UBS Ditches Wealthfront After Agreeing to a $1.4 Billion Acquisition

UBS Ditches Wealthfront After Agreeing to a $1.4 Billion Acquisition
  • UBS and Wealthfront have mutually terminated a $1.4 billion acquisition announced earlier this year.
  • Despite the call-off, UBS has given Wealthfront $69.7 million in financing at a $1.4 billion valuation.
  • The termination of the deal comes after a significant decline in fintech valuations.

No matter the circumstances, breakups are always hard. Just ask financial services firm UBS and roboadvisor Wealthfront.

After agreeing to acquire Wealthfront in a deal valued at $1.4 billion in January, the two announced last week that the deal was off. Prior to last week, the acquisition was expected to close in the second half of this year. However, the two parties cited “unspecified regulatory concerns” as a reason for the deal collapse.

Purchasing Wealthfront, a roboadvisor headquartered in California, would have helped Switzerland-based UBS grow in the U.S. market and also would have offered access to Wealthfront’s digital wealth management tools and user-friendly technologies.

In January, Wealthfront had 470,000 clients and a total of $27 billion in assets under management. The company was founded in 2008 by Andy Rachleff and Dan Carroll as KaChing, and rebranded under the Wealthfront name in 2010. The company is known for it user-friendly, automated investing tools. Last year, Wealthfront added to its reputation by creating a Socially Responsible Investing Portfolio that is designed around sustainability, diversity, and equity.

“We are continuing to explore ways to work together in a partnership and UBS has given us $70 million in financing at a $1.4 billion valuation,” said Wealthfront Chief Executive Officer David Fortunato. “With this fresh round of funding under our belt along with the ability to begin self-funding the business, we are committed to building a lasting company that positively impacts the lives of our clients for decades to come.”

UBS has offered the new investment, which totals $69.7 million, via notes that can be converted into Wealthfront shares. “That protects other investors in Wealthfront from potentially having to mark down their stakes in the companies,” explained the Wall Street Journal

It is worth noting that the call-off of the acquisition comes after a significant decline in fintech valuations. If the deal was to have gone through, UBS would have likely overpaid for Wealthfront. It will be interesting to see if the Swiss bank will acquire a cheaper U.S.-based roboadvisor as a replacement now that valuations have decreased.


Photo by Kelly Sikkema on Unsplash

Fintech Merger and Acquisition Activity Starts Strong in Q1 2022

Fintech Merger and Acquisition Activity Starts Strong in Q1 2022

While 2021 was a record year for fintech merger and acquisition (M&A) activity, 2022 is off to a great start.

According to FT Partners, there were 1,485 M&A deals in the fintech space totaling $348.5 billion in 2021. As Square’s $29 billion takeover of Afterpay demonstrated, last year’s massive volume is partially thanks to multiple large deals.

This quarter, only eight of the 21 deals initiated disclosed financial details. Of those, the deal volume added up to almost $5 billion.

January

February

March

While experts predict that 2022 M&A activity will likely see momentum from 2021, there are two aspects to watch out for this year. First, we will not see as many SPACs as we saw last year. This may decrease the number of companies choosing to exit this year. Second, fintech valuations are deflating after experiencing huge rises over the course of the past two years. While the loss in value won’t directly impact the number of M&A deals, it will decrease the deal volume.


Photo by Martin Lopez

Wealthfront Agrees to Acquisition by UBS

Wealthfront Agrees to Acquisition by UBS

In one of the first big fintech acquisitions of the year, Wealthfront has agreed to be acquired by global investment bank and financial services company UBS. Valued at $1.4 billion, the all-cash deal represents a premium of at least 2x on Wealthfront’s most recent private market valuations, and underscores UBS’s determination to attract younger, high net worth American investors.

In a blog post at the Wealthfront website, company CEO David Fortunato called the acquisition a “strategic partnership” that will enable Wealthfront to offer new services and give its customers access to “UBS’s industry-leading investing insights and research.” Fortunato praised UBS’s new CEO Ralph Hamers, who was appointed to the top spot in the fall of 2020, as a “digital native” who has put the digitization of the Swiss-based multinational firm at the top of his agenda. Fortunato noted that Wealthfront will continue to operate as a standalone business under its own brand after the acquisition.

