Robo-adviser SigFig is expanding its reach outside the US following its acquisition of UBS SmartWealth, a UK digital advice platform.
The San Francisco-based robo will get access to SmartWealth’s technology and its team’s knowledge of UK banking and compliance. The deal will also give SigFig access to SmartWealth’s high-net-worth and ultra-high-net-worth clients in Switzerland, China and the US.
The challenge of complying with foreign regulatory regimes has kept other US robos from expanding into other markets, said Sean McDermott, senior analyst at Corporate Insight.
“SigFig may be able to move quickly into new markets because they have a strong support system in place with SmartWealth’s technology and team,” he said.
UBS, which launched SmartWealth in February 2017, must have realized it wasn’t a lucrative area for them, McDermott added. Furthermore, UBS has an equity stake in SigFig and wants to see the business succeed, he said.
Defined contribution plan executives, providers, tech firms and academics are all giving “gamification” techniques a closer look in hopes of driving participant engagement and financial literacy.
“Over the past few years there has been an increase in elements of gamification within the digital retirement space,” said Olivia Jack, New York-based retirement industry analyst at market research firm Corporate Insight Inc.
Gamification elements, which include online games and challenges, peer comparisons and interactive education tools are all “cropping up” on record keepers’ participant websites and mobile apps, she said.
Much of this stems from the industry’s focus on finding ways to get more employees thinking about and preparing for their financial futures, Ms. Jack said.
Driving engagement among defined contribution plan participants “is definitely one of the most prevalent conversations across the industry for sponsors and record keepers,” she observed.
While “a lot of (the) rhetoric in the retirement industry has been around ‘setting it and forgetting it,'” gamification techniques “can encourage participants to go on their retirement websites and check if they are on track to meet their goals,” Ms. Jack said.
The investment market comprises all establishments engaged in managing various investment related activities such as securities underwriting, stock brokerage and wealth management service. The investment industry is categorized on the basis of the business model of the firms present in the industry. Some firms might come under multiple categories. The investment market in this report is segmented into Wealth Management, Securities Brokerages & Stock Exchanges and investment banking.
The demand for automated or robo advice is growing rapidly in wealth management services. Automated advice is an online wealth management service which provides automated or algorithmic investment advice without any human intervention. This is becoming popular mainly because robo advisors are relatively cheap, compared to traditional wealth management services. Though robo advice is not entirely new, it is recently gaining traction amongst users. According consulting firm Corporate Insight, total assets managed by the 11 leading robo advisors in the US rose 65% during 2014, and registered assets under management (AUM) reached $19 billion.
Robo-adviser Betterment has moved from simply running plain-vanilla exchange-traded fund portfolios to incorporating smart-beta, alternatives and now potentially commodity ETFs.
After a concerted move from digital to hybrid, Betterment has been serving up model portfolios from BlackRock and Goldman Sachs Asset Management since 2017, alongside its own models. The robo is reluctant to extend the list of outsourced portfolios unless it sees a need, Huang said.
“The barrier for us to bring in other model portfolios is pretty high,” she said. “We have to see how it sits in our platform, and if it adds a differentiated value to our customers.”
Adding BlackRock’s and Goldman Sachs’ model portfolios is a win for Betterment because it strengthens their legitimacy in the eyes of investors, according to Sean McDermott, senior analyst at Corporate Insight.
For June’s celebration of Pride Month, I was part of a valuable discussion about the intersection of LGBTQ and fintech. My fellow panelists and I celebrated Pride and gains in diversity and inclusion, and talked about how to be momentum-drivers, not only in our organizations but in our communities.
These conversations are critical because we are still so far behind the curve when it comes to diversity and inclusion in financial services. Part of that is the socioeconomic and demographic reality of wealth management services and the makeup of their consumer base, where shifts happen slowly, even if they should not.
But there is some positive movement. Interestingly enough, robo-adviser users are increasingly more diverse than consumers of traditional wealth management providers, according to Corporate Insight. Positive indicators and trends like this show technology is an element that can help level the playing field for individual investors.
Surveys show that millennials don’t trust financial advisors. However, surveys can be damaging, especially if their conclusions are questionable. But most consumers believe survey results because they’re easy to remember. And in a sound-bite society where content is king and most young people are short on patience and in a frenetic rush to succeed, many consumers opt not to read. Why bother when they can absorb bite-size, real-time content 24/7 on their iPhones? The average consumer hardly questions survey standards and methods, such as the number of people surveyed and whether they’re a representative sample.
A survey conducted by research firm Corporate Insight found that that the investment industry is discriminating against millennials. Based on a survey of 500 advisors, only 30 percent of financial advisors are actively looking for clients under age 40. It’s widely (but incorrectly) believed that advisors prefer older clients because they have money, and thus are not interested in millennials. It’s time to right the scales and bridge the millennial/financial advisor misinformation gap.
Offering a retirement plan is a great thing—but its value partly depends on whether employees take advantage of it. Are you using everything possible in your plan design tool kit to encourage employees to contribute as if they will retire one day? In “Opportunities Knock,” we assemble a list of five underutilized plan features that, experts say, can boost participant outcomes relatively quickly and easily. If you don’t already use these techniques, proactively running them by your committee and providers may be something you’ll want to do—it may be the panacea that gets participants to a better place.
