Is UBS’ robo advisor worth the extortionate management fee?

With fees almost double the average fintech robo, does this bank run service provide bang for buck?

Is UBS’ robo advisor worth the extortionate management fee?

Swiss private banking giant, UBS, recently launched its very own robo advisor named SmartWealth – targeting the UK mass affluent sector.

The management fee for its active management service is notably higher than fintech competitors – 1.7% as opposed to less than 1%.

UBS claims that its service truly offers financial advice to clients as opposed to being merely an online discretionary portfolio manager. Allegedly filling in the “advice gap” in the UK that has been created post RDR. But I’m yet to be truly convinced.

During a demo at the service’s launch on Monday evening, I was shown how the onboarding process uses artificial intelligence (AI) and neural linguistic programming (NLP) to properly access a client’s risk appetite.

The service also included a system which allowed clients to access the feasibility of their spending aspirations – buying a sports car, or second home, for example.

Yet it struck me that this is not too dissimilar to what Nutmeg is doing. Perhaps the technology is a little bit more sophisticated, but real financial advice always needs to be bespoke – especially from a tax obligation perspective. Yes, the UBS technology is impressive, but I’m not convinced that it’s sophisticated enough to replace a high quality IFA.

What you do get with the UBS run robo advisor is the ability to leverage the bank’s vast asset management division. However, with the fees being so high, performance will have to be extremely good to legitimise the cost.

The key differentiator from the investment perspective is that the portfolios are actively managed by hundreds of experts, as opposed to the standard collection of index linked ETFs that most fintechs provide robo clients. But one must remember that over 80% of active managers fail to beat benchmarks – so in theory, clients could be lumbered with higher management fees paired with lower returns.

Only time will tell, and if I was a prospective client with the £15,000 entry requirement available to invest, I would be holding out for a year to see what the performance figures are. If I had a crystal ball, I would expect the results to be impressive – after all, this is the world’s largest wealth manager we’re talking about.