When UBS reported earnings on Tuesday, CEO Ralph Hamers provided more details on why the bank
Though the fintech will have to conform with some of UBS’s corporate standards when it comes to compliance and regulations, Wealthfront will continue to operate as a standalone operation “for a long time,'' Hamers said in a call with analysts.
“We want to manage them as much as possible as a separate unit and develop that digital proposition and beyond,” he said.
Part of this strategy comes from lessons learned from SmartWealth, UBS’s first attempt at a robo advisor. The bank
However, UBS is looking for “easy wins” in the near-term. Hamers said. UBS could take over the cash sweep arrangements Wealthfront has with other banks to offer cash management services, Hamers said. He also reiterated plans to use Wealthfront to provide digital wealth management to Workplace Wealth and retirement services clients, as well as provide existing Wealthfront clients with UBS’s investment insights and research.
Hamers also sees an opportunity to leverage Wealthfront’s software development prowess. To start, UBS wants the programmers to work on incorporating remote access to human advisors into Wealthfront’s purely digital product.
After launching and scaling the service for mass affluent investors, Wealthfront’s technology can improve the digital experience of two other channels — UBS’s core wealth management business for high and ultrahigh net worth investors, and its institutional wealth business.
“Their engineering culture will help us in how we deliver our services, both through Wealthfront's current proposition, but also for new propositions to come,” Hamers said. “Working together, will have ample opportunity for long-term value creation.”
Chief Financial Officer Kirt Gardner named two pieces of Wealthfront’s technology the bank is interested in: tax-loss harvesting and direct indexing.
A good year and quarter for UBS Global Wealth Management Americas
In 2021, UBS’s wealth management operations across the U.S., Canada and Latin America brought in $64 billion in net new fee-gathering assets and $20 billion in net new loans. The business outperformed analysts’ expectations with $2 billion in pretax profit, a record for the wirehouse and a 47% year-over-year increase.
The fourth quarter was also its best Q4 on record with $471 million in pretax profit, a 24% year-over-year increase.
Fewer but more efficient advisors
The wirehouse’s advisor workforce continued to shrink, with 48 fewer advisors
However, the company is doing more with less. The $2 billion in pretax profit is double what the firm brought in when it had around 7,500 advisors, and far better than when the business was losing money in 2008 with about 9,000 advisors.
More deals could be coming
UBS is open to additional M&A if it could bring scale or help the bank serve new segments of the market, Hamers added.
“We're not necessarily looking; if it comes it comes,” he said. “We're focused on organic growth, we're focused on making Wealthfront a success, and we're focused on making sure that we perform on the share buybacks.”
French money-laundering case hit the bottom line
Overall, UBS posted net profit of $1.35 billion in Q4, down from $2.28 billion in the previous quarter and $1.64 billion year-over-year. The reason for the diminished performance was a provision for the French cross-border tax case, said a source familiar with the firm. The firm is fighting a $2 billion tax penalty at the French supreme court and was hit with a $740 million fourth-quarter charge related to the case,
Increased buybacks
UBS surprised analysts by pledging to buy back up to $5 billion worth of shares in 2022. The bank had already repurchased $2.6 billion worth of shares at the end of Q4 from its previous $4 billion share buyback program launched in 2021.
