How UBS built its digital financial management service SmartWealth 'like a startup'

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© UBS

How two people within UBS pitched the robo-advice business for seed capital and built a digital wealth management service from scratch in just twelve months

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In November 2015 Shane Williams, a resident technologist at the world's largest wealth manager UBS, entered the Swiss company's head office at 45 Bahnhofstrasse in Zurich and stood in front of the group innovation board.

Williams was pitching for money to build a startup called SmartWealth. The difference is, this was to be a business-within-the-business at UBS, and a means of democratising the sort of investment advice the organisation has been providing to millionaires and billionaires for over a century.

Now the co-head of UBS SmartWealth, Williams told Computerworld UK that he wanted to replicate what he was seeing in the USA with the rise of robo-advice -- essentially entrusting algorithms, instead of a wealth manager, to make and manage investments for you, significantly reducing the sort of fees that has made investing unreachable for most people.

The group innovation board liked the idea, and gave Williams some seed capital to go off and build a minimum viable product, and a team capable of doing it. "We pitched the idea of what we had done that was more than an app. We pitched it as a business, as you would to a venture capitalist, and positioned it as the construct of an entire digital business," he said.

The first step was engaging with London-based design agency ELSE to wireframe the platform. "We designed it from a blank sheet of paper. This is not taking something we already had and trying to fit it into a nice interface," he said. "It is really building it from the ground up and asking what is best in class."

Next Williams built out the team "with marketing, data science, engineering, the UX team". In under a year SmartWealth had gone from a two-man operation to an 80-person business and the SmartWealth service was launched as a minimum viable product in November 2016.

Read next: UBS developing AI tool for investment research

So who is the target market? Building an investment platform that is purely digital allows UBS, and other robo-advisors, to charge drastically lower fees, which means lower barriers for entry for investors. Whereas UBS traditionally wouldn't touch anyone with less than £2 million in worth, SmartWealth is aimed at the "mass affluent" market of professionals with at least £15,000 to invest.

"We wanted to give the offering to as many people as possible, but because of what you get, SmartWealth is a premium service."

Surprisingly enough the client advisors being disrupted by SmartWealth within UBS have been pretty welcoming of the new channel, Williams said. "What they are seeing now is that we are a vehicle for prospects. A chance for people to try UBS before they come in and develop the sort of complex financial needs where they require an advisor."

The technology

Next, Williams engaged existing business units at UBS to create a set of APIs, which he could quickly leverage and plug into the SmartWealth platform.

"There was some work done in Switzerland around investor profiling to find the psychology of people, beyond just how much you have and could lose if the market went down, to how you feel about it," he explained. "We basically took that work and the wealth planning modules and got the bank to wrap a nice API on top."

From the start SmartWealth has been built on a progressive microservices architecture, there is AI embedded within the onboarding process, and the development team runs on monthly sprints for feature releases.

UBS is still a Swiss bank though, so this isn't built in the cloud. "We have got a small internal cloud and everything is on-premise on our own servers, so no AWS or cloud-based services," Williams said, "those servers interact with other services within the bank behind the firewall.

"For us the fastest way to spin up and get going was to utilise those servers internally as we have high requirements for security and those servers are already hardened. That doesn't mean we wont go to the cloud in the future."

How does it work?

The 'robo' part of SmartWealth comes with automating large parts of the onboarding process, which is self-serve, via a chat interface.

Williams explained how it works: "The process is we assess your financial situation, so earnings, how much you have saved and what you have invested; that is the factual part. The next part is the behavioural finance part, where we start to assess loss aversion, uncertainty aversion; all the unconscious biases that you make."

SmartWealth doesn't offer the popular "slider" interface seen at UK rivals Nutmeg or Wealthify, when it comes to assessing risk though. "People will always pick the higher number," Williams explained. "Where in fact it is based on risk, so are they prepared to lose an amount as well? So rather than answer questions, which can be affected by unconscious bias, we actually use pictures and charts to find the tipping point.

"So you keep choosing and the charts keep changing, using numbers you have already provided to find your tipping point, rather than answering A, B or C."

Then customers get access to UBS funds, which are anything but "robo". SmartWealth customers are actually plugging into the wealth planning department at UBS, "so we took some of the technology that they had for projecting the future using Monte Carlo [algorithms], but it's what our chief investing office says the future will look like.

"So this is two hundred analysts trying to predict the short and long term view of the markets and create asset allocations for a ten year strategic view and monthly tactical views. We do that anyway for the millionaires and billionaires, and with SmartWealth you tap into that.

"Once you are in you are in the largest wealth manager in the world and they are managing your wealth like they would do for everyone else. That is a big difference compared to others."

In short though, SmartWealth invests your money in a range of funds composed of liquidity, bonds and equities, both within a tax-free ISA wrapper and as taxable core investments.

Users are then charged an annual advisory account fee, which ranges from 0.25% for investments below £100,000, to 0.15% for between £100,000 and £250,000, and 0.1% for anything above £250,000.

You will also be charged On-going Charges Figures (OCF) which include the costs of the fund itself and will vary depending on the funds themselves. See the SmartWealth FAQ for a deeper breakdown of the fees.

You can then enter financial goals, like your children's education, buying a second home, a dream car, and check in on the app to see how your investments are tracking, on desktop, mobile or tablet.

Competitors

UBS launched SmartWealth in the UK because of "a progressive regulator, high digital affinity with financial products and the talent for development in London", Williams said.

UBS plans to expand the service internationally from day one, but the next locale has yet to be decided. "We are going through an exercise of planning where to go next but nothing has been decided. We knew that would be the case from the beginning so before the first line of code we knew it had to be multi-language entity, multitenancy platform," he said.

SmartWealth is unique in that it is entering a market where the incumbents are pretty much all startups. Here in the UK the major names in the robo-advice world are Nutmeg, Wealthify, Moneyfarm and Moneybox.

A key difference is that SmartWealth actually provides advice, and redress if it doesn't go well. Competing robo-advisors are discretionary services that manage a user's money for them.

Where UBS can make SmartWealth stand out is off the back of its trusted brand. "So startups have that speed but they don't have the brand, so the cost of acquisition is a big problem, which is why a lot of the VC capital is spent on marketing and brand building," Williams said.

And when asked if having the financial cloud of UBS -- with around £757 billion in assets -- behind him gives them an advantage over its rivals, Williams was bullish: "To be honest if I look at some of the venture capital figures the startups get, I am rather jealous of them. Look at how much Nutmeg have to work with [nearly £70 million to date].

"There is always that perception that the big companies have the biggest resources, but it is probably not exactly the way it is in reality."

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