The Swiss bank UBS decided to break off the plans to merge with Wealthfront. Both parties have mutually agreed to cancel their January deal.
The bank then officially introduced the intention to merge with the robo-adviser for 1.4 billion dollars. This is a major setback for UBS, because the bank aimed to grow its digital wealth management advice in the US.
As one of the biggest wealth managers by capital, UBS sealed the deal earlier this year before the tech-company’s value plunged in a sell-off on the market.
Bank heads wanted to use this as a way to attract young investors who prioritized online money management through applications rather than seeking guidance from an adviser.
According to them, the Swiss bank had the means to utilize Wealthfront’s user-friendly technology to create new digital services, aiming to improve customer experiences.
Wealthfront stated that it has a total market value of $27 billion and around 470,000 clients. On the other hand, Swiss UBS included thousands of advisers and relationship managers worldwide and a capital of $2.8 trillion.
UBS and Wealthfort didn’t publicly share the reasons why they broke off the merger.
Instead, the Swiss-based bank has decided to purchase notes worth $69.7 million, which Wealthfront can further convert into shares.
This way Wealthfront can keep its investors safe from being in position to cut their stakes in the companies. Among the investors are Social Capital, DAG Ventures and Tiger Global Management.
At the end of July, Ralph Hamers, UBS’s Chief Executive, informed the public that the investment would follow through and the only thing that was missing was a regulatory approval.
Investors and analysts supported the investment which was included in UBS’s plans to appeal to many wealthy Americans and branch out in different parts of the country.
Wealthfront’s Chief Executive David Fortunato assured about the company’s liquidity in the months ahead and that it would be self-sufficient.
Tom Naratil, who was behind the merger between UBS and Wealthfront, announced in July that after 39 years, he would part ways with the bank.
