8 ms·

UBS, Wealthfront Cancel $1.4B Deal

88 points by uptown 4y ago

htrp 4y ago
UBS walking away from an overpay on the acquisition price.
- dsimmons 4y ago
  I was kind of wondering about this myself! Although they're putting a "positive" spin on it, surely this can't be good (for at least one party)?
  - MrMan 4y ago
    maybe people are realizing they can also write javascript
  - kibibyte 4y ago
    Considering this press release came out on a Friday afternoon shortly before the Labor Day weekend, I sensed this wasn't supposed to be good news.
    - hotpotamus 4y ago
      That's the heuristic I'm applying too and I've got a substantial amount of money in Wealthfront that I'm now debating what to do with.
- benjaminwootton 4y ago
  I imagine $1.4 billion is a rounding error on a rounding error to UBS.
  - boyka 4y ago
    It's rather ca 100% of their average yearly earnings or 3% of their current market cap/6-10% of their market cap a few years ago.
    - sealeck 4y ago
      UBS 2021 net income was US$ 7.6 billion and they have $1.12 trillion in assets under management.
      - rco8786 4y ago
        Their AUM is not really relevant. That’s not their money.
  - lotsofpulp 4y ago
    $1.4B is a rounding error to big tech companies or a big bank like Chase or BoA. For UBS, it is a decent percent of their profit. https://www.macrotrends.net/stocks/charts/UBS/ubs-group-ag/net-income https://www.macrotrends.net/stocks/charts/UBS/ubs-group-ag/n...
prepend 4y ago
> average level of assets per client account was about $57,000 It’s strange to me how people with such low assets would pay for a roboadvisor instead of just a fidelity or vanguard mutual fund. Even at a low price of 25 basis points per year that’s not very wise for the simple needs of low value portfolios. I can understand if you have a lot and actually need some complicated management. But if you just have a few thousand then there’s no need. It’s interesting and sad how it seems regular people get fleeced when they should just pay $500-1000 once to a fee only advisor and do their thing.
- benced 4y ago
  I’ve done the math on it and the losses I can declare on and deduct from my taxes from their tax loss harvesting cover their fee. Am I missing something?
  - hedora 4y ago
    According to their marketing, tax loss harvesting more than covers their advisory fee for 96% of customers: https://www.wealthfront.com/pricing https://www.wealthfront.com/pricing If you want to save a few more bucks, you could check your portfolio every morning, invest in 100s of stocks manually, track wash sales and comparable stocks, then enter each trade into your tax software instead of just using the 1099 computations their computer does for you. Or, maybe spend that time relaxing or being paid to do something more valuable. They charge $212 a month to manage a million dollar portfolio. Assuming I could earn minimum wage doing something else, the lost wages from the time it would take me to do all that every weekday would be more than $212.
    - geraldwhen 4y ago
      In general I don’t think anyone trades daily. You rebalance quarterly and tax loss harvest annually or maybe semi annually. If you traded daily you would run into tracking error quickly as you ran out of similar funds to jump between for your tax loss harvest.
    - prepend 4y ago
deleted 4y ago
[deleted]
mcqueenjordan 4y ago
> UBS will, however, buy a $69.7 million note that is convertible into Wealthfront shares. I wonder if this is the effect of a sort of acquisition equivalent to a 5% earnest money clause/agreement? 5% of $1.4bn is $70m.
balderdash 4y ago
What’s amazing is how far behind the large wealth managers are with regards to offering services that the robo advisors do (at 1/4 the price)
- asah 4y ago
  HNW folks who are wondering: old school retail wealth managers attached to large institutions can be good human contacts when you have urgent needs and exceptional situations. To optimize the cost, just give them a small portion of your portfolio to manage, and put the rest in a mix of funds, robo and self-directed.
funstuff007 4y ago
> UBS is paying $3,000 for just $117 of annual recurring revenue (ARR), That's 25X revenues. According to a fintech banker, I spoke to this past week those multiples are just not getting done anymore. As to how UBS was able to pull a Musk (in a much cleaner fashion), I'm not sure.
- rst 4y ago
  Among other things, UBS probably didn't let the seller (Wealthfront) totally dictate the terms of the deal. (The convertible note that they bought might have been the fee for a much more liberal termination clause than the one in the Musk/Twitter deal.)

88 points by uptown 4y ago

htrp 4y ago

UBS walking away from an overpay on the acquisition price.

dsimmons 4y ago
I was kind of wondering about this myself! Although they're putting a "positive" spin on it, surely this can't be good (for at least one party)?
- MrMan 4y ago
  maybe people are realizing they can also write javascript
- kibibyte 4y ago
  Considering this press release came out on a Friday afternoon shortly before the Labor Day weekend, I sensed this wasn't supposed to be good news.
  - hotpotamus 4y ago
    That's the heuristic I'm applying too and I've got a substantial amount of money in Wealthfront that I'm now debating what to do with.
benjaminwootton 4y ago
I imagine $1.4 billion is a rounding error on a rounding error to UBS.
- boyka 4y ago
  It's rather ca 100% of their average yearly earnings or 3% of their current market cap/6-10% of their market cap a few years ago.
  - sealeck 4y ago
    UBS 2021 net income was US$ 7.6 billion and they have $1.12 trillion in assets under management.
    - rco8786 4y ago
      Their AUM is not really relevant. That’s not their money.
- lotsofpulp 4y ago
  $1.4B is a rounding error to big tech companies or a big bank like Chase or BoA. For UBS, it is a decent percent of their profit. https://www.macrotrends.net/stocks/charts/UBS/ubs-group-ag/net-income https://www.macrotrends.net/stocks/charts/UBS/ubs-group-ag/n...

prepend 4y ago

> average level of assets per client account was about $57,000 It’s strange to me how people with such low assets would pay for a roboadvisor instead of just a fidelity or vanguard mutual fund. Even at a low price of 25 basis points per year that’s not very wise for the simple needs of low value portfolios. I can understand if you have a lot and actually need some complicated management. But if you just have a few thousand then there’s no need. It’s interesting and sad how it seems regular people get fleeced when they should just pay $500-1000 once to a fee only advisor and do their thing.

benced 4y ago
I’ve done the math on it and the losses I can declare on and deduct from my taxes from their tax loss harvesting cover their fee. Am I missing something?
- hedora 4y ago
  According to their marketing, tax loss harvesting more than covers their advisory fee for 96% of customers: https://www.wealthfront.com/pricing https://www.wealthfront.com/pricing If you want to save a few more bucks, you could check your portfolio every morning, invest in 100s of stocks manually, track wash sales and comparable stocks, then enter each trade into your tax software instead of just using the 1099 computations their computer does for you. Or, maybe spend that time relaxing or being paid to do something more valuable. They charge $212 a month to manage a million dollar portfolio. Assuming I could earn minimum wage doing something else, the lost wages from the time it would take me to do all that every weekday would be more than $212.
  - geraldwhen 4y ago
    In general I don’t think anyone trades daily. You rebalance quarterly and tax loss harvest annually or maