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In October, Swiss wealth manager UBS joined the robo-advice market with the limited launch of its SmartWealth solution.
That service is now available to all customers, with its full launch completed on Tuesday, Wealth Manager reports.
In many ways, SmartWealth is a fairly standard robo-advisor product. Clients can open an account entirely online, and are given access to investment strategies through a number of passive and active funds constructed and managed by UBS. SmartWealth continually monitors the portfolio's performance and suggests adjustments of necessary. Its active portfolios charge fees between 1.7% and 1.8%, while its passive funds charge 1%. As compared to UBS' traditional wealth management services, which have an investment threshold of £2 million ($2.5 million), SmartWealth sets the bar at just £15,000 ($18,500). The service was built entirely in-house.
However, SmartWealth stands apart with its emphasis on advice:
It uses behavioral analytics to understand its clients' needs. The questionnaire that users fill out to construct a portfolio incorporates behavioral analytics software, which the human advisors behind SmartWealth can leverage to gain an insight into a user's psychology and offer more targeted and actionable advice. This means personalization can be achieved in real time.
It provides extensive educational material. The team behind SmartWealth worked extensively with writers and financial journalists to provide helpful research and financial articles on their website, as well as access to daily podcasts by UBS' chief economist. This will likely appeal to investors seeking more context around their investments.
SmartWealth seems well designed to appeal to a wider market. The service's relatively modest minimum investment will give the average consumer the opportunity to invest with an otherwise exclusive wealth manager; UBS' reputation alone is likely to draw users. Moreover, the average consumer's investment knowledge tends to be limited, potentially putting them off investing. UBS' personalized and hands-on approach to client advice and education therefore seems likely to reassure hesitant consumers, and help UBS capture a much larger market. This, in turn, could help it pull ahead of the intensifying robo-advisor competition from other incumbents.
Robo advisors are threatening to upend the enormous global wealth management industry in several ways, and they are likely to arrive in full force within the next few years.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on robo advising that looks at the market for robo advisory services, the drivers behind consumer adoption of robo advising, why the robo advisor market presents an opportunity to traditional wealth management firms, and how startup robo advisors can succeed as massive legacy companies begin offering their own services.
Here are some of the key takeaways from the report:
Large incumbent wealth managers won't lose out to startups like Betterment and Wealthfront. Instead, they are embracing the technology and launching their own products, which are scaling quickly.
Consumers across all asset classes are receptive to robo advisors — including the wealthy. 49% of this group would consider investing some of their assets using a robo advisor.
The majority of assets managed by robo advisors will come from people who already have some investments. We estimate that the volume of assets that comes from people who don't currently invest will be less than 1% of the total by 2020.
Startups are going to find it difficult to scale, and will need to differentiate their products to succeed. They are already doing this by providing white label services to wealth managers, and more customized stand alone solutions.
In full, the report:
Provides a forecast for the volume of assets robo advisors will manage by 2020.
Highlights the factors that will drive the growth of robo advisors
Explains the different types of robo advisor business model.
Details the outlook for incumbents and startup robo advisors in the wealth management industry.
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