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multiple of 21 times! That’s a staggering   advisory force will not be thrilled to   nology of Learnvest would be a great
                 valuation considering that Schwab paid   now be working with these relatively   way to break into the digital advice
                 roughly  4.3 times  for TD Ameritrade’s   tiny accounts. So how can they do this   world. But as we know, that didn’t work,
                 revenue and Morgan Stanley paid 4.6   profitably by adding an expense layer   and it completely shut down Learnvest.
                 times for E-Trade’s revenue to acquire   of people when the competitive price   Similarly, Principal took a flier on the
                 those highly profitable and growing dig-  points are at zero?       digital advice platform RobustWealth,
                 ital businesses.                    To confirm this notion, let’s check   had the same result, and shut it down
                   So there must be other reasons why   back in with our friend Andy Rachleff.   as well.
                 UBS would pay such a premium for a   “The hybrid model hasn’t worked at all,”   What makes this deal even more
                 tech startup that never really started up   he declared at another fintech confer-  curious, however, is  that UBS  actually
                 after more than 14 years — which in the   ence in late 2020. “We’ve been validated   had invested in and developed a robo-
                 tech world is about 589 dog years.  in the approach that we take.” He was   advisor of its own called SmartWealth
                   According to the company release,   referring to the fact that Wealthfront   a few years ago, but ultimately sold
                 UBS is touting the abil-                                                 it to the startup robo advisor
                 ity to now go after “affluent   [Wealthfront’s] Rachleff                 SigFig, which UBS had a signifi-
                 Gen Z and millennial” inves-                                             cant investment in, and still relies
                 tors  through  Wealthfront’s     and his believers are                   upon for UBS’ outsourced digital
                 digital platform. That makes                                             advice offering.
                 sense, but as we have  seen,   swallowing a bitter pill for                So why does UBS now think
                 Wealthfront’s recent growth                                              that  dropping  nearly a  billion
                 has been only after it started   having come with much                   and  a  half  dollars  on  another
                 offering banking products and   fanfare to disrupt wealth                robo-advisor will be any differ-
                 services, not investments.                                               ent? And what happens to SigFig
                   And now, with digital indus-  management, only to find                 as UBS still maintains an owner-
                 try leaders such as Schwab and                                           ship interest?
                 Fidelity offering free robo-ser-  themselves thwarted by the               All great questions, of course,
                 vices, UBS most likely will have                                         but to put this deal in perspective,
                 to adopt a similar pricing struc-  formidable power of the               that $1.4 billion purchase price is
                 ture just to stay competitive,                                           a fraction of the nearly $20 bil-
                 let alone stop client defections     human advisor.                      lion in fines and penalties UBS
                 now that the independent,                                                has paid over the last 20-plus
                 anti-establishment spirit of Wealthfront   users were younger and “wanted to   years, if you include the $2 billion fine
                 has been replaced with a massive, centu-  learn this on their own,” not from an   UBS just recently received for enabling
                 ries-old Swiss bank.              aging Gen X or baby-boomer advisor.  wealthy French people to evade taxes.
                                                     Thus, the only answer has to be for   So they can afford to roll the dice with
                 THE BIG WHY                       UBS to dust off the product playbook   yet another robo-advisor.
                 Further rationalizations of the deal,   and try to cross-sell UBS products to   Ultimately, though, for those keep-
                 according  to UBS, will  be its  ability  to   its newly acquired accounts, as well as   ing score at home, the sad tale of
                 grow and attract affluent next-gener-  put those same proprietary products   Wealthfront is yet another example
                 ation  clients through access  to remote   into the Wealthfront robo-portfolios.   of how technology alone will never
                 human advice, a major change in the   Ah, Wall Street’s product strategy never   replace the human touch when it comes
                 philosophy  and  ethos  of  Wealthfront’s   gets old!               to personal finance, investing and help-
                 culture to rely only on technology — not   We will have to let the deal play out   ing people achieve their long-term
                 people — to deliver advisory services.   to determine whether or not this apples-  financial goals.
                   Will the 470,000 self-directed cli-  and-oranges tie-up will ever make sense.
                 ents of Wealthfront who signed up for   History,  however,  has  not  been  kind   Timothy D. Welsh, CFP, is president, CEO and
                 a  digital  experience  suddenly  change   to legacy financial services companies   founder of Nexus Strategy LLC, a consulting
                 their minds and want hybrid tech-and-  buying technology platforms. Most   firm to the wealth management industry. He
                 human advice? And where will UBS get   notably, Northwestern Mutual thought   can be reached at [email protected] or
                 these people  — its well-compensated   that  buying the financial planning tech-  on Twitter @NexusStrategy.



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