UBS Steps Up Digital Game With Wealthfront Acquisition

Tom Burroughes

27 January 2022

said in a note that “UBS plans to launch a new digital-plus-remote-advice wealth management platform for mass affluent customers in the US (linking its existing workplace franchise (and internationally) if possible. This should add growth and strengthen the core WM business, similar to Morgan Stanley’s moves in this area.”

UBS said Wealthfront will expand UBS’s existing offering through the firm’s Wealth Advice Center, 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.

The bank’s desire to push into the digital wealth space has been a talking point for months. Back in October, Hamers noted in an interview (Wall Street Journal, January 11, 2022), that an earlier digital-human channel that UBS developed, called My Way, tripled invested assets last year to $5.1 billion. This lets customers in Switzerland and other parts of Europe and Asia build and maintain portfolios in online sessions with advisors and UBS research.

The Wealthfront move is ironic because in 2018 UBS sold its SmartWealth business to US-based online investment advisor SigFig. At the time it appeared that the bank had pulled out of moving into such a channel.

Subsidiary
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, UBS said.

UBS Investment Bank serves as financial advisor to UBS and Sullivan & Cromwell acts as legal counsel. Qatalyst Partners serves as Wealthfront’s exclusive financial advisor and Fenwick & West act as legal counsel.

Last year the global wealth management arm of UBS reported a pre-tax profit of $1.5 billion in the third quarter of 2021, up a touch from $1.507 billion a year earlier and continuing a broadly positive trend for its results. Fee-generating assets were slightly down sequentially to $1.412 trillion. Net new fee-generating assets were $18.8 billion, supported by inflows in nearly all regions, and represented an annualized growth rate of 5 per cent in the quarter. Total invested assets as at the end of September were $3.2 trillion.

“UBS is in decent shape as it is, enjoying a robust operating environment, clearing its cost of equity, managing risks prudently and buying back shares in meaningful size. Those attributes in themselves position it as one of the stronger banks in the European sector, safe to own, compounding over time, and making incremental improvements as it goes,” BNP Paribas said in its aforementioned note.

BNP Paribas said, however, that the UBS wealth business, accounting for 39 per cent of group capital, “remains highly value-creating, although in recent years it has suffered from low growth and declining returns.”

The share-trading drama last year over US video games retailer GameStop, and other firms, threw into sharp relief the use of new digital trading platforms, including those catering to DIY clients and a younger generation not beholden to traditional wealth models.