UBS said it would pay cash for the digital platform, one in a clutch of startups whose assets have grown rapidly in an industry shift to automated advice. California-based Wealthfront has $27 billion under management for nearly half a million clients.
UBS Americas president Tom Naratil said the Wealthfront purchase further sets out UBS’s ambition to bring in more wealthy U.S. customers, especially millennial and Gen Z investors.
"This could also be a feeder for our business in the future because some of these people will be the high net worth and ultrahigh net worth clients of the future," Mr. Naratil said.
For many of them, digital advice, rather than an old-fashioned broker relationship, is the preferred option, he said.
Mr. Naratil said the bank has to consider whether it is "positioned properly, for those who don’t necessarily think the traditional financial adviser model is the right one for them." UBS gets most of its wealth clients in the U.S. through a 6,000-strong army of financial advisers. Giving digital advice is cheaper, and should improve profit margins, UBS executives have said.
Wealth managers and banks across the industry have invested heavily in digital tools to bring in younger clients who are reluctant to cede control of their finances to a traditional adviser.
UBS Chief Executive Ralph Hamers said in October the U.S. market is a priority for the Swiss bank. The company bills itself as one of the world’s largest wealth managers, with $3.2 trillion in invested assets and access to more than half of the world’s billionaires.
Mr. Hamers joined UBS in 2020 from ING Groep NV, a pioneer in growing through online banking.
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Mr. Hamers has compared UBS’s ambitions to those of Netflix and Spotfiy in terms of engaging users and giving them relevant content. One engine of UBS’s wealth management business is a chief investment office providing streams of investment ideas to customers.
Mr. Naratil said UBS has a chance now to learn from what has worked for Wealthfront, both in reaching audiences and developing user-friendly applications. Wealthfront users access its services via an app or online. It helps clients build automated portfolios and helps them plan for life events, such as sending a child to college. It uses algorithms to advise clients on tax-loss harvesting and direct indexing, among other investment strategies.
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