UBS backs personalised advice with robo-service

Friday, 9th February 2018

Investment bank UBS is backing its strategy of providing personalised recommendations and advice through its robo-advice website, not just guidance.

While the regulator is yet to finalise its definitions of advice and guidance for online investment platforms, UBS says it is “confident” it has got it right.

The Smart Wealth app, which was launched earlier this year, will analyse users’ financial details as well as asking a number of behavioural economics based questions to make investment recommendations.
It will advise some savers not to invest if it is not appropriate.

The move mirrors a move by RBS, which launched “fully regulated” robo-advice service last month, making it the first UK bank to offer personalised recommendations through a digital advice service. HSBC and Barclays are expected to follow as they develop their propositions.

UBS head of Smartwealth Nick Middleton says: “People often have unrealistic expectations about what they can do with their money and often their time horizon is too short for what they want to achieve. We will tell people if they should not invest.”

UBS has historically never accepted clients with wealth of less than £2 million. The launch of its app in February saw its services opened up to those with as little as £15,000 for the first time.
Middleton says: “We realised that made no sense, because by the time someone has accumulated £2 million in wealth they will have an adviser and they won’t change that provider.
“What we are noticing is that while our existing clients are not switching to robo-advice because their needs are complex, their children and grandchildren are choosing to use us.”

The robo-advice app recommends users one of five multi-asset strategies and the choice of investing using active or passive funds, with all-in fees typically 1.8 per cent and 1.2 per cent respectively.
Co-head Shane Williams says giving personalised advice is important because investors often under or over-estimate their risk appetite and time horizon and make the wrong investment choices.
Currently the system offers general investment accounts and Isas, but there are plans to launch a Sipp and Junior Isa as well as expanding beyond the UK.

Robo-advice currently accounts for just 0.9 per cent of all non-advised assets which are managed online.

Research from financial guidance website Boring Money estimates that robo-advisers have some £1.7bn assets under administration with an average account size of £20,500.

Boring Money founder Holly Mackay says: “I think 2018 will be the year we see the bigger brands start to compete in the robo space. With average customer acquisition costs of £250, revenues of less than 1 per cent and low average account sizes, building a robo-adviser from scratch is not an easy game to win.”