One option any plan sponsor will want to ask about in its RFPs is a financial app for plan participants. Apps are proliferating because they make it easier for participants to engage with their retirement plan—whether that means making transactional changes or just to learn. Out of 20 of the leading retirement firms, 80% have an iPhone app, 80% have an Android app, and 65% have a tablet app, according to Corporate Insight’s Retirement Plan Monitor group. “Upwardly Mobile” delves into this more deeply.
Although usage of retirement plan provider websites has failed to become as pervasive as was expected, plan sponsors may want to note that apps are becoming increasingly important to the participant experience. For one thing, they enable access by employees without computers—e.g., those who work in the field such as construction workers or retail salespeople—who access the web via phone or tablet when at home. Mobile apps may be their only real access point, according to Andrew Way, retirement manager at Corporate Insights (CI) in New York City.
Out of 20 of the leading retirement firms, 80% have an iPhone app, 80% have an Android app, and 65% have a tablet app, according to CI’s Retirement Plan Monitor group. Firms without a phone app have designed responsive websites that users can access from their phones by logging on to the site, with the data displaying in an optimized way. However, Olivia Jack, a CI analyst on the retirement team, notes that consumers are more apt to log in to an app than a mobile responsive website.
Features to Consider
The standard offerings of participant apps, CI has found, include: participant account balance, rate of return, current contribution rate, a list of holdings, and at least a brief transaction history.
“What has become more common are mobile transactional capabilities—especially contribution rate transactions and investment election management—and mobile apps with more robust retirement income planners,” Jack says. (See chart.)
It is becoming standard for participants’ projected retirement income to display when they first sign in to their provider’s app, as is also the trend on participant websites overall. “The app displays projected retirement monthly income, what the participant’s projected monthly income goal should be, and the gap between before and after,” Jack says. “A retirement income statement is more common than modeling tools, but those[, too,] are getting integrated into more apps.”
According to Way, “People in their 40s or 50s are seeing their income projection before they look at their account balance. Account balances can be misleading. Most people would think that $1 million is enough, but if you are making $100,000 per year and you use $100,000 per year, that’s only going to last 10 years. Because of this, participants are looking at income projections as a data point and not just as a tool.”
Providers such as Voya, Fidelity and Vanguard allow for participants to integrate additional financial accounts, making their income projections more valuable. For example, Jack says, “By default, Voya includes the participant’s DC [defined contribution] plan and Social Security payments. Participants can add their spouse’s information, an annuity or other income stream for a more holistic view. But the apps/tools are beholden to what data the firm has access to. The more advanced firms allow this—some apps also include the participant’s cost of health care.”
Unique Mobile Offerings
Of the 16 recordkeepers that have created phone a app:
81% offer contribution rate transactions
62% provide retirement income projections and goals, plus gap analysis
50% have tools that update inputs and shows results for alternative scenarios
50% offer fund exchange transactions
50% provide future investment allocation management
6% offer a check scanning feature
6% allow participants to upload documents—but not checks
Initially, it was the start-ups came on the scene and crashed Wall Street’s party,” says Corporate Insight project manager Sean McDermott. “But the tables have been turned.”
Once feared as a disruptive force, in recent years start-up robos’ “entire service model” has been “co-opt[ed] … by the industry behemoths, ” he says. McDermott points to examples such as Charles Schwab’s Schwab Intelligent Portfolios and Vanguard’s Personal Advisor Services.
Valuations for major digital providers, such as Wealthfront, Betterment or SigFig, are likely too large for other financial services firms to consider, McDermott says.
SigFig is “probably the one to watch,” McDermott says, because of its success partnering with distributors such as Wells Fargo, UBS and Citizens Bank. The software provider has also received funding from UBS, Eaton Vance, General Atlantic and other financial services firms.
But the partnership route is more difficult for providers like WealthFront that have positioned themselves as outsiders, McDermott adds.
More stand-alone firms are likely to pile on with similar banking products, Corporate Insight’s McDermott says, as they try to position themselves as “a one-stop shop for all your financial services needs.”
Many robo-advisors have also expanded their portfolio offerings, adding options such as smart beta or socially responsible investments, McDermott notes. Betterment and Wealthfront both added SRI options last year, while TIAA and Morgan Stanley also offer SRI investments in their robo services.
Such changes are part of an effort “diversify their product lineup to try to appeal to a broader swath of investors and a broader segment of the different demographics out there,” McDermott says.
UBS Wealth Management rolled out a new version of its online platform for
corporate clients and equity compensation plan participants as it continues to
expand its digital-advice services.
“The launch is in line with the company’s strategy of targeting high-net-worth
individuals,” Sean McDermott, senior analyst at Corporate Insight, explained.
“UBS is looking to deepen their relationships with equity plan participants, so they
could do business with them outside company-sponsored equity programs.”
The UBS offering is the first of its kind in terms of digital advice targeting equity
plan participants, according to McDermott.
Platforms such as Betterment and Wealthfrontoffer blogs and educational content for investors but don’t have a specific defined service for employees with equity compensation plans, he said. Betterment’s premium feature offers clients the option of managing aspects of their equity plans, but the robo doesn’t have a standalone
service dedicated to such clients.