UBS’s growth plans in the United States have been shaken after the failure of the Wealthfront deal

(Bloomberg) – UBS Group AG chief executive Ralph Hamers has suffered a surprise setback in his quest to make the Swiss wealth manager more digital after the collapse of the $1.4 billion acquisition of an American robo-advisor that was the cornerstone of its push.

On Friday evening, UBS and Wealthfront announced that the transaction they announced in January would not take place. Neither side specified the reason for the decision.

The deal would have been Hamers’ biggest deal since becoming CEO less than two years ago, and was the centerpiece of his aim to expand the Swiss lender’s wealth management offering beyond of traditional customers through the use of digital platforms. At the same time, technology stock valuations have fallen sharply in recent months, raising the possibility that UBS is overpaying for its US breakthrough.

“This is a real strategic setback for UBS management,” said Michael Kunz, analyst at Luzerner Kantonalbank.

UBS shares fell 2.7% in Zurich on Monday, in line with the broader pullback in the Stoxx 600 Banks index.

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Founded in 2008, Wealthfront was one of the first robo-advisors, using algorithms to help people manage their money. Zurich-based UBS was looking to add more than $27 billion in assets under management and more than 470,000 clients in the United States through the purchase. Hamers said the bank needs to embrace a broader base, even if that means pushing low-margin automated products that aren’t the hallmark of UBS’s personalized offerings.

After passing the $3 trillion mark in assets under management, UBS was counting on greater use of digital technology to increase cost savings and increase business with the world’s wealthy. With a broad slowdown in Asian markets underway this year, the lender has also placed greater emphasis on opportunities in the United States to support growth.

Still, the aborted deal is the latest in a series of failed digital ventures carried out by Hamers. As CEO of ING, he bought payments provider Payvision, but ING later shut down the unit’s adult industry portfolio and phased it out altogether after Hamers left. ING also announced last year that it was shutting down its UK retail app Yolt for consumers. It was introduced in 2016 under Hamers.

The Dutch bank took an impairment charge on one of Hamers’ flagship projects, named Maggie, just four days after he became CEO of UBS, saying the effort to streamline IT across multiple markets had underestimated “the complexity and costs of cross-border operations”. system and product integration.

–With the help of Steven Arons.

Lance B. Holton