“Rest assured that nothing will change with your account or the cost of our service,” Fortunato wrote to the company’s customers. “We will continue delivering great products and features to you, now at a much faster pace. And you’ll get access to even more research and insights that can empower you as an investor.”

Founded in 2008 – and making its Finovate debut as kaChing a year later – Wealthfront has grown into a leading online automated investing platform with $27 billion under management and more than 470,000 clients in the U.S. Earlier this month, the company announced a trio of updates to its Smart Beta service, a feature of the company’s U.S. Direct Indexing offering that helps investors optimize their allocations to individual stocks. Last fall, Wealthfront unveiled its Socially Responsible Portfolio, which leverages Modern Portfolio Theory to give investors the ability to put their money where their values are while still earning returns comparable to those available in its Classic Portfolio.

“Adding Wealthfront’s capabilities and client base to our global investment ecosystem will significantly boost our ability to grow our business in the U.S.” UBS’s Hamers said in a statement. “Wealthfront compliments our core business in the U.S. providing wealth management to high net worth and ultra high net worth investors through trusted relationships with financial advisors, and will enhance our long-term ambition to deliver a scalable, digital-led wealth management solution to affluent investors.”


Photo by H. Emre from Pexels

6 Ways Roboadvisors Have Evolved to Suit 2020

6 Ways Roboadvisors Have Evolved to Suit 2020

By many accounts, 2020 has been a difficult year full of events nobody could have anticipated or planned for.

As an industry, however, fintech has faired rather well. The shift to digital combined with an enhanced focus on the customer experience have benefitted banks, end users, and even fintechs themselves.

Fintech’s wealthtech subsector is no different. In fact, roboadvisory tools have evolved over the past decade with near-futuristic new features and offerings that are helping today’s consumers battle the challenges of 2020.

Here we’re taking a look at six ways roboadvisors have improved to (unknowingly) prepare for the toughest year yet.

AI has gotten smarter

Thanks to machine learning capabilities, the AI technology that powers investment strategies, forecasting, and reporting has improved significantly since roboadvisors hit their peak in 2015. Additionally, the amount of data has increased and computing power has been significantly upgraded, meaning that AI has never been smarter.

Recession forecasting

One of my favorite tools that launched this year is Personal Capital’s Recession Simulator. While many investment portfolio models offer a range of what-if scenarios, the Recession Simulator helps users illustrate the effects that historical recessions may have on their portfolio. Currently the Recession Simulator allows users to mimic returns of the DotCom crash of 2000 and the Financial Crisis of 2008.

Challenging the challengers

Last year ushered in the era of challenger banks, and roboadvisors were quick to jump on the opportunity. Three of the top roboadvisors by assets under management– Wealthfront, Betterment, and Personal Capital– all launched checking tools last year. These accounts help consumers keep all of their cash in a single, unified place and some offer tandem, high-yield savings accounts.

Automation

While many fintechs have promised to automate savings, investing, and billpay, many have been slow to deliver. Recently, however Wealthfront has made strides toward its Self-Driving Money concept. Last month the company unveiled Autopilot, the first product in its self-driving money suite. Autopilot takes clients’ savings and automatically monitors their balances and moves money around on their behalf to maximize their savings and returns.

Looking beyond retirement

While everyone hopes to save for retirement, there are plenty of other events to save for, too. Many roboadvisors have set up their platforms to enable users to save up for relatively smaller savings goals, such as a kitchen renovation, a child’s education, or a wedding.

Built for everyone

While many investment platforms cater to a variety of risk appetites, some have started to cater to new client bases, such as gig workers. Betterment, for example, launched a promotion with Steady, a gig economy workforce platform, to offer its users free financial advisory services for one year.


Photo by Eugene Zhyvchik on Unsplash

Wealthfront Unveils First Product in Self-Driving Money Suite

Wealthfront Unveils First Product in Self-Driving Money Suite

The fintech industry has long fantasized about automating finances. The earliest example of this is automatic billpay, which is so common today it is considered table stakes.

Wealthtech player Wealthfront is taking personal finance automation to a new level today with the launch of Autopilot, the first service under the company’s Self-Driving Money umbrella. Autopilot takes Wealthfront Cash clients’ savings and automatically monitors their balances and moves money around on their behalf to maximize their savings and returns.

