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UBS Acquires Wealthfront for $1.4 Billion

Industry: Investment Banking
Current: Other Industry Indicators

Traditional banks make a foray into the digital wealth management sector to cater to Gen Z & Millennial investors
With Wealthfront, UBS enters into digital wealth opportunity to grow its business in the US and cater to affluent investors
The US leads the global wealth management segment with a 47% market share in terms of liquid assets in 2021, with the mass affluent category holding the majority of assets

UBS Acquires Wealthfront for $1.4 Billion

On January 26, 2022, UBS signed an agreement to acquire Wealthfront, an industry-leading, automated wealth management provider, for $1.4 billion, in an all-cash transaction. Wealthfront provides automated investment management solutions, financial planning capabilities, and banking services using robo-advice, an automatic software algorithm that recommends investment funds and portfolios.

The deal is expected to close in the second half of 2022, subject to regulatory approvals and closing conditions. UBS Investment Bank and Qatalyst Partners are serving as financial advisors for UBS and Wealthfront, respectively.

UBS’s wealth management business has traditionally catered to high net worth and ultra-high net worth individuals. Through this acquisition, company CEO Ralph Hamers expects to grow its business in the US and cater to affluent investors. Wealthfront manages over $27 billion in assets under management for more than 470,000 clients in the US. The clients are mostly millennials and Gen Z investors, a high-growth client segment. There are over 130 million investors in the US, and millennials and Gen Z investors will own an increasing share of wealth.

Wealthfront will form the core of the bank’s new digital offering, including the feature to access remote human advice. The acquisition will also expand UBS’s existing offerings, such as Wealth Advice Center, a call center service that caters to affluent clients, and Workplace Wealth Solutions business, which works with employees of corporate clients on equity plan participation, financial education, and retirement programs.

The acquisition supports the digital transformation strategy unveiled by Mr. Hamers in October 2021 to attract more affluent clients and increase the market share in the US. The deal follows the launch of My Way, a hybrid digital wealth management platform, which is open to people with 250,000 Swiss francs ($278,000) upwards. In January 2022, Mr. Hamers said that it tripled invested assets in 2021 to $5.1 billion.

In the recent past, large investment banks felt the need to appeal to the younger mass, who would act as clients in the future, such as wealthy millennials and Gen Z investors who prefer a digital platform for their wealth investments. Thus, large institutions plan to expand their customer base beyond the niche clientele they have traditionally served through a foray into digital wealth management. In the recent past, Morgan Stanley acquired digital broker E*TRADE for $13 billion. The acquisition gave Morgan Stanley access to the trading software and 5.2 million client accounts with over $360 billion of retail client assets. Similarly, Goldman Sachs acquired United Capital for $750 million. United Capital had more than 220 advisers and $25 billion in assets under management and operated the digital platform FinLife CX.

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