- UBS agreed to buy U.S. robo-adviser Wealthfront in a $1.4 billion, all-cash deal slated to closed during the second half of this year, the Swiss bank said Wednesday.
- The transaction would add more than $27 billion in assets under management to UBS’s portfolio, and give the Swiss bank access to Wealthfront's 470,000 clients — many of whom are in coveted millennial and Gen Z demographics.
- UBS said in October it planned to launch a digital wealth manager in the U.S. in 2022 to target customers with between $250,000 and $2 million in assets, putting it in direct competition with Morgan Stanley, Bank of America's Merrill Lynch and others. UBS already counts 2 million U.S. customers in that segment. The Swiss bank’s CEO, Ralph Hamers, is set to update investors Feb. 1 on the bank’s strategic direction and to set new financial targets.
Hamers told Bloomberg in October that UBS could grow its U.S. digital wealth presence organically, but “if there is an inorganic option that could accelerate us into that direction, we would certainly consider it.”
The Wealthfront deal indicates the Swiss bank “may have decided it was easier to buy than build,” Mike Bailey, director of research at FBB Capital Partners, told the wire service Wednesday.
Wealthfront, which allows customers to open an investment account with a $500 minimum deposit, will become a subsidiary of UBS’s U.S. wealth management business.
And the clientele expansion is twofold. UBS will add customers who are more comfortable getting financial advice digitally — a prospect that may save costs and boost the bank’s profit margins — and begin serving them relatively early in their lives, giving the bank a chance to keep their business for decades.
“If you get a younger investor using your platform, that’s a client for the next 50 years,” said Eric Balchunas, a Bloomberg analyst. “This is their way of getting their leg into that market.”
Tom Naratil, UBS’s Americas president, said much the same Wednesday to The Wall Street Journal.
“This could … be a feeder for our business in the future because some of these people will be the high net worth and ultrahigh net worth clients of the future,” Naratil said.
UBS boasts roughly 6,000 financial advisers. But robo-advisers have encroached on the space over the past decade or more — managing $785 billion altogether by the end of 2020, Backend Benchmarking found.
“It is a proven model, it’s a successful unit and it is going to continue to grow under us,” Hamers told the Financial Times on Wednesday.
Wealthfront, founded in 2008 under the name kaChing, initially targeted individual investors who wanted to track — and match — the portfolios of other successful investors. It tweaked that model to focus more on index tracking. Over the past two years, it launched a service allowing clients to automate their savings and investments plans, added a debit card and checking features to its cash account, and brought on two high-profile former U.S. regulators — Federal Deposit Insurance Corp. (FDIC) ex-Chair Sheila Bair and former Comptroller of the Currency Tom Curry — to its Banking Advisory Group.
“Partnering with UBS will allow Wealthfront to offer our clients additional value-added services and best in class research that will help accelerate our vision to make growing wealth delightfully easy,” Wealthfront CEO David Fortunato said in Wednesday’s press release.
For UBS, the acquisition covers what Ben Johnson, global director of passive strategies research at Morningstar, calls “a gap in their clientele.”
“This brings them closer to the masses in a meaningful way with a platform and technology that clearly has met the needs of tens of thousands of clients,” Johnson told Bloomberg.
UBS claims $3.2 trillion in invested assets and access to more than half of the world’s billionaires, the wire service reported.
The Swiss bank managed $1.7 trillion of wealth assets in the Americas as of the third quarter, up 21% from the same three-month span a year earlier.
Wednesday’s move comes as U.S. banks are weighing alternately how to expand globally or rein in their international footprints. Citi, for example, laid out a strategy last year to extricate itself from retail banking in 13 markets — and added Mexico this month to its planned exits. Singapore-based DBS is expected to announce Friday that it will buy Citi’s consumer-banking operation in Taiwan.
Wells Fargo, meanwhile, is considering divesting its 20% stake in Shanghai Commercial Bank, Bloomberg reported Tuesday. That holding could sell for nearly $1 billion, the wire service reported, and would further the bank’s strategy of jettisoning assets it sees as “non-core.”
JPMorgan, on the other hand, boosted its presence overseas Tuesday, agreeing to take a 49% stake in the Greek fintech Viva Wallets.