Wealthfront Cash is a challenger banking service the company launched last year. The account, which is key to the company’s Self-Driving Money concept, is fee-free and pays accountholders 0.35% APY on their savings. When an accountholder’s paycheck is deposited into their account, Wealthfront optimizes the allocation of the funds by automatically paying bills and routing the remaining funds to investments, savings accounts, debt payoff, etc.

“Our clients are diligent savers and follow best practices to grow their savings, but they struggle to prioritize managing their finances among a long list of competing priorities,” said Chris Hutchins, Wealthfront’s Head of Autonomous Financial Planning. “This can lead to missed days in the market or missed days of compounding interest, which has a huge negative impact on your long term net worth. Autopilot is your free financial assistant, automating your financial tasks to ensure your savings are put to work immediately in the best account for your goals.”

Wealthfront’s next development will improve upon the speed of money movement within its ecosystem by implementing services such as same-day investing. The company already offers clients the option to receive their paychecks up to two days early when they use direct deposit with their Wealthfront Cash account.

“We’ve set out to build a new system that makes money with our clients, not off of them as traditional banks do,” said Wealthfront Co-founder Dan Carroll. “The system we’re building has the potential to be one of the biggest wealth creation engines of our generation, automatically optimizing your money in the background while saving you time and stress.”


Photo by Nathan Lindahl on Unsplash

Wealthfront’s Biggest Weapon During a Pandemic

Wealthfront’s Biggest Weapon During a Pandemic

Wealthfront has been around the proverbial fintech block a few times. The San Francisco-based wealthtech company launched near the dawn of fintech under the name KaChing in 2008 and demoed its investment platform at the second-ever Finovate conference in 2009.

Given its time in the space, Wealthfront is well-positioned during this pandemic. The legacy fintech benefits from a strong customer base, name recognition, and profitability. So when the pandemic hit and many firms were struggling with customer service or the transition of working from home, Wealthfront didn’t miss a beat.

Its secret weapon? Scalability. As Wealthfront’s client base has grown to almost 400,000 users, the company has relied on automation to ensure a high-quality customer experience. “Automation has been a key product principle at Wealthfront from day one,” said Wealthfront Founder and Chief Strategy Officer Dan Carroll in a blog post. “If we can’t automate a service, we won’t build it. When a client needs to email or call us, we consider that a failure in our product and work to build an automated solution.”

Instead of customer service representatives, Wealthfront refers to its team members as Product Specialists. The 12-person team is comprised of licensed financial advisors who are each responsible for fielding client questions and tracking and relaying customer feedback to the company’s product development team. Using these techniques, Wealthfront has been able to scale to 30,000 clients per specialist.

And while some banks were closing down call centers and struggling with customer hold times ranging from 30 minutes to three hours, Wealthfront’s team of 12 Product Specialists weren’t overburdened. To get ahead of the projected spike in client inquiries, the team moved to individual remote work settings and composed a list of questions they anticipated from customers. With the help of the company’s content team, the specialists deployed in-app pop-ups that offered answers to potential questions and provided advice to help clients navigate volatile markets and the CARES Act.

So what’s next for Wealthfront? “While banks grapple with something as basic as streamlining customer service, we’re working on the future of financial services — something we call Self-Driving Money,” Carroll said. The new product will automate users’ recurring transactions including billpay, savings, and goals. “Our ultimate vision is to optimize your money across spending, savings, and investments, putting it all to work effortlessly.”

Wealthfront Acquires Financial Planning Startup Grove

Wealthfront Acquires Financial Planning Startup Grove

Wealthtech firm Wealthfront made its first acquisition today. The California-based company has purchased Grove for an undisclosed amount. Grove is a four year old virtual financial planning and advice company with $4 million in assets under management and is headquartered in California.

Not included in Wealthfront’s purchase are the clients behind Grove’s accounts, which number close to 500. Grove has entered into a strategic agreement with Facet Wealth to offer financial planning to these clients, who will be able to transition to Facet Wealth starting tomorrow. With Facet, clients will receive three check-ins per year, a dedicated financial planner, investment recommendations, and a strategy session for $780 per year plus a set-up fee of $560. Additionally, Facet anticipates that some of Grove’s CFPs and planning employees will transition over to its team.

