This article appears in the November 2016 issue of Research on Wealth.
Earlier this year, UBS Wealth Management Americas and SigFig, a San-Francisco-based technology company, said they were forming a strategic alliance to develop financial technology for the UBS unit, its roughly 7,000 financial advisors and their clients.
For its part, UBS made an equity investment in SigFig, which also has earned the support of Bain Capital Ventures, Union Square Ventures and others. Meanwhile, SigFig is working on digital tools and services for UBS WMA, and the two firms are jointly creating the Advisor Technology Research and Innovation Lab.
UBS advisors in the Americas help manage more than $1 trillion in client assets, while SigFig's Enterprise Digital Wealth Management platforms serve investors with about $400 billion in assets.
“It's a great idea and a very savvy business move for UBS,” given what SigFig can do for it, said Chip Roame, head of Tiburon Strategic Advisors, in an interview.
Sure, SigFig has a robo-advisor service, Roame explains. “But behind the robo is a lot of technology that all advisors should be able to use and to offer their clients, like snazzier user interfaces,” he said. Plus, there is technology that gives clients access to information and services 24 hours a day, seven days a week.
“We’re talking about a series of user-friendly technologies that advisors can give to their clients. That means better customer service and higher client satisfaction,” the consultant explained.
Rich Steinmeier, head of Emerging Affluent and the Wealth Advice Center for UBS — which has about 120 advisors and generally serves clients below the high-net-worth and ultra-high-net-worth segments — and SigFig CEO Mike Sha recently shared their views on what the partnership is all about. The highlights are included here.
Why does the partnership make sense for your firm?
Steinmeier: We took a hard look at the evolution of the fintech space and how there were going to be increasing demands upon us to improve the way that we deliver advice to clients, to make it more broadly accessible, to improve our advisors’ sets of capabilities in delivering advice and in having a broader perspective across our clients’ financial lives, not just in terms of the holdings they have with UBS but broadly to be able to provide advice across their entire wealth spectrum and their entire financial picture.
We realized that we wanted to partner with a player who was leading in the industry in the space, who had the ability to adapt rapidly, to prototype rapidly and to launch incremental capabilities in really short timeframes.
We had a bias toward their being a tech startup that had highly talented engineers and had design and implementation cycles that were measured in weeks, not months.
Sha: As a fintech company, there are a number of things that we really believe will mark the evolution of the industry — and a number of them led us to be excited to work with UBS. One is the idea that there are fintech companies out there trying to compete with financial institutions in the hope that they may put them out of business.
It is our view that in the wealth-management space, the existing players have such important advantages in terms of their size, scale, brand, customer bases, the loyalty and trust [attached to] the brand. These are all very hard for startups to replicate. They take a ton of time and capital.
We believe technology will play an increasing role in the provision of financial advice and doing that work in a partnership with a firm like UBS would actually help us to achieve our mission to help improve the client experience for as many people as possible.
Our view is that providing advice is a nuanced, complicated, emotional and confusing task for a lot of people, and the wealthier you are, the more complicated it gets. We think humans play a really important role in helping clients get the right outcomes.
What brought the two firms together?
Steinmeier: We recognized that there were technological capabilities that we needed to compete in the marketplace, and we made the determination that we would prefer not to develop them in house and to pursue a partnership. We then evaluated over 100 potential fintech vendors/partners, and we very quickly realized that there are only a few with the ability to do an integration, that have the broad set of capabilities that we think would be differentiating for us and that have the ability to receive a partnership with an entity as large as UBS.
We viewed them as a firm that is going to lead, and for us it is [also] critically important that they form more partnerships beyond UBS, so they can thrive.
Sha: When you look at the space, sometimes people mistakenly pin us as a robo-advisor. The truth is that technology will play an increasingly important role in helping to enable advisors. That isn't necessarily limited to what the industry thinks of as robo-advice.
There is an easy way of misunderstanding our partnership and thinking that it is about robo-advice or about developing a new channel. It's really about putting better technology into the hands of advisors.
Steinmeier: We are not looking to introduce a new channel that is a robo channel. That really is the lens through which we looked at potential partners. We looked for somebody who could add capabilities and enhance how our advisors do what they do every day, more deeply engage clients, and incorporate some enhanced capabilities around portfolio construction and more technology implementations.
What are your expectations?
Steinmeier: We think it's terribly important that we bring UBS's intellectual capital to market. SigFig has a customizable algorithm that we can add inputs to, such as our capital-markets function and our strategic asset allocation. This is run through their algorithm, and that gives you the ability to do tax-loss harvesting and tax optimization. It is a much more efficient investment vehicle.
When you look at their offering, there is a passion about design that is not prevalent in the other firms.
This really resonated with us, because this is a long-term partnership. They are going to touch our client and be involved with the ways in which our clients engage with us, and they have respect for that engagement and an elegance to the design that we thought was beyond what many of the other competitors had. Their mobile and tablet capabilities are also best in class.
What's next for the partnership?
Steinmeier: Our first deployment will be through the Wealth Advice Center — which is a channel we have that serves clients remotely with advice though advisors at two locations. We will start there.
We will introduce a new product that will be driven by a discretionary managed portfolio, have our intellectual capital and be driven by and empowered by SigFig's algorithm. We are integrating their capabilities into our web-client experience and into our aggregation service, and we are integrating their advice overlay, their portfolio analysis and insights into the holdings of our clients — both at UBS and away that they choose to aggregate.
All of that will be integrated. The ability to open this account online seamlessly and bring in outside assets seamlessly will be introduced in the first quarter. We will then, over the course of 2017, extend these capabilities — which will have to be further customized — to the 7,000 advisors we have in the field.