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UBS SmartWealth closure proves prematurity of robo advice
UBS’s surprising sale of its SmartWealth platform in the UK is the latest in a series of robo-advisor closures. Nevertheless, this is not the end for automated service: robo has the future, and UBS provides lessons to learn.
In the UK, UBS has traditionally targeted HNW and UHNW clients – contrary to its home market Switzerland, where it also operates in the retail banking space.
With a minimum account balance of £15,000, SmartWealth was the private bank’s attempt to engage with a less affluent demographic.
The progress must not have been so satisfactory after all. Competition in the UK robo space is fierce, and providers of day-to-day banking remain the go-to for arranging investments. A strong brand and reputation can help win clients, but UBS is not a universal bank appealing to a mass market. And as the average account balances of the biggest UK robo platforms suggest, robo is currently mostly a mass market game. Setting fees at up to 1.8%, while most UK robo-advisors charge less than 1%, did not help SmartWealth to attract price-sensitive retail investors either.
Is this the end of robo-advice for the affluent ?
HNW demand for robo-advice is on the rise, according to the GlobalData 2018 Wealth Managers Survey, but more so for the next generation of clients. This proves there is still a market for digital investment platforms, but robo-advisors in general may be ahead of their time.
And indeed UBS is not giving up on robo and digital completely. Existing customers can continue to use the platform and the bank believes only its “short-term potential is limited.” The business has been sold to SigFig, in which UBS has a stake and with which it collaborates. UBS also has some other initiatives related to digital running.
Robo-advice is here to stay, although will take time to cement itself.
The digitally savvy next generation will embrace an automated service and big banks should capitalise on this.
However, a big brand is not enough to justify much higher fees. To succeed incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by startups.