UBS has agreed to buy California-based digital wealth management start-up Wealthfront. This is in a $1.4 billion all-cash deal. This is as the Swiss bank targets younger tech-savvy investors in the United States. UBS said that it would make Wealthfront’s capabilities “the foundation”. And this is as it seeks to grow business amongst the 130 million millennial and Gen Z investors in the United States who will own an increasing share of the world’s wealth.
The acquisition marks the first major deal in Chief Executive Ralph Hamers’ bid. This is to reach customers outside UBS’s super-rich core client base made up primarily of billionaires and multi-millionaires. One of the largest digital wealth management firms robo-advisers, Wealthfront caters primarily to millennial and Gen Z investors. They currently count around half a million clients in the United States. It manages more than $27 billion in assets.
Hamers said in a joint statement that adding Wealthfront’s capabilities and client base to their global investment ecosystem will significantly boost their ability to grow the business in the U.S. UBS in October outlined a push to lure in more affluent clients in America by building up a digitally scalable advice model. This is as the bank sought to increase its share in its biggest wealth market. They are set to unveil the results of Hamers’ broader strategic review when it reports results on Feb. 1. Hamers became CEO in November 2020 following a successful stint digitalising Dutch lender ING.
The Wealthfront purchase, set to close in the second half of 2022. Wealthfront will become a wholly owned subsidiary of UBS. They will operate as a business within UBS Global Wealth Management Americas. Vontobel analyst Andreas Venditti said that if successful, they believe UBS could roll out the model on a global scale. CEO David Fortunato said that by joining up with UBS will let Wealthfront offer clients more services and research. Also, he added that they couldn’t be more excited to have found a strategic partner who has the same view on the power of technology.
The purchase follows a trend set by U.S. rivals Goldman Sachs and Morgan Stanley. UBS said it would finance the deal with excess capital. The companies said that UBS Investment Bank is acting as financial adviser to UBS, and Sullivan & Cromwell as legal counsel. Qatalyst Partners is Wealthfront’s financial adviser, and Fenwick & West is acting as legal counsel.
