UBS Group AG, the world’s biggest manager of money for the wealthy, is going downmarket in a bid to scale up.
Starting next month, the Swiss bank will give some UK customers with as little as £15,000, or about $18,000, access to an online service that invests their money based on information they provide about themselves. In time, other countries will be included in the “SmartWealth” platform, with the full UK roll-out set for early 2017.
The project is part of a global drive to expand the bank’s wealth-management business, in particular by taking advantage of advances in digital technology. UBS manages $2tn of client assets, mainly for high net worth and ultra-high net worth people, typically those with at least $2mn and $50mn respectively to invest.
“This is a growing area for our business and I see it increasing in relevance, as well as extending to other locations over time,” said Edmund Koh, head of wealth management in the Asia-Pacific region, who is leading the push. UBS is also opening its doors to the merely affluent in Germany and Taiwan, through different programmes.
Switzerland’s largest bank is under pressure from record- low interest rates and the growing tendency of the wealthy to hold cash rather than put their funds to work in trades or other investments because of economic and political uncertainty.
The bank’s wealth-management unit has repeatedly missed analyst profit estimates, forcing Chief Executive Officer Sergio Ermotti to step up cost cuts, including layoffs.
“UBS is growing mainly because of high and ultra-high net worth clients,” said Andreas Brun, an analyst at Mirabaud Securities in Zurich. “It’s little-known in the retail and mass affluent segment outside of Switzerland and has low penetration because of that.”
Unlike in traditional wealth management, clients won’t be going into a branch and will be able to manage their assets entirely online. While British customers with just £15,000 will be able to use the platform - a nod to the particularities of the country’s pension system - ideally UBS wants to nab people with at least £100,000 to invest.
Other banks are turning to technology to reach investors. Deutsche Bank AG and Morgan Stanley are building robo-advisers, algorithms that help people build and manage portfolios with little or no human interaction.
At UBS, “the investment decision is not ultimately made by a robot,” said Dirk Klee, chief operating officer of the wealth- management unit, said in an interview. “These are experts’ opinions delivered through a digital channel.”
Clients will pay more for that. UBS said it will charge a fee of about 1.7% on assets for an actively managed portfolio and about 1% for a passive strategy, or one that mirrors market indexes.
The fees decrease the more a client invests. Robo-advisers typically cost less than half the fees of a traditional brokerage.