UBS scraps $1.4bn takeover of robo-adviser Wealthfront

Swiss bank UBS and US robo-adviser Wealthfront have terminated their $1.4bn takeover agreement just over eight months after announcing the tie-up, the companies said on Friday.

It scraps what would have been the largest acquisition by UBS since the 2008 financial crisis. The purchase was also viewed as a statement of intent by chief executive Ralph Hamers of his plans to grow the bank’s presence in the US wealth management market.

“UBS remains committed to its growth plans in the US and will continue the buildout of its digital wealth management offering,” UBS said in a statement.

The companies did not give a reason for the termination but the news comes after a sharp drop in the valuations of financial technology companies since the all-cash transaction was announced in January.

Wealthfront chief executive David Fortunato said the two companies were still exploring ways to work together and that UBS had given his company $70mn in financing at a $1.4bn valuation.

“I am incredibly excited about Wealthfront’s path forward as an independent company and am proud to share that thanks to the hard work of our team and the trust you put in us, we will be cash flow positive” and profitable on the basis of earnings before interest, tax, depreciation and amortisation “in the next few months”, Fortunato said.

The purchase of Wealthfront, which uses automation to provide banking services and financial advice, had been expected to close in the second half of this year.

Wealthfront is popular among millennials and Generation Z customers, and was founded in 2008 under the name kaChing. It was launched by former Benchmark Capital partner Andy Rachleff, targeting individual investors who wanted to track and replicate successful investment portfolios.

Since the acquisition of Wealthfront was agreed in January, UBS appointed Iqbal Khan as the sole head of its flagship wealth management unit in a management reshuffle that included division co-head Tom Naratil announcing his departure from the bank.

Additional reporting by Owen Walker in London