Wealthfront is making the purchase to bolster its Self-Driving Money vision. Under the new initiative, Wealthfront takes control of the user’s finances by allocating their paycheck once it is deposited into their account. The tool will ensure all bills are paid, deposit the appropriate amount into each savings account, and contribute to the best investments to help the user attain their goals.

Grove Cofounder and CEO Chris Hutchins said, “We’ve always appreciated the role technology and automation can play in scaling quality financial advice. We are dedicated to the vision of Self-Driving Money as we believe it will have a huge impact on how people manage their finances.”

This is Wealthfront’s first reveal of its Self-Driving Money plans. The launch depicts a departure from the high-touch model competitors such as Betterment and Personal Capital have added to their offerings. It shows that, in an era of customer service revolution in fintech, Wealthfront is sticking with its robo roots. If Wealthfront serves as a place where consumers deposit their paycheck, they can gain a better foothold to compete with traditional banks.

Wealthfront debuted as KaChing at FinovateSpring 2009. The company pivoted as Wealthfront in 2015. Last year, Wealthfront unveiled a host of new offerings, including a freemium model, homeownership planning tool, and an integration with TurboTax that leverages user’s data to offer a more personalized experience.

Finovate Alumni News

On Finovate.com

  • Fiserv Drives Digital Transformation for NEFCU.
  • DemystData Lands $12.5 Million for its Data Marketplace.
  • CashFlows Partners with Akamai for Defense Against DDoS Attacks.
  • Wealthfront Acquires Financial Planning Startup Grove.

Around the web

  • SumUp to power card payments for Fleximize members.
  • Wipro teams up with Blue Prism to launch new automation lab in Australia.
  • AiThority talks with DataSine CEO Igor Volzhanin on the role of machine learning and AI in marketing technology.
  • IdentityMind picks up new patent for digital identity-based automated review.
  • Tink urges regulators to “be flexible” when it comes to the implementation deadline of September 14 for PSD2.
  •  Flybits named to the Digital Finance Institute’s list of Canada’s Top 50 Fintech Companies for 2019.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Wealthfront’s New Freemium Model

Wealthfront’s New Freemium Model

Wealthtech innovator Wealthfront unveiled this week its plans to launch a freemium version of its online roboadvisory service. The California-based company will open its Path financial planning tool for free to U.S. users.

Users new to Wealthfront can sync their existing financial accounts with Path, an automated financial planning solution launched in 2017, that offers an interactive experience for users to explore different scenarios that may help them reach their goals. By syncing their own accounts with Path, users can gain a better understanding of their current wealth management habits and create a personalized retirement plan for the future. Wealthfront will allow freemium users to sync not only traditional bank account information but also brokerage account and home value data. As is the case with most freemium services, Wealthfront’s goal with the new offering is to transition clients of the free service to its managed plans.

In an interview with Reuters, Wealthfront Co-founder and Chief Strategy Officer Dan Carroll said, “We don’t believe that financial advice should be for the ultra wealthy and it should be behind the paywall.” The company’s management fees are on the low end of the industry, however. Wealthfront charges a transparent advisory fee of 0.25% and a fund fee that ranges from 0.07% to 0.16%. “We were gratified when we looked at the data, that clients that engage with the engine do save more,” Carroll added.

The freemium service is slated to launch by the end of this year.

Wealthfront stands a little taller now in comparison to competitor Betterment, which is still limited to paid, managed plans. To its benefit, however, Betterment offers optional access to licensed financial experts who provide a human touch to an otherwise strictly algorithmic investing approach. Personal Capital, which offers both a freemium model and access to a team of financial advisors, remains a step above both.

Wealthfront debuted as KaChing at FinovateSpring 2009. The company started 2018 with a capital raise of $75 million and the launch of its home ownership planning tool. Earlier this week, Wealthfront announced it teamed up with Intuit to leverage data from account holders’ TurboTax returns to create a smoother onboarding experience for new clients and offer more personalized services to existing clients, based on their detailed tax return data.

Finovate Alumni News

On Finovate.com

  • DoubleNet Pay Acquired by Benefits Provider Purchasing Power.

