When one of Shane Williams’ three sons recently asked him how to make money, the UBS SmartWealth co-head replied: ‘You don’t need to make money you’re an 11-year-old’.
This did not discourage his son from spending three weeks on a Lego-like computer game however, building something for another player, only to be refused payment at the end.
Williams sees this as a good life lesson when building anything – make sure you have the right support behind you. This is certainly a principle he took to heart when taking the job developing a robo adviser for UBS, with its £1.6 trillion in client assets.
‘There is obviously a big engine that runs through our investment process and chief investment office. Getting access to SmartWealth means you get that scale. We don’t have to build that scale – which is very different from a start-up, where they would have to do that themselves.’
This seems to be a life lesson robo advisers – unlike Williams’ young son – have on the whole failed to learn. Attempting to corner a growth market, a series of undifferentiated offerings burned cash. As more and more rivals have launched, cracks in this model have started to show.
The unsurprising crunch point tends to be profitability and funding, with Nutmeg the posterchild for repeated funding rounds as it sought the huge client numbers needed to make low fees add up.
The protective umbrella of UBS takes some of these pressures away. ‘The difference between a start-up and a larger organisation is the philosophy. If you have a start-up, what you are looking for is to grow and as a founder – and especially if there are investors – you are looking for an exit to get a return on your investment. So there is always pressure from venture capital when you are in a start-up. With UBS we can take a longer-term view and we can really develop the product.’
Development of the service began in 2015 and Williams and his co-head Nick Middleton were able to roll out the product for a number of clients at the beginning of 2016. The service was fully launched in 2017. He says it has been an interesting journey because he has been working on SmartWealth from the start.
‘There was an innovation group in Zürich. I was actually on the technology side and that innovation group was on the business side,’ he says, adding that the two convened to discuss how they could build something incorporating the lessons of the first, frontier generation of robo developers.
‘So that conversation started and then within UBS there is a group innovation board that gives funding for ideas and experiments because you don’t really know whether something will work.’
This stage is important because Williams is not convinced that something like SmartWealth would necessarily get through a formal governance process. However, the innovation board liked his first pitch and decided to give the idea a fighting chance by agreeing to fund it.
‘The funding wasn’t that much. It was probably around the same as you would get from early seed funding.’ This was enough to secure the service of an experienced design consultancy, ELSE.
‘The reason we used that one is that they were an experienced design agency, that had done a little bit of banking work but they had never done anything on wealth management.’ This was of particular appeal to Williams, he says, as he was keen to get an outsiders’ view.
‘If everything was from people who work very closely with wealth management then in effect you get the same as you always got before. What we wanted to do was challenge ourselves with that external agency.’
Having that outside force challenging and questioning SmartWealth’s proposition was a key aspect of its development.
‘ELSE worked really well because they were actually positively naïve. They were always asking why are you doing that, why are you doing this, and they were really focused on the customer, which is important.’
By the end of 2015, Williams and his colleagues began to build the business beyond what he describes as a fancy website.
Williams leveraged a lot of technology from the bank – such as using AI and natural language processing to create an intuitive enrolment process, which clients should be able to complete in roughly 10 minutes.
This all led up to a second pitch – the big one – to UBS’s executive committee in November of that year. It seems to have been a relatively easy sell given Williams’ new product would open up a whole new market for the bank.
‘UBS is obviously the biggest wealth manager in the world. What we wanted to do was to bring that to as many people as possible.
‘We do that now for clients with £15,000 or above to invest, whereas traditionally for wealth management it would be £2 million. That means a lot more people have access to our investment process and really all of the power of UBS.’
He adds the team built the underlying model to be scalable, multi-language, and have the ability to be quickly adapted to operate in a range of regulatory environments. Following the proof of principle in the UK the firm is currently looking to rapidly expand the product into its other markets.
Williams would not reveal the front-runners, but did say expansion plans were in the very late stages.
Because of the digital nature of the business, he thinks this can be done without significantly adding to SmarthWealth’s 55 members of staff and with a limited impact to the cost of running the robo adviser.
Williams pitched to then chief executive office of UBS Wealth Management Jürg Zeltner who gave the venture the green light.
‘That support gave us air cover from above and they’ve given us the freedom really to innovate and do things that allow us to build this best-in-class platform solution, and do so in ways that weren’t really being done at the time.’
Another area Williams sees his robo adviser having an edge over the competition is that as a firm, UBS can offer more products as a client’s wealth grows.
‘The thing about having a big wealth manager behind you is there is a path to complexity for the entrepreneur.
‘If you’re an entrepreneur and you’re with UBS SmartWealth and then you have an exit event, then actually your needs might become more complex. So you might need structured products, for example, that means you might want to move onto having an adviser and access to a lot more products. They have got a path through to the traditional wealth management business.’
Williams adds this also means, unlike other digital wealth firms, there is significantly less pressure to hold on to clients.
‘We focus on the client needs, but we are not trying to hang onto them if they need to change.’