Last Friday, UBS Group and Wealthfront informed that the transaction between them announced in January will not go through. This was a big setback to Ralph Hamers, the CEO of UBS Group, who had pushed to make the Swiss wealth Manager more digital by acquiring WealthFront for $1.4 billion.
Wealthfront is a Robo US advisor based in Palo Alto, California. The automated investment company was founded by Dan Carol and Andy Rachleff in 2008. Wealthfront last reported having $27 billion in Asset Under Management covering 470,000 accounts
As per Bloomberg News, neither side gave any reason for the decision to call off the deal.
The deal was supposed to be Hamers’ biggest achievement since he took over as CEO two years ago. His focus on buying Weal front was too broad-base the lender’s wealth management services from the traditional client base to the use of a digital platform. Around the same time, tech stocks’ valuations fell sharply in the last few months, bringing into question Abou UB overpaying for its entry into the US market.
Michael Kunz, an analyst with the retail banking group Luzerner Kantonalbank in the Swiss canton of Lucerne said that the deal call was a setback for the UBS group.
UBS shares fell by 2.7% Monday in Zurich and are in line with a fall in Stoxx 600 Banks index.
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Wealthfront, a robot adviser, uses algorithms to manage clients’ money. The Zurich-based UBS group was looking forward to adding the huge AUM and customers in the US through this acquisition.
Hamers insisted that the UBS bank should embrace the broad-based digital product if broad-based it meant lower profit margins, which was not the trademark of UBS retail offerings.
With its $3 trillion+ asset under management, UBS was scouting for a digital technology that would have resulted in cost savings and more business from wealthy customers globally. The sluggish Asian market this year prompted the Swiss lender to focus on the US for new opportunities.
The aborted deal with Wealthfront is among the many failed attempts of CEO Hamers in digital projects. Earlier, as Ing CEO, Hamers acquired Payvision, a payments provider, but ING closed down the portfolio and phased it out completely after Hamers left the company. In 2016, Hamers introduced Yolt, a retail app for UK consumers, but that too was closed last year by ING.
ING also took a hit as impairment charges on a flagship project of Hamer, called Maggie, just days after Hamer became UBS CEO.
