UBS Group AG expects American automated wealth management provider Wealthfront Corp., which it acquires in one all-cash transaction worth $1.4 billion, serve as an “engine of growth”.
The Swiss bank plans to run the business for growth, number of clients, AUM and direct technology first before running it for profit and loss, UBS Group CEO Ralph Hamers told analysts at a briefing. an earnings call on Feb. 1. Wealthfront, which had approximately $27 billion in assets under management and more than 470,000 clients in the United States as of January 28, is primarily focused on Millennials and Gen Z investors, a segment that UBS considers as having high growth potential in the global wealth market.
“The way we’re growing Wealthfront, please consider that a growth driver for now… [It] must continue to grow and create value and provide that value to us as well,” Hamers said, adding that the business will operate as a stand-alone operation for a long time because “they are successful, they are growing fast, [and] they have a unique proposition.”
The United States has seen strong growth for UBS in recent years, with its fee-earning assets in the Americas standing at $900 billion at the end of December 2021, up from $757 billion the previous year.
With the wealth front acquisition, UBS is rolling out a digital offering in the U.S. and plans similar models globally, Hamers said. He previously said that the Swiss bank plans to launch a digital wealth management service for affluent clients in the US with assets of $250,000 to $2 million, which analysts say offers plenty of opportunity.
UBS has about 2 million clients in the United States alone in its Workplace Wealth Solutions offering, according to Hamers.
“It’s kind of the more affluent customers where we need a more digital wealth offering,” the CEO said. “And that’s why Wealthfront is an attractive proposition for them, and therefore for us as well to make sure we keep them as clients in the future.”
The acquisition of Wealthfront is part of the group’s plan to develop what it calls a Wealth Management Platform for the Americas, or WMAP, to help it achieve its strategic goals in the United States. , Hamers said.
The Americas were the main contributor to pretax operating income of UBS Global Wealth Management Division in the fourth quarter of 2021, contributing $471 million, or approximately 82%, of the division’s total operating income of $563 million before tax.
As of December 31, 2021, the division had approximately $3.303 billion in invested assets, of which $1.842 billion came from the Americas region. Hamers has previously stressed the importance for UBS to be active in the region, noting that it is a important integral part of the bank’s investment ecosystem.
UBS expects its Common Equity Tier 1 ratio to decline by around 40 basis points following the acquisition, which could happen in the second half of the year. The group also expects the transaction, which will be funded from its existing capital resources, to be marginally accretive to EPS and accretive to its returns over time.
“We’re actually excited about the acquisition from a strategic perspective,” said Kirt Gardner, UBS’s chief financial officer. noted.