FaceBook  Twitter

via efinancialnews.com— UBS on May 31 emerged as one of the investors in a $40 million funding round for US-based robo-adviser SigFig, underscoring the growing activity by large financial institutions in the digital advice sector.Other investors in the funding round included Santander InnoVentures, Eaton Vance, Bain Capital Ventures, Union Square Ventures and Nyca Partners.

The investment came a week after UBS announced its partnership with SigFig to develop technology and tools that can be used by its advisers to service the group's wealth management clients. The project will initially be piloted with advisers in the group’s US-based Wealth Advice Center and will be fully rolled out to all of its 7,000 US advisers in 2017.

Other large firms including BlackRock, Fidelity, Vanguard and Schwab have all made moves in robo-advice over the past year.

FN spoke to Rich Steinmeier ’96, head of emerging affluent and the Wealth Advice Center at UBS Wealth Management in the Americas, about the latest investment, as well as plans for the partnership.

Why did you back SigFig? How did it stand out compared to other companies in the space?

There are a number of capabilities that we looked at as we assessed the marketplace. We thought their technology was second to none and specifically their design principles are very consistent with ours. We think that is important as we look at high net worth and ultra-high net worth clients.

Near the top of the list for us was also the fact they have a customizable algorithm. Our philosophical approach here is that we believe that we have very strong intellectual capital in portfolio construction, portfolio management and securities selection. As we build the product together, we wanted to leverage their algorithm to get the efficiency, but we thought we needed an algorithm that could actually be customized and could receive, at the core, our intellectual capital.

Additionally they have leading mobile and tablet capabilities. We know that our clients are going to increasingly engage with our advisers through multiple portable factors, mobile, tablets and even wearables, and SigFig has a very robust set of capabilities. Lastly on the technology, they have a very robust set of personalized marketing capabilities.

Aside from technology?

When you look at SigFig as a company, outside the technology, it has a philosophical belief that financial advisers will continue to be at the hub of client relationships, and that they will be supported by technology. We believe this strongly as well. This is not about introducing a robo-channel, this is about partnering with a company that has outstanding technology to help our advisers more deeply engage their [high net worth] and [ultra-high net worth] clients. The fact that they share that belief was very important to us.

The management team is very strong. If you look at their background, where they have come from, you have the who's who of Silicon Valley on the management team: representation from Amazon, Facebook, Google, and it is a seasoned management team that understands fintech. We think the partnership with the depth of our understanding of wealth management and our clients will come together very nicely.

Why did you invest and not just partner with them, or become their client?

We believe that it was important to solidify the partnership, not just as a client. We believe that this is ultimately not a short-term space. We think that fintech is a long-term evolution into our industry. We believe passionately in their philosophy, in their management team and that a deeper linkage through a strategic partnership would be mutually beneficial for both UBS and SigFig.

Why is it important to offer more digital services to high and ultra-high net worth clients through advisers?

While the adviser is central, clients need to be able to engage online, through mobile, through tablet, potentially even through wearables. We want to be the hub of our client's online experience and, to do that, we want to provide them with a view of their full financial picture. That is why SigFig’s aggregation functionality was important: so that our clients can understand not only their holdings at UBS, but their holdings at other financial institutions in one place; so that we can help them contextualize those holdings into one set of insights into their full financial life and ultimately help them achieve their goals.

Is this robo-advice then?

I don't know that we necessarily think of it as robo, but we think of it as digital advice delivery. We know that it is a fast-moving space and that the development and evolution of this market is measured in months not years. So it was important for us to get to a player who has very frequent release cycles, has the ability to rapidly prototype, test and get to market, which is a real strength of SigFig.

Are we at the point where clients would switch adviser because another has better technology?

I don’t know that we are at that point where a client would switch advisers. I think the relationship between an adviser and their client is really the glue that binds. But we recognise that this has gone from a low hum to maybe a quiet rumble and we need to arm our advisers with these capabilities because, at some point in the future, this is going to be a decision factor.

How does the algorithm part work? Will each adviser be able to customise the algorithm?

Our expectation is that, as we first launch this inside of UBS, it will be controlled centrally. There is a capability to ultimately customize this at the adviser level that we like, but that won't be in our first iterations.