UBS expands US foothold with Wealthfront take-over

Investment bank UBS has entered into an agreement to acquire automated wealth management provider Wealthfront in a $1.4bn all-cash deal.

Through this acquisition, UBS said it will accelerate its growth ambitions in the US, broaden the firm’s reach among affluent investors and expand its distribution and capabilities.

With over $27bn in assets under management and more than 470,000 clients in the US, Wealthfront’s platform helps clients easily manage their wealth by providing access to financial planning capabilities, banking services and investment management solutions.

Wealthfront’s primary focus is on millennial and Gen Z investors, a client segment with significant domestic growth potential. With more than 130 million investors in the US alone, millennials and the Gen Z population together comprise a high growth segment that will own an increasing share of the world’s wealth.

As UBS looks to establish and grow relationships with additional affluent clients, Wealthfront’s capabilities will become the foundation of its new digital offering which will also include access to remote human advice.

In addition, Wealthfront will expand UBS’s existing offering through the firm’s Wealth Advice Centre, which focuses on serving core affluent clients, and its Workplace Wealth Solutions business, which works with employees of corporate clients on equity plan participation, financial education and retirement programs.

Ralph Hamers, group chief executive officer of UBS, said, “Wealthfront complements our core business in the US providing wealth management to high net worth and ultra high net worth investors through trusted relationships with financial advisors, and will enhance our long-term ambition to deliver a scalable, digital-led wealth management solution to affluent investors.”

Wealthfront will become a wholly owned subsidiary of UBS and will operate as a business within UBS Global Wealth Management Americas. The transaction is expected to close in the second half of 2022, subject to closing conditions including regulatory approvals.

Back in 2018, UBS closed down SmartWealth, its own digital wealth management platform. In a statement at the time UBS said while it was “satisfied” with the commercial progress of the service,“at this time we believe the near-term potential is limited and have therefore decided to close our digital-only offering in the UK.”

The system, which used proprietary technology to provide regulated and real-time investment advice online, was sold to SigFig, which UBS invested in in 2016 as part of a wider partnership.

A report by Allied Market Research predicts the global robo-advisory market will reach $41.07bn by 2027, growing at a CAGR of 31.8% from 2020 to 2027. The report said the pandemic gave impetus to robo-advisory services, owing to a surge in adoption of robo-advisors for efficient wealth and assets management in a time of highly volatile markets.

Earlier this week, European robo-advisor Moneyfarm received £44.1m in Series D funding from M&G. The company said the capital will allow it to expand its product proposition and build out its new B2B2C proposition through further strategic partnerships.

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