UBS Sells SmartWealth? Good for Them!

By Catherine Flax

Catherine Flax, CEO of Pefin, comments on UBS' decision to sell Smartwealth, a digital management platform to SigFig.

So UBS sold SmartWealth to SigFig.  What does this mean for digital financial planning and advice? Well, actually, nothing new at all.  What it means is that the world is cluing into some less than flattering realities about Robo Advisors.  My guess is that UBS probably realised the following:

The term “Advisor” is a misnomer.  Robo Advisors provide simple beta portfolio recommendations based upon some very rudimentary information about the user.  That is in no way the same as holistic, fiduciary financial planning which should tell a user how to pay down debt, how best to save for important life objectives, how to optimize their retirement plans, and so much more.  My favorite Robo experience was when I went onto a very popular platform and pretended I was one of my kids.  I told the platform that I was 25 years old and I made $50k per year.  Immediately I get a response which tells my what portion of my portfolio should be in equities and which portion should be fixed income.  Probably obvious to anyone, the answer should have been a) I don’t know enough about you to tell you anything at all about your finances and also b) if I had to guess it is most likely the case that you have no business investing.  Such is the quality of the “advice” as dispensed by a Robo.

Robos are actually very low tech.  Yes, they are digital- but in this day and age, what isn’t?  So because the technology is simple and now highly commoditised, to actually compete as a Robo you have to spend a fortune (like a very serious fortune) on advertising.  It is Coke vs Pepsi, not Car vs Horse and Buggy. 

To build an actual fiduciary, financial advice platform that mimics the experience of a Human Advisor- which is where the differentiation would actually be meaningful- is not easy to build.  In fact, a decent technologist should be able to build a Robo advisor from scratch in about a year, maybe less.  To build an AI financial advice platform - and AI would be necessary to actually deal with the many, many variables that describe a person’s financial life- takes years.  It also isn’t going to happen as an “add-on” to a Robo.  Architecting something holistic needs to be thought through from the beginning. 

If the hook to get investors onto a Robo is the low fee structure (which is great- who doesn’t love low fees?) - you are getting clients that are bargain shoppers, not value seekers.  So when the next (completely commoditised Robo) undercuts you by 3 basis points, why would they not move?  When the market drops and unsophisticated investors get spooked, evidence suggests they pull their money out.  This in contrast to investors that have a real financial plan and understand that markets go up and markets go down, but as long as their plan is on track they should stay the course. And if their plans are no longer on track, they need actual advice to get back on track- which is only going to come via AI in a digital platform.

Many institutions are now looking more deeply into what a properly fiduciary affordable digital planning and advice platform can do for their clients.  Good for UBS for seeing the limitations of their approach and being willing to pivot.  Failing fast - not just for startups anymore!

Catherine Flax, ceo of Pefin, has been a leader in the fintech space, sharing her vast knowledge and experience to the industry. She has served as managing director and head of commodity derivatives, Americas at BNP Paribas and as chief marketing officer of J.P. Morgan, prior to her role at Pefin.

Keywords: Technology, Digital Financial Planning, Robo Advisors, AI
Institution: UBS, SigFig


Diary of Activities
Digital Finance Leadership Programme 2019
29 July - 02 August 2019 | United Kingdom