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Robo-advice has bright future despite UBS SmartWealth closure, says GlobalData

According to Sergel Woldemichael, Wealth Management Analyst at GlobalData, competition in the UK robo-advice space is fierce, and providers of day-to-day banking remain the go-to for arranging investments. A strong brand and reputation can help win clients, but UBS is not a universal bank appealing to a mass market...

Following UBS’s sale of its SmartWealth platform in the UK, the latest in a series of robo-advisor closures, Sergel Woldemichael, Wealth Management Analyst at GlobalData, offers his view: ”This latest closure is not the end for automated service: robo has the future, and UBS provides lessons to learn.

“Competition in the UK robo-advice space is fierce, and providers of day-to-day banking remain the go-to for arranging investments. A strong brand and reputation can help win clients, but UBS is not a universal bank appealing to a mass market.

“As the average account balances of the biggest UK robo platforms suggest, robo is currently mostly a mass market game. Setting fees at up to 1.8%, while most UK robo-advisors charge less than 1%, did not help SmartWealth to attract price-sensitive retail investors either.

“High net worth demand for robo-advice is on the rise, according to GlobalData’s 2018 Wealth Managers Survey, but more so for the next generation of clients. This proves there is still a market for digital investment platforms, but robo-advisors in general may be ahead of their time.

“While robo-advice is here to stay, it will take time to cement itself. The digitally-savvy next generation will embrace an automated service and big banks should capitalize on this. However, a big brand is not enough to justify much higher fees. To succeed, incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by startups.”

Next Finance 3 September
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