Around the web

  • Moxtra partners with Virtusa to help banks with client engagement.
  • Daon announces partnership with Avtex to improve contact center experience.
  • Envestnet | Yodlee launches risk insight for pre-qualification.
  • Benzinga features Kabbage growth stats.
  • CNBC: Coinbase and Circle form joint venture to boost adoption of dollar-backed digital coins
  • City A.M. reports Azimo and CurrencyCloud to open offices in Amsterdam.
  • Temenos announces new Hybrid Pooling cash management solution for corporate banking.
  • ClearBank selects Featurespace for real-time fraud and AML detection.
  • Insuritas partners with Northwest Bank to launch bank-owned digital insurance agency platform.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Lending Club and Wealthfront Score Intuit Consumer Data

Lending Club and Wealthfront Score Intuit Consumer Data

What do you get when you combine Intuit, Lending Club, and Wealthfront? We’re about to find out, thanks to Intuit’s announcement today that it is making user data available to third party providers.

California-based Intuit partnered with P2P lending company Lending Club and roboadvisor Wealthfront this week. These partnerships are fueled by Intuit-owned Turbox, leveraging the more than 80,000 data fields on the TurboTax return, including income, employment, housing, etc. With one click, TurboTax users can save time during LendingClub’s loan application process by importing their data. Similarly, shared TurboTax and Wealthfront clients can open an account much faster and receive more personalized financial advice based on their tax return data.

Lending Club noted the capability will do more than just speed up the application process. Cole Gillespie, Vice President and Head of Business Development at LendingClub, said that the TurboTax data will “unlock the access to credit for customers that ordinarily we might not be able to serve… this partnership is a step in leveraging alternative data sources to help us increase the speed and access to credit.”

Andy Rachleff, CEO of Wealthfront said that partnering with a company like Intuit is “a dream come true.” He explained, “They don’t just pay lip service to caring about the client. They constantly challenge themselves to provide more value. Integrating with TurboTax data that customers agree to provide will allow Wealthfront to continue to raise the bar on what it means to deliver accessible, convenient, and deeply personalized financial planning. We can’t wait to do more together.”

Intuit is also leveraging the data to pre-fill applications within PFM platform, Mint; financial recommendations site, Turbo; and existing external Intuit partners. By combining household data to give lenders a view of shared household income, credit score, and debt, Intuit offers a fuller picture of total borrowing and savings power. The company estimates pre-qualification leveraging TurboTax data generates a conversion rate of up to 9x in offer performance.

“With more than 25 million users and rich insights into their financial profile, Mint and Turbo are uniquely positioned to deliver value to both consumers and strategic partners,” said Varun Krishna, VP of product management for Intuit’s Consumer Division. “Using machine learning, we are able to provide consumers a comprehensive view of their finances and highlight relevant opportunities to save time and money and generate unique value to our partners.”

Best known for its Quickbooks accounting software, Intuit most recently demoed at FinovateFall 2009. The company has 20 locations across 9 countries and employs 9,000 people. Founded in 1983, Intuit went public 10 years later and today has a market capitalization of $54.6 billion.

Founded in 2006, Lending Club demoed at FinovateSpring 2009 and at the inaugural Finovate in 2007. Earlier this summer, the company appointed Ronnie Momen as Chief Lending Officer. Lending Club went public in 2015 and today the company’s market capitalization sits at $1.54 billion.

Wealthfront debuted as KaChing at FinovateSpring 2009. The company began 2018 by landing $75 million in funding, bringing its total raised to $205 million. A few weeks later, the company launched a home ownership planning tool.

Finovate Alumni News

On Finovate.com

  • Identity Risk Scoring from Socure Helps Radius Bank Reduce Online Fraud.
  • Lending Club and Wealthfront Score Intuit Consumer Data.

Around the web

  • American Express and PayPal announced expanded strategic partnership to enhanced experience for U.S. Amex card members using PayPal and Venmo.
  • NCR to test age detection technology to improve efficiency in self-service checkouts.
  • Sberbank unveils its new Payment Schedules solution, enabling users to configure the interface of Sberbank Business Online into an event feed format.
  • Tinkoff Bank launches Tinkoff Junior mobile app for children and teenagers.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.