UBS targets mass affluent sector with SmartWealth online platform

Mention the phrase ‘fintech’ and thoughts turn to small, nimble start-ups rather than traditional wealth managers, and indeed many of those who have made the biggest waves thus far have been the new boys.

But the bigger players are beginning to fight back and are starting to develop their own digital strategies.

Latest to launch its answer to the digital revolution in private banking is UBS, which has just put its UBS SmartWealth online wealth management service live in the UK.

Although the idea for the service was conceived in the firm’s Zurich innovation lab, the UK market was chosen as the initial launch site, with plans to eventually roll the platform out internationally.

Why the UK? “Following the retail distribution review there are a lot of people who are not covered by the existing IFAs and there is therefore an advice gap,” says Nick Middleton, co-head of UBS SmartWealth. “People who know they should be getting advice, but don’t know where. We also felt there was an enormous pool of talent to draw upon here to help build it.” 

SmartWealth is inevitably being called a robo-adviser, a label Mr Middleton was initially keen to avoid, although the term seems to have stuck. “We are a digital wealth management offering,” he says.

Despite being based within a large organisation, the SmartWealth project has developed its own sub-culture, claims co-head Shane Williams.  “We have been given the freedom to set our own pace,” he says, explaining how the 70-odd members of the team, sourced from both within UBS and externally, all sit together.

The platform was built from scratch, and is very much based around customer needs and offering them investment advice, rather than taking an existing offering and fine tuning it for the online market, claims Mr Williams. SmartWealth took a year to develop, with the bulk of the work being done in-house, although external companies were also used, particularly around the onboarding process.

“There are some innovative companies in the fields of AI, for example, and that is something that we didn’t want to build ourselves because there was already something that was really good in the market. So we integrated that.”

Target audience

A large part of the thinking behind the platform is for UBS to gain access to a new type of client. “This is aimed a completely different segment to UBS’ traditional customer,” explains Mr Middleton, adding that with a minimum account size of £2m ($2.44m), UBS in the UK has really only been a bank for “millionaires and billionaires”. SmartWealth’s minimum investment, by contrast, is relatively low at just £15,000, although the target audience is those with £100,000 to £2m in investable assets. This is clearly a service aimed at mass affluent rather than mass retail.

“If you think about how long an individual would need to accumulate enough to open a UBS account, by the time you are there you are probably already talking to someone else. So if we can get into people’s live much sooner then that is great.”

The hope is this offering will also mean deeper relationships with existing clients, through offering them something new, or perhaps by providing these services to their children.

UBS claims that the big difference between SmartWealth and the other online wealth management tools available is that the platform genuinely offers advice to its customers. The onboarding process involves a series of questions designed to gauge customers’ risk appetites and investment goals, the aim being to enable advisers to understand the phycology of the client.

Once funds have been invested, clients then have access to a wealth planning module which predicts future returns and enables clients to input income and expenditure goals such as school fees, property purchases or luxury cars. Research and educational articles and podcasts are also made available.

Investments and fees

SmartWealth’s investments are based around five “strategies”, with a fund of funds structure sitting within each. There are actively implemented strategies, which follow an open architecture approach, and passive strategies, predominantly built around ETFs but which can involve a smart beta overlay. Fees will be determined by the strategies clients choose to follow, and are in the area of 1.7 per cent of assets for an actively managed strategy and 1 per cent for a passive one, falling as the amount invested increases.

Put those numbers into a price comparison website and SmartWealth would look very expensive compared to other robos, says Mr Middleton, but that would not be showing the whole story, he claims.

“We are not more expensive. In many cases, when you add up the entire cost to the client, then we are cheaper. It is very hard to find out what clients are really being charged. We are very clear and we offer advice.”

Mr Middleton currently sees little direct competition in the UK marketplace be it from start-ups or established players. “Even the incumbents – the likes of Brewin Dolphin and Investec – who we are doing something, are actually just doing their master portfolio service online. There is nothing very innovative there. We are doing something different.” 

Firms coming over from elsewhere could be another matter, while the conversation inevitably turns to the likes of Google, Apple or Amazon launching online investment services.

“We often hear that the likes of Vanguard and Schwab are coming and they clearly have enormous assets behind them, but the regulations here in the UK are incredibly tough,” says Mr Middleton. “Those looking in from overseas will not understand how difficult it is to provide advice online.”