UBS Abandons $1.4 Billion Deal for Robo-Adviser Wealthfront

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UBS Group AG has abandoned its plan to acquire US robo-adviser Wealthfront, unwinding what would have been the Swiss bank’s first major acquisition under Chief Executive Officer Ralph Hamers.

The companies together decided to terminate their January merger agreement, valued at $1.4 billion, according to statements from both of them on Friday that didn’t specify a reason. UBS will purchase a $69.7 million note convertible into Wealthfront shares.

The planned deal marked Hamers’ effort to put a definite stamp on UBS after former Chairman Axel Weber recruited him in 2020 from Dutch lender ING thanks to his perceived digital skills.

At the time, Hamers trumpeted the Wealthfront acquisition as a cornerstone of his plan to grow UBS’s US operations and widen the lender’s client base by finding a cost-efficient way to also cater to less-rich people, as opposed to the ultra rich who tend to be UBS’s core clientele.

UBS is “expanding into new segments to reach a much broader set of clients,” Hamers said in the lender’s annual report, published shortly after the announcement. The Wealthfront deal “will help us deliver a digital wealth management offering to Millennial and Gen Z affluent investors in the US, allow us to expand our wallet share, lower the cost to serve and drive long-term growth.”

But UBS reached the deal when financial technology startups were commanding higher valuations. In the months since, US markets, and tech stocks in particular, have tumbled and set off a wave of investor markdowns for privately-held companies. That downturn could even erode Americans’ readiness to invest their savings in the months and years ahead.

The aborted transaction is the latest in a string of failed digital projects that Hamers has led. As ING CEO, he bought the payments provider Payvision, but ING subsequently closed the unit’s adult industry portfolio and phased it out altogether after Hamers had left. ING also announced last year it’s closing its UK retail app Yolt for consumers. It was introduced in 2016 under Hamers.

Founded in 2008, Wealthfront was an early robo-adviser, using algorithms to help users manage money. Zurich-based UBS was looking to add more than $27 billion in assets under management and over 470,000 clients in the US through the purchase.

“I am incredibly excited about Wealthfront’s path forward as an independent company,” the venture’s CEO, David Fortunato, said in its statement on Friday. He predicted the firm will be cash-flow positive and profitable before interest, taxes, depreciation and amortization “in the next few months.”

(Updates with details on strategy from third paragraph)