Longtime UBS partner SigFig isn’t worried about being the odd one out after Wealthfront’s planned $1.4 billion sale to UBS, according to SigFig co-founder and CEO Mike Sha. Even as Wealthfront brings its highly praised engineers to UBS, Sha is confident UBS will need SigFig’s 175 employees to provide technical know-how when Wealthfront’s digital investing platform is linked with the remote advisors UBS plans to deploy in conjunction with its latest purchase. To make itself even more indispensable, SigFig has launched a lead-generation software application, called Discover, and is planning to deploy a remote collaboration tool called Engage.
SigFig’s role as UBS’s outsourced digital intermediary and developer—as well as capital recipient—far predates the most recent acquisition in the wealth planning space.
In 2016, UBS was part of a $40 million fundraising round for SigFig, as robo advisors rushed to capture marketshare and fundraising dollars. That same year the two firms agreed to build “a joint Advisor Technology Research and Innovation Lab, where the companies will continually collaborate on new wealth management technology tools,” according to an announcement by UBS.
In 2018, SigFig designed UBS Advice Advantage, the first digital advice platform collaboration between the two firms. Advice Advantage is still used today by “a higher wealth segment” than that expected to use Wealthfront, according to UBS CEO Ralph Hamers, on a recent earnings call.
The strength of the UBS-SigFig partnership will continue growing, said Sha. He anticipates UBS calling on SigFig’s design expertise after it closes the purchase of Wealthfront. SigFig’s anticipated mission in that case would be to connect the software-centric world of Wealthfront with the human-centric world of UBS.
Sha said that he had been privy to “what the plans are and how [the Wealthfront acquisition] is going to work,” adding that he was speaking as CEO of SigFig, not a representative of UBS.
“Wealthfront's been in the news forever about the fact that it's not about the advisor; it's about the technology,” he said. “If you think about the technology that they've built, it probably reflects that point of view.”
“UBS cares a lot about advisors. That's their bread and butter,” he continued. “Wealthfront’s got some nice technology that automates a bunch of stuff. That's great.”
“But [UBS is] going to continue wanting to have really great technology that helps advisors do their jobs well,” Sha said. “And SigFig has been an important partner of theirs in that quest.”
UBS declined to provide additional comment for this story. “The [Wealthfront acquisition] release we made and subsequent comments during our earnings [call] was pretty comprehensive,” said UBS spokesperson Huw Williams. SigFig was not mentioned by name in either.
Wealthfront did not return a request for comment for this story.
SigFig’s partnership with UBS could soon be different
Analysts don’t share Sha’s optimism. "You can't have two service models," said Alois Pirker, director of the wealth management practice at Aite-Novarica Group, following the announcement that UBS would be buying Wealthfront. He thinks SigFig is overestimating its importance to UBS.
Indeed, Sha’s confidence in the talent of SigFig engineers and its longtime partnership with UBS was tempered by Hamers’ praise of Wealthfront’s developers on a recent call with analysts.
“[Wealthfront’s] engineering culture will help us in how we deliver our services, both through Wealthfront's current proposition, but also for new propositions to come,” Hamers said. “Working together [we] will have ample opportunity for long-term value creation.”
He cited Wealthfront’s tax-loss harvesting capabilities, cash sweep features and direct indexing—all relatively standard automated investing offerings—as examples of Wealthfront technologies that UBS will soon utilize.
But UBS already has access to tax-loss harvesting and cash sweeps through SigFig, raising questions about technological prowess and the rationale behind UBS’s purchase of Wealthfront.
UBS has a history of fumbling digital investment advice initiatives. In 2017, it rolled out its own homegrown 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 following the announcement of the Wealthfront deal. JPMorgan analyst Kian Abouhossein asked Hamers to describe the difference between Wealthfront and SmartWealth. “How should we think about your digital robo investing [for] the [mass] affluent five years from now? Or six or seven?” he asked.
UBS hopes it can avoid the issues that plagued SmartWealth by operating Wealthfront as a separate entity, with less focus on profitability compared to other aspects of its business, according to Hamers. “If you expect [profit and loss] to come from a business like that 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 is digital, you need scale.”
Wealthfront was founded in 2008 and has $27 billion in client assets on its platform. SigFig was founded in 2012 and has more than $1.4 billion in assets.
SigFig branches out
In recent years, SigFig has been moving beyond its flagship offering of automated digital investment advice. It now has a lead generation service called Discover and is planning to launch a digital collaboration tool called Engage later this quarter.
“It makes more sense for us to provide the integration layer,” said Sha, outlining a niche that would see the automated investing platform provider act more as a digital mechanic than a builder of wealth management platforms. “We can actually help unify 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 investing platforms for Santander. But future clients could just as easily be RIA roll-ups, he said.
Sha also sees potential for SigFig to design and build wealth management platforms for firms used by third-party sellers and gig workers. A merchant selling on Amazon or Shopify, for example, could place earnings directly in a wealth management account, instead of waiting for funds to be deposited to a bank and then moved to an investment account. “You can move upstream,” he said. “Closer to the source of the accumulation of that wealth.”
While the future of UBS and SigFig will play out over the coming months, Sha doesn’t want to wait any longer to distance his firm from companies like Wealthfront, Betterment and Personal Capital.
“We are like a very different kind of company,” he said. “Now we have a lot of different kinds of solutions. [We are] helping the world think about the need for new technology that extends beyond just algorithms to manage money.”