra Thompson, North American wealth management lead at Accenture, a consulting firm.

UBS’s move — announced to employees Tuesday — is the culmination of strategic decisions the bank took in 2016, after partnering with SigFig, a Silicon Valley developer, instead of building the technology in-house. UBS is emphasizing the human advice component and the control that advisors will have over the digital platform’s use.

“Our model is advisors, and this supports that model,” says Steinmeier.

The firm’s digital solution, dubbed UBS Advice Advantage, will first be offered through the firm’s Wealth Advice Center. It has a $10,000 minimum and costs 75 basis points,which puts it higher than some competitors. Morgan Stanley Access Investing has a $5,000 minimum and charges 35 basis points, while Bank of America’s Merrill Edge Guided Investing has a $5,000 minimum and charges 45 basis points.

UBS says that structure includes its research capabilities and the human advisor component.

“This is part of a holistic solution that includes advisors and planning. We don’t view it as a pure digital solution and because of that we were comfortable with how we are pricing into the marketplace,“ Steinmeier says.

Lex Sokolin, global director of fintech strategy at Autonomous Research, says there have been two primary approaches to digital wealth management. One is “a standalone service disconnected from the overall offering.”

“The other option is to do a transformational project, where the chassis, data architecture, trading, CRM and client experience are digital and optimized across all clients. This option creates more potential for scale and efficiency, but is far more expensive. That expense is both the cash to pay for development, as well as the career risk of executives. And the upside has not been well quantified because analog wealth management still makes money,” Sokolin says.

UBS plans a staged roll out and the firm’s 6,800 advisors will get access to the tools later this year, according to Steinmeier. Advisors will be compensated for using UBS Advice Advantage with clients. The firm declined to specify how much advisors will be paid, but it’ll be on an ongoing basis for as long as the advisor is at UBS and the client uses the service.

Advisors also played a role in the technology’s development, Steinmeier adds.

That process started in 2016 after UBS partnered with and invested in SigFig, (SigFig also helped Wells Fargo develop its offering, Wells Fargo Intuitive Investor, which has a $10,000 minimum and charges 50 basis points). This differs from the approach of some competitors. BlackRock, for example, snapped up FutureAdvisor while Merrill Lynch built its digital advice offering in-house.

UBS and SigFig organized so-called innovation labs, in which advisors would spend time at SigFig’s San Francisco headquarters, meeting with developers, programmers and other team members from both firms. In these sometimes freewheeling sessions, employees from both sides peppered each other with questions.

SigFig developers led group discussions to better understand how advisors go about their day, acquire clients, discover their needs and manage relationships. Participants were encouraged not to hold back in asking questions and making suggestions and requests, even if they were unlikely to be met. This approach spurred UBS and SigFig to respond to advisor feedback, UBS executives say.

“What we got from the advisors was ‘Help me have a broader picture on my clients' lives and to be able to advise them more broadly,’” Steinmeier says.

For example, Steinmeier points to a feature in UBS Advice Advantage that allows clients to connect accounts held at other firms, and, having answered a basic risk and goals questionnaire, get UBS’s perspective on whether changes should be made to align the account.

A participant in the innovation lab, who spoke on condition of anonymity, said that if the firm implemented just one-tenth of the ideas generated there, it’d be transformational.

The relationship with SigFig doesn’t end with the initial launch, says Steinmeier, who adds that he’s frequently on the phone with Mike Sha, the tech developer’s founder.

"That’s one of the reasons we choose a partner because we can take their developmental roadmap and integrate it organically. It took a little while on the front end, but we will get the benefit of their R&D,” Steinmeier says.

Of course, UBS isn’t alone in making such investments. Asset managers, brokerages and others have been focusing their attention on all things digital. And fintech overall has attracted large sums from private equity firms, notching $5.8 billion for the fourth quarter of 2018, according to KPMG.

In addition to making new investments, traditional wealth management firms are striving to find ways to better integrate robo advisor technology into business operations. Whereas firms would have built a tool and spent money to train advisors, today there’s more effort at collaboration, Accenture’s Thompson says. Advisors are being brought into the development process, helping test prototypes and more.

“Those design collaborations will become the norm in the same way that Silicon Valley style development is becoming the norm for the industry,” Thompson says.

For UBS advisor Jennifer Susco, who participated in the innovation labs and who has seen the final product, new technology can’t arrive soon enough. Succo’s Pittsburgh-based team manages approximately $700 million in assets and their client base includes many multigenerational families. There are clients, particularly ones at the start of the accumulation phase of their lives, who may not need a lot of advice today but who will in the future, she says.

“I think that’s one of our biggest challenges now. We’re not spending enough time building those relationships. This platform will help us do that and capture dollars moving forward,” she says.

Robo advisor technology may also help advisors become more efficient as they use new tools to serve some client accounts, says Alois Pirker, research director at Aite Group. But it will also be incumbent upon advisors to adapt, he adds.

“I think the advisor will need to better position themselves around value adds other than those that are getting commoditized. It could be planning, consultation with the clients – being there, for example, when the markets drop. But being a portfolio manager will less and less be the norm,” Pirker says.

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Robo advisors Automated investing Investment technology Fintech UBS UBS Wealth Management