Swiss bank UBS’s decision to sell its Smartwealth service to US ‘robo’ giant Sig Fig demonstrates the limitations of a digitally delivered advice business and the importance of face-to-face advice.
Smartwealth was intended to catch the interest of the next generation of high net worth clients and was said to have met its growth targets. However, it appears, UBS felt it wasn’t meeting its targets well enough.
Against it was price, as one of the more expensive services, although it did offer actively managed portfolios.
UBS is not well known on the high street and it may have overestimated the brand recognition in the UK and the appetite for active management in that segment.
Importance of face-to-face advice
According to UK private bank Brown Shipley, clients still value face-to-face advice despite the rise of digital and sharing disruption in so many other industries; in the media (Facebook/Google), transport (Uber), retail (Amazon), and TV (Netflix).
“In an increasingly tech-savvy industry, we believe there is still significant value in providing a face-to-face service for our clients and their families,” said Guy Healey, head of private banking at Brown Shipley, commenting on the Smartwealth divestment.
“Face-to-face interaction is the most effective way of developing relationships and building trust with clients, as well as being the best way to manage the complexities involved in managing wealth.”
“While the development of robo-advice has yielded benefits for a small demographic, the overwhelming majority of private clients continue to place significant value on, and a preference for, face-to-face interaction with their advisers,” continued Healey.
“Technology certainly plays a critical role in supporting a human-delivered service by providing greater and easier access to information for clients. However, we are of the strong belief that the future is a ‘hybrid’ model, where a combination of face-to face advice supported by technology will deliver most value to clients.”
Of course, UBS has not retreated from robo completely. It still owns a stake in Sig Fig and shareholdings in major robo players seem popular among asset and wealth managers. BlackRock, for example, has a strategic stake in Scalable Capital.
Just recently Schroders-backed We Invest has won contracts to deliver platforms for OCBC and CGS-CIMB, a Chinese Malaysian outfit, proving that there is still plenty of appetite to invest in robo businesses, even if client uptake can be lukewarm.