Amid challenging revenue environment, restructuring continues to be the core agenda for most global banks. UBS Group AG (UBS - Free Report) is on the verge of shutting down its British digital wealth-management platform, SmartWealth. Moreover, the intellectual property rights of this service will likely be sold to Silicon Valley-based SigFig — “a financial technology firm that the bank has an equity stake in” and had been “working for two years in the U.S.”.
Financial terms of the deal remain undisclosed.
The discontinuation of the SmartWealth pilot program comes on the heels of limited potential of the service in the near term, per an internal memo.
SmartWealth, the automated online-investment service, was initiated in March 2017 by the Swiss Bank. The launch formed part of a $1-billion investment by the bank for young clients and others having less money for wealth-management business.
Notably, the platform was created for investors with minimum investment worth £15,000 ($19,300). Moreover, similar to robo-advisors, this service was a low-cost option for investors aimed at helping those who prefer managing their investments themselves. The program created substantial clientele for UBS Group AG providing digital real-time advice to investors increasing its wealth-management customers. In addition, last December, the bank was planning to broaden the program.
Nevertheless, SmartWealth, dissimilar to other robo-advisers, came with a mix of active and passive funds for investors which escalated costs for the bank as compared with other apps. Furthermore, with the creation of one global unit merging the North American and international businesses, as part of its wealth-management reorganization, UBS Group AG planned the platform’s closure for using the resources in a more refined way.
"While we were satisfied with the initial commercial progress, at this time we believe the near-term potential is limited and have therefore decided to close our digital-only offering in the UK," Eva Lindholm, head of Wealth Management U.K., and Reto Wangler, chief operating officer of Global Wealth Management, said in the memo.
Post the global financial crisis, UBS has been undertaking strategic restructuring measures and has gradually shifted focus on fortifying its wealth-management business, in order to reduce reliance on capital-intensive investment banking. Apart from streamlining operations, the company has been reducing headcounts in several units. Therefore, such moves are anticipated to reduce costs and drive revenues.
Among others, U.K. retail banks are also entering the market. Royal Bank of Scotland (RBS - Free Report) rolled out robo-advisory services through its NatWest Invest platform last year. Further, Lloyds Banking Group, Nationwide and Santander are about to initiate such services.
However, banks in the United States started this fairly early. A few U.S. banks having similar services include Charles Schwab (SCHW - Free Report) and Bank of America (BAC - Free Report) . These have existed for some time now and provide services at a cheaper rate.
In six months’ time, UBS Group AG’s share price has declined 16.2% on the NYSE as compared with the 13.4% fall recorded by the industry.
UBS Group AG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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