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Swiss-bank UBS has terminated its $1.4B acquisition of roboadvisor Wealthfront after announcing the deal in January. Instead, the bank purchased a $69.7MM note convertible in Wealthfront shares, and the companies are supposedly exploring ways to still partner. Like that with SigFig.
Wealthfront claims to be excited to remain an independent private company, but independent roboadvisors have experienced fairly slow growth as Schwab, Vanguard, Fidelity, Goldman, and Merrill all caught up with their own direct digital wealth and neobank offerings. Still, for what it’s worth, Wealthfront won ‘Best Overall Robo’ alongside SoFi this year.
Last month, UBS sold its UBS Fund Advisor LLC, the UBS proprietary US alternative investment manager, and the feeder fund platform known as “AlphaKeys Funds'' to iCapital. We found this confusing considering UBS bought Wealthfront for digital distribution to retail and mass affluent investors but has sold its US alternative digital investment manager. Perhaps it’s not so confusing, and UBS is cutting riskier costs all around.
Who knows why the deal was terminated? We could guess that Colm Kelleher, who took over as chairman in April, has a different view from CEO Ralph Hamers about how UBS should grow its US business, who had said “If you expect [profits] to come from a business like that [Wealthfront] in the first five years, basically, you're setting it up for failure”. Or, perhaps Naureen Hassan, who led digital investing at Schwab and Morgan Stanley, now running UBS, would prefer to build rather than buy (h/t to Efi for the theory). Or, $1.4B is simply too much in the current environment, as fintech multiples dropped by 90%, and walking away is cheaper than buying in enterprise value terms.
The acquisition offered UBS 480,000 digital investors, $27B in AUM, and Wealthfront's proprietary tech. We guess they’ll have to spend that $1.4B on Google ads instead.
Digital wealth manager FinaMaze released an investment product meant to offset rising US Rates through hedging for retail clients. If US rates increase, the product will generate a positive performance, and a negative one if rates fall, providing a hedge against variable mortgage rates. FinaMaze portfolios are based around a number of themes, like Motif and Covestor before it — a US Rates Protect Smartfolio, the Black Swan Smartfolio, and Contrarian Bitcoin. The yearly management fee is 0.85%, and all Smartfolios are free to exit.
Pantera Capital claims the Fed will tighten considerably more than the markets currently forecast, and BlackRock sees “… inflation trending higher over the medium term than markets expect.” It is interesting to see more sophisticated hedging and derivative products becoming integrated into digital wealth footprints, alongside the usual Markowitz pie charts. It is also interesting to see how pervasive mobile distribution of financials has become across geographies.
Avaloq, a wealth management SaaS firm that services 12MM HNWIs, and Synpulse, a management consulting firm, have finalized a 'license reseller' agreement to provide end-to-end digital solutions for private banks and wealth managers in Asia, starting with Indonesia.
Avaloq provides over 230 digital workflows via (1) Avaloq Engage, which helps relationship managers connect with clients using social messaging apps like WhatsApp or WeChat, and offers 100+ self-service features, such as chat bots to answer client requests; (2) Avaloq Wealth, an automated platform delivering investment strategies, risk analysis, and CRM, which in turn supports onboarding clients in hours vs. days; (3) Avaloq Core, a core banking solution, and (4) Avaloq Insight, which offers analytics and reporting. See here for more detail.
A 2022 Grand View Research report on wealth management highlights that financial institutions desire an integrated offering from their vendors. The success of FNZ, a wealth management platform-as-a-service firm that raised $1.4B this year, is a testament to this. Similarly to FNZ, Avaloq provides banks and wealth managers large software deployments to run their core operations.
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