Swiss bank UBS Group said Wednesday it would acquire robo-advisor Wealthfront in an all-cash deal valued at $1.4 billion. UBS said the deal will accelerate its growth in the U.S. and help it target the next generation of affluent investors.
Wealthfront has grown to manage more than $27 billion in assets across more than 470,000 client accounts in the U.S. The digital-only platform has been particularly popular with younger investors, a group that UBS expects will control an increasing amount of the world’s wealth in the coming years.
“Wealthfront complements our core business in the U.S. providing wealth management to high-net-worth and ultra-high-net-worth investors through trusted relationships with financial advisors, and will enhance our long-term ambition to deliver a scalable, digital-led wealth management solution to affluent investors,” said Ralph Hamers, CEO of UBS, in a news release.
Wealthfront and other robo-advisors use computer algorithms to automatically select investments based on clients’ answers to a few questions, such as their risk tolerance, time horizon and desired return. The robo-advisors then build a diversified portfolio using a handful of exchange-traded funds, or ETFs. Accounts are easy to set up and annual fees typically come in well below that of traditional financial advisors’ fees.
Wealthfront has earned a reputation as one of the top robo-advisors in the industry by offering hundreds of different ETFs that let clients build customized portfolios, as well as additional features such as automatic portfolio rebalancing, tax-loss harvesting and a cash management account. It charges an annual fee of 0.25 percent, a meaningful discount from a traditional advisor’s fee, which typically runs about 1 percent.
UBS said it plans to make human advisors available remotely as part of its new digital offering.
The companies said Wealthfront’s existing clients won’t see any immediate change in their accounts and the cost of the service will remain the same. The deal is expected to close in the second half of 2022. The companies said Wealthfront will become a wholly owned subsidiary of UBS.
UBS had previously tried to enter the robo-advisor business on its own through a digital wealth-management platform called SmartWealth. The service, which launched in the U.K. in March 2017, was closed less than two years later with the bank selling the technology to U.S.-based SigFig.