This publication interviewed the CEO and CIO of a new online wealth manager to discuss the future of robo-advisors.
The chief executive and co-founder of the new online wealth manager Tiller is surprised by the timing of UBS’ sale of UK-based SmartWealth. In September, this publication reported that Tiller is offering UBS Smart Wealth clients a discount for life. The company is offering an average 20 per cent discount to all clients opting out of the platform to shift assets to Tiller. The offer is available until 31 October.
As reported in August, UBS decided to shut the UK robo-advisory service which was launched in 2016, and sell the technology to US digital wealth manager SigFig. The sale comes after a review by the firm found that its commercial potential was “limited”.
During an interview with this publication, Ian Cadby, CEO and co-founder of Tiller, talked about the Swiss bank's sale decision as well as his firm’s plans and the future of robo-advice.
“We weren’t shocked by the fact that a large global bank goes into a new product line or business – and then pulls out – but we were surprised by the timing of it,” said Cadby. “To only do it for a year and pull out seemed strange. But when you saw the articles about it in the US – it looks like it was driven by a top-down perspective. It looks like they were probably worried about cannibalisation of their European banking platform and took the decision to pull out and sell to SigFig, a company which UBS has an equity stake in and is a specialist in the area.”
WealthBriefing also interviewed Tiller’s chief investment officer and co-founder, Jonathan Wauton, who also discussed the sale of UBS Smart Wealth.
“Why does an organisation go and buy a specialist robo-manager in the States then spend allegedly tens of millions opening a competitor in the UK?” said Wauton. “We all know that institutions do strange things, so who knows why they did? But if you now step back – and look at what they have done, which is to sell it to SigFig – and SigFig may open in the UK, then it becomes an entirely understandable rationalisation. If that is the reason – then I get it, but it begs the question as to why didn’t they do that in the first place as opposed to now?”
Cadby discussed what Tiller plans to offer former UBS Smart Wealth clients.
“My understanding is UBS Smart Wealth clients have been given 60 days to take their money and go – so we thought it would make sense to offer them a home, as the saying goes “it would be rude not too",” said Cadby. “Our service is materially cheaper – anything from 13 per cent to 26 per cent cheaper depending on the programme you chose. And we are open architecture, so it gives clients more choice.”
Tiller is a UK-based online wealth management service designed for private investors and institutional partners (private banks, wealth managers and financial advisors). It was launched in July.
There are three portfolio choices available for clients. Core portfolios (£10,000 ($13,200) minimum) are made up of exchange-traded funds. Smart portfolios (£10,000 minimum) are made up of the ETFs and actively managed funds, which are hand-picked by Tiller’s investment team. Lastly, select portfolios (£100,000 minimum) are personalised for each individual – and customers can choose from a list of 20 themes – made up of regions, classes, sectors and ethical choices.
Cadby spoke about how he and Wauton created Tiller and what it is planning to offer investors in the current market.
“We stumbled upon robo in about 2013/2014 and we thought that conceptually it made an awful lot of sense for us for wealth management to be accessed online,” said Cadby. “People are being rejected by IFAs because they haven’t got a certain amount of money, and even the higher end – UK banks like Standard Chartered said unless you have £3 million they don’t want you. What we wanted to build was two channels, one on retail - targeting “high earners not rich yet” (‘Henry’s) which is age agnostic. And a second channel that would appeal to large UK wealth managers that suddenly realised that they needed that capability, and, for an expedient route to market, would either lease it (white label) or [use] some other form of partnership. And I would suggest that is 75 per cent of our business model.”
Wauton and Cadby admitted that the first design of Tiller, even in the first Powerpoint, was to be a B2B robo-advisor.
Cadby talked about the people they were in contact with and where the firm wanted to expand overseas.
“Interestingly, we launched it in July, even from that period to today there are about four significant wealth managers talking to us,” said Cadby. “The wealth managers we are talking to are UK-based. We always thought to get UK up and running within 18 months, then we had a vision to branch out to Asia next. A couple of reasons for Asia – firstly good savings ratios, and secondly the demographic is perfect, also we know the region really well. I worked there for seven years in Hong Kong and Singapore, and Jonathan worked in Hong Kong for around five years. Also, there is a global bank’s Zurich office very interested in doing something with us.”
Wauton added: “We have had some very high-level conversations with some US-based wealth managers. We are not saying that they couldn’t or wouldn’t progress, but for us it’s about those people who understand the UK market and have an existing client base here, rather than those outside looking to come into the UK.”
Future of robo
After the sale of UBS Smart Wealth – the financial sector was questioning the future of robo-advisory services.
Wauton spoke to this publication about the future and why Tiller is coming into the sector at the right time.
“Post the UBS announcement, I think there was some discussion in the press which suggested that even the large firms are having second thoughts about the sustainability of robo,” said Wauton. “However, we have been to see a lot of very large wealth firms, private banks and insurance companies, and they are all moving into this space and you will see that over the next few years. I think the tipping point where institutions were wondering whether online wealth was going to work happened about 18 months ago."
"There is just a delay now as these institutions work out how they are going to deliver it. I would suggest that it is a total anomaly that you generally can’t buy wealth management services online. In the future, of course you will be able to do this, and these large firms around the world will offer it as a matter of course. UBS pulling out to rationalise is an anomaly not a beginning of a norm," he added.