Longtime UBS partner Sigfig isn’t worried about getting awkward following the $1.4 billion sale of Wealthfront to UBS, according to Mike Sha, co-founder and CEO of Sigfig. Even though Wealthfront brings its highly acclaimed engineers to UBS, Shaw is confident that Sigfig’s 175 employees will be needed to provide technical know-how to UBS when Wealthfront’s digital investment platform is linked with remote advisors. Planning to deploy in conjunction with latest purchases. To make itself even more imperative, Sigfig has launched a lead-generation software called Discover, and plans to deploy a remote collaboration tool called Engage.
Sigfig’s role as UBS’s outsourced digital intermediary and developer as well as capital recipient has spanned over the years.
In 2016, UBS was part of a $40 million fundraising round for Sigfig, as robo advisors arrived to capture marketshare and fundraising dollars. According to an announcement by UBS, the same year the two firms “agreed to create a joint advisory technology research and innovation lab where companies will continually collaborate on new wealth management technology tools”.
In 2018, Sigfig designed UBS Advice Advantage, the first digital consulting platform collaboration between the two firms. According to UBS CEO Ralph Hammer, on a recent earnings call, Advice Advantage is still used today by “a high wealth segment” that expects to use Wealthfront.
The strength of the UBS-Sigfig partnership will continue to grow, Sha said. They expect UBS to call on Sigfig’s design expertise after closing its purchase of Wealthfront. In that case Sigfig’s anticipated mission would be to connect the software-centric world of Wealthfront with the human-centered world of UBS.
Sha said she was privy to “what the plans are and how”. [the Wealthfront acquisition] is going to work,” adding that he was speaking as CEO of Sigfig and not as a representative of UBS.
“Wealthfront has always been in the news about the fact that it is not about the advisory; it is about the technology,” he said. “If you think about the technology that they have built, it is probably reflects that attitude.”
“UBS cares a lot about advisors. That’s their bread and butter,” he continued. “Wealthfront has got some cool technology that automates a bunch of stuff. That’s great.”
“aim [UBS is] There is going to continue to be a desire for really great technology that helps consultants do their jobs well,” said Sha. “And Sigfig has been an important partner of theirs in that quest.”
UBS declined to provide additional comment for this story. ,Tea [Wealthfront acquisition] Subsequent comments during the release we made and our earnings [call] was wide enough,” said UBS spokesman Huv Williams. Sigfig was also not mentioned by name.
Wealthfront did not return a request for comment for this story.
Sigfig’s partnership with UBS may soon fall apart
Analysts don’t share Sha’s optimism. “You can’t have two service models,” said Alois Peerker, director of wealth management practice at Eight-Novarica Group, following the announcement that UBS would be buying Wealthfront. They feel that Sigfig is undermining its importance to UBS.
In fact, Sha’s confidence in the talent of Sigfig engineers and its long-term partnership with UBS was undermined by Hammer’s praise of Wealthfront’s developers on a recent call with analysts.
,[Wealthfront’s] The engineering culture will help us deliver our services through Wealthfront’s current offering, but also for new offerings to come,” said Hammer. [we] There will be ample opportunities for long-term value creation.”
He cited Wealthfront’s tax-loss harvesting capabilities, cash sweep features and direct indexing—all relatively standard automated investment offerings—as examples of Wealthfront technologies that UBS will soon use.
But UBS already has access to tax-loss harvesting and cash sweeps through Sigfig, raising questions about the technical prowess and rationale behind UBS’s purchase of Wealthfront.
UBS has a history of thwarting digital investment advice initiatives. In 2017, it launched its own in-house automated investment advice platform, SmartWealth, only to close it the following year. It sold the intellectual property to Sigfig in 2018.
UBS’s SmartWealth flop was top of mind after the Wealthfront deal was announced. JPMorgan analyst Kian Abuhosin asked Hammer to describe the difference between Wealthfront and SmartWealth. How we should think about your digital robo investment [for] Tea [mass] Swarm five years from now? Or six or seven?” he asked.
UBS hopes to avoid the issues affecting SmartWealth by operating Wealthfront as a separate entity, with less focus on profitability than other aspects of its business, according to Hammer. “If You Expect” [profit and loss] To come from that kind of business in the first five years, basically you’re setting it up for failure because it’s not going, it’s not going to happen,” he said. “Because even if it’s digital, you need to scale.”
Wealthfront was founded in 2008 and has $27 billion in client assets on its platform. Sigfig was founded in 2012 and has a net worth of over $1.4 billion.
sigfig branches out
In recent years, Sigfig has grown beyond its flagship offering of automated digital investment advice. It now has a lead generation service called Discover and plans to launch a digital collaboration tool called Engage later this quarter.
“It makes more sense for us to provide an integration layer,” said Sha, outlining a niche that would see the automated investment platform provider act more as a digital mechanic than a creator of wealth management platforms. “We can really help you integrate into your digital experience.”
In addition to UBS, Sigfig works with Wells Fargo, Citizen Financial, Cambridge Savings Bank and Scotiabank. Last year it also designed automated investment platforms for Santander. But future customers could easily be an RIA roll-up, he said.
Sha also sees Sigfig’s potential to design and build wealth management platforms for third-party vendors and firms used by gig workers. For example, a sale on Amazon or Shopify can earn proceeds directly into a wealth management account, rather than waiting for the money to be deposited into a merchant bank and then transferred to an investment account. “You can go upstairs,” he said. “closer to the source of accumulation of that wealth.”
The future of UBS and Sigfig will unfold in the coming months, but Shaw doesn’t want to wait any longer to distance his firm from companies such as Wealthfront, Betterment and Personal Capital.
“We’re like a very different kind of company,” he said. “Now we have a variety of solutions. [We are] Helping the world think about the need for new technology that goes beyond just algorithms for managing money. ,
