UBS agrees to buy robo-adviser Wealthfront for US$1.4b

[ZURICH] UBS Group agreed to buy US robo-adviser Wealthfront for US$1.4 billion in cash, as chief executive officer Ralph Hamers tapped a fintech firm for his first major acquisition.

The deal will add more than US$27 billion in assets under management and over 470,000 clients in the US, Switzerland's biggest bank said in a statement Wednesday (Jan 26).

It accelerates Hamers's plan to win over affluent customers with assets of US$250,000 to US$2 million, a group the bank hasn't targeted in a meaningful way. UBS announced in October plans to launch a digital wealth manager in the US and Hamers has said the bank would consider acquisitions to move that strategy forward.

"UBS is trying to expand into a new demographic that prefers more automated advice," said Mike Bailey, director of research at FBB Capital Partners. And, the bank "may have decided it was easier to buy than build", he said.

Hamers, in his second year running the bank, wants to use artificial intelligence to better pitch services to the world's wealthy.

Founded in 2008, Wealthfront was an early robo-adviser, using algorithms to help users manage money.

Wealthfront makes recommendations for portfolios of index funds, providing some of the benefits of a financial adviser but at a lower cost. Investors can use it to plan and save for retirement and for other life events like buying a house.

Wealthfront and rivals including Betterment have upended the wealth and asset-management industries by using technology to play more of a role in offering investment insights. Brokerages including Robinhood Markets and Webull Financial are oriented toward traders looking to buy and sell individual stocks and cryptocurrencies.

Hamers plans to update investors on the bank's strategic direction and set new financial targets on Feb 1. UBS managed US$ 1.7 trillion of wealth assets in the Americas as of the third quarter, up 21 per cent from the previous year.

UBS's investment bank advised UBS. Qatalyst Partners advised Wealthfront. The transaction is expected to close in the second half of this year. BLOOMBERG