UBS is partnering with the technology developer SigFig to launch a robo platform for its 7,000 advisers, making this one of the most high-profile deals of its kind between a wealth management firm and a tech startup.
UBS' partnership with SigFig, which met with top UBS executives in Silicon Valley last summer, is also the first of its kind among the large brokerages.
UBS said it is not creating a standalone robo-adviser; instead, the partnership with the startup will boost the available tool kit for the firm's advisers and their productivity.
"Our view is that the technology that SigFig is building will enhance the ability of an adviser to better manage a client's money, allow them to better collaborate with clients," said Tom Naratil, president of UBS Americas.
The two firms will begin by piloting new technology in UBS' Wealth Advice Center, which assists the firm's smaller clients.
"It's a controlled environment and will allow us to see how it performs," Naratil said.
ON THE EDGE
UBS is not the first high-end brokerage firm to strike this type of deal. RBC's U.S. wealth management unit, which counts about 1,900 advisers, announced a similar partnership earlier this year with BlackRock's FutureAdvisor.
However, the UBS-SigFig deal is of a greater magnitude as the company has roughly $1 trillion in assets under management — executives say their goal is to be the firm of choice for wealthy clients. UBS is also making an equity investment in SigFig and creating a jointly run Advisor Technology Research and Innovation Lab.
That investment in developing new technologies may prove critical in the coming years because while robo technology has been more typically associated with smaller accounts, the digital preferences of mass-affluent and wealthy clients are evolving rapidly.
"As client needs and desires start to change — and it will change quickly as they experience new technology — we will be able to meet those needs and desires very quickly," Naratil said.
Meanwhile, the robo field is evolving at an equally fast clip, yet still being viewed as primarily a robo-adviser to client service, said SigFig CEO Mike Sha, who formerly worked at Amazon.
"Robo-adviser is a small piece of the way we think technology can impact industry for the better," he said.
Sha said one way to understand the changing dynamic is to think of it as old tech and new tech. Under the old paradigm, firms would engage in huge multiyear, multimillion-dollar projects and then move on to the next moon launch.
"But we live in an age where we are deploying new features and new technology constantly," Sha said.
Naratil gave a similar assessment, noting how frequently contemporary technology firms are rolling out new apps, features and updates.
However, Sha said, SigFig and other firms suffer from certain limitations. SigFig's goal is to help clients improve their financial lives. But Sha noted that the costs of client acquisition are high and that winning clients' trust and cultivating relationships is hard.
"That's not ultimately a great use of venture capital dollars," he said.
And that makes teaming up with a firm of UBS' scale necessary.
"On our own, it would be hard to serve the high-net-worth client segment. But in partnership with UBS, it's quite possible," Sha said. "We believe the net result will be happier clients and happier advisers."
'BRINGING THE BEST'
UBS may have been able to move more quickly than some of its competitors on a robo service because senior leaders took a keen interest in the fast-changing robo space. Last summer, Naratil's predecessor, Bob McCann, UBS CEO Sergio Ermotti and other executives went to Silicon Valley to meet with SigFig and other firms, according to Naratil.
SigFig stood out in follow-up meetings because of the quality of the management team as well as an alignment of vision and capabilities, Naratil said.
"What really made the lightbulb go off for me, as we went around the table talking with Mike and the team, and their backgrounds, and they were saying I worked at eBay, I worked at Amazon or Twitter," he said. "All their work experience was on stuff that we don't do that well, which was all client-interface technology."
Naratil, who became president of UBS Americas in January, also credited the firm's willingness to look outside itself in order to acquire the best tools and solutions for its advisers.
"It's a true statement of open architecture," he said. "Not just product, but intellectual. It fits with our culture of bringing the best to our advisers."