UBS steps into ‘Gen Z’ push with $1.4 billion Wealthfront buy

By Michael Shields and Brenna Hughes Neghaiwi

ZURICH (Reuters) – UBS has agreed to buy California-based digital wealth management start-up Wealthfront in a $1.4 billion all-cash deal, as the Swiss bank targets younger tech-savvy investors in the United States.

UBS said it would make Wealthfront’s capabilities “the foundation” as it seeks to grow business amongst the 130 million millennial and Gen Z investors in the United States who will “own an increasing share of the world’s wealth”.

The acquisition marks the first major deal in Chief Executive Ralph Hamers’ bid to reach customers outside UBS’s super-rich core client base – made up primarily of billionaires and multi-millionaires – by upping digital services.

One of the largest digital wealth management firms known as “robo-advisers”, Wealthfront caters primarily to millennial and Gen Z investors, and currently counts around half a million clients in the United States, the two firms said.

It manages more than $27 billion in assets, having added cryptocurrencies and socially responsible investing into the mix in 2021.

“Adding Wealthfront’s capabilities and client base to our global investment ecosystem will significantly boost our ability to grow our business in the U.S.,” Hamers said in a joint statement on Wednesday.

UBS in October outlined a push to lure in more affluent clients in America by building up a digitally scalable advice model, as the bank sought to increase its share in its biggest wealth market.

The world’s number one wealth manager is set to unveil the results of Hamers’ broader strategic review when it reports results on Feb. 1. Hamers became CEO in November 2020 following a successful stint digitalising Dutch lender ING.

The Wealthfront purchase, set to close in the second half of 2022, follows UBS’ roll-out of a ‘hybrid’ platform blending digital and personal advisory services in Europe and Asia, launched in 2020 to quick uptake.

Wealthfront will become a wholly owned subsidiary of UBS and will operate as a business within UBS Global Wealth Management Americas, the companies added.

“If successful, we believe UBS could roll out the model on a global scale,” Vontobel analyst Andreas Venditti said.

Joining up with UBS will let Wealthfront offer clients more services and research, its CEO David Fortunato said. “We couldn’t be more excited to have found a strategic partner who has the same view on the power of technology,” he added.

The purchase follows a trend set by U.S. rivals Goldman Sachs and Morgan Stanley in looking to broaden their client bases beyond the super-high-net-worth individuals they traditionally served.

UBS said it would finance the deal with excess capital.

The companies said UBS Investment Bank is acting as financial adviser to UBS, and Sullivan & Cromwell as legal counsel. Qatalyst Partners is Wealthfront’s financial adviser, and Fenwick & West is acting as legal counsel.

(Reporting by Michael Shields; Editing by Jan Harvey and Alexander Smith)

By Michael Shields and Brenna Hughes Neghaiwi

ZURICH (Reuters) – UBS has agreed to buy California-based digital wealth management start-up Wealthfront in a $1.4 billion all-cash deal, as the Swiss bank targets younger tech-savvy investors in the United States.

UBS said it would make Wealthfront’s capabilities “the foundation” as it seeks to grow business amongst the 130 million millennial and Gen Z investors in the United States who will “own an increasing share of the world’s wealth”.

The acquisition marks the first major deal in Chief Executive Ralph Hamers’ bid to reach customers outside UBS’s super-rich core client base – made up primarily of billionaires and multi-millionaires – by upping digital services.

One of the largest digital wealth management firms known as “robo-advisers”, Wealthfront caters primarily to millennial and Gen Z investors, and currently counts around half a million clients in the United States, the two firms said.

It manages more than $27 billion in assets, having added cryptocurrencies and socially responsible investing into the mix in 2021.

“Adding Wealthfront’s capabilities and client base to our global investment ecosystem will significantly boost our ability to grow our business in the U.S.,” Hamers said in a joint statement on Wednesday.

UBS in October outlined a push to lure in more affluent clients in America by building up a digitally scalable advice model, as the bank sought to increase its share in its biggest wealth market.

The world’s number one wealth manager is set to unveil the results of Hamers’ broader strategic review when it reports results on Feb. 1. Hamers became CEO in November 2020 following a successful stint digitalising Dutch lender ING.

The Wealthfront purchase, set to close in the second half of 2022, follows UBS’ roll-out of a ‘hybrid’ platform blending digital and personal advisory services in Europe and Asia, launched in 2020 to quick uptake.

Wealthfront will become a wholly owned subsidiary of UBS and will operate as a business within UBS Global Wealth Management Americas, the companies added.

“If successful, we believe UBS could roll out the model on a global scale,” Vontobel analyst Andreas Venditti said.

Joining up with UBS will let Wealthfront offer clients more services and research, its CEO David Fortunato said. “We couldn’t be more excited to have found a strategic partner who has the same view on the power of technology,” he added.

The purchase follows a trend set by U.S. rivals Goldman Sachs and Morgan Stanley in looking to broaden their client bases beyond the super-high-net-worth individuals they traditionally served.

UBS said it would finance the deal with excess capital.

The companies said UBS Investment Bank is acting as financial adviser to UBS, and Sullivan & Cromwell as legal counsel. Qatalyst Partners is Wealthfront’s financial adviser, and Fenwick & West is acting as legal counsel.

(Reporting by Michael Shields; Editing by Jan Harvey and Alexander Smith)