UBS: reversal on Wealthfront raises questions about chief

A goal of Swiss wealth manager UBS is to preserve capital. That applies to its shareholders as well as the clients it serves. Breaking off a $1.4bn US acquisition of Wealthfront this month reflects good stewardship of investor equity.

That deal, agreed by newish chief executive Ralph Hamers in January, was to be UBS’s largest since 2008. Its cancellation will instead generate a shareholder windfall. On Tuesday, UBS promised to raise its dividend by a tenth to $0.55 a share and increase its proposed share buyback of $5bn for 2022. As a sop to Wealthfront, UBS has said it would invest $70mn into the robo-adviser at the same valuation. Markets shrugged, seeing these moves as a small positive.

Hamers, in charge since November 2020, is unlikely to benefit from this decision. The price he agreed — equivalent to 5 per cent of $27bn of reported client assets — looks silly today. Most fintech valuations have crumbled. Some such as Klarna have suffered “down rounds” of financing this year.

New chair Colm Kelleher, in place since April, may well have guided the bank’s board away from buying a business that looks more about front than wealth. Its focus on younger investors with fewer assets today — $57,000 each on average — was meant to offer a base for later growth in the US wealth market.

Kelleher is a 30-year veteran of Morgan Stanley, which has transformed itself since 2008 into America’s top wealth manager. His CV includes acting as chief financial officer and co-head of corporate strategy during the worst of the last financial crisis. Hamers, who has spoken of creating a Netflix-like interface for wealth clients, looks out of his depth in comparison. Since he took over as CEO the valuation gap between the two banks, measured on price to tangible book value, has doubled.

UBS’s quarterly results have recently compared favourably with most peers, especially Credit Suisse. A change to this trend would cast deep shadows over Hamers.