UBS Robo Customers Serviced by FAs Get 66% Fee Hike

UBS Wealth Management USA has increased to 1.25% the maximum fee customers can be charged on a digital managed account designed by its chief investment office if it is serviced by an advisor, even though the same “robo” account charges 0.75% if purchased through its centralized call center.

The fee hike, disclosed in a March 30 ADV filing with the Securities and Exchange Commission, applies to the “Advice Portfolio Program,” one of two managed account programs available to so-called mass affluent customers who use the firm’s “Wealth Advice Center” that is staffed by salaried sales teams. The fee had been 0.75% even if a full-service financial advisor had recommended and serviced the account.

A UBS spokesman declined to comment on the reason for the change, or say how many of the firm’s approximately 6,100 U.S. advisors recommend the robo account rather than 11 other wrap-fee programs that the firm offers.

The fee increase for the Advice Portfolio Program, which requires a minimum of $10,000, is the only fee change outlined in the filing for the 12 managed accounts UBS brokers can offer to customers. “Accounts in the Wealth Advice Center can continue to access the product for 0.75%,” the ADV filing says.

UBS unveiled the Advice Portfolio Program in April 2018 as the cornerstone of its algorithm-driven “UBS Advice Advantage” robo program offered primarily to customers with accounts of under $100,000 or those who want digital access.

“The higher fee may reflect higher service levels, having a dedicated advisor versus a team service in the call center,” said David Goldstone, a research analyst for Backend Benchmarking, which ranks robo-advisors. “One point two five percent is not unheard of, but it’s certainly on the higher end of the spectrum.”

A UBS advisor who has been a broker for more than 20 years and spoke on condition of anonymity said he assumes many of his colleagues were asking for a way to hike up the asset base, even on discretionary accounts managed away from them. “A good number of advisors are asset gatherers, and some are fee hogs,” he said.

The portfolio management algorithm used to manage the robo accounts is licensed from the parent company of SigFig Wealth Management LLC, a robo advisory firm that UBS has invested in. (It does not have a control position in the company.) The algorithm is customized to incorporate UBS’s views on capital market assumptions, asset allocation, security selection, trade and rebalancing thresholds, according to the filing.

As is typical of robo models, customers fill out questionnaires designed to determine which of five risk profiles they fit into, ranging from conservative to aggressive.

Even at the 0.75% fee offered through the call center, UBS’ robo-advisor price is higher than at many competitors.

Wells Fargo Advisors’ “Intuitive Investors” robo program—which also uses a SigFig algo— charges 0.35% of assets under management. Morgan Stanley’s “Access Investing,” which uses an in-house algo, charges 0.35% while Merrill Lynch’s “Guided Investing,” also a proprietary algo-run product, charges 0.45%.

San Francisco-based SigFig had $835 million in assets under management as of the end of last year, according to a regulatory filing.