UBS Group AG has agreed to buy U.S. robo-adviser Wealthfront for $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 $27 billion in assets under management and over 470,000 clients in the U.S., Switzerland’s biggest bank said in a statement.
It accelerates Hamers’s plan to win over affluent customers with assets of $250,000 to $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 U.S. 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 LLC 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 Inc. 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 $1.7 trillion of wealth assets in the Americas as of the third quarter, up 21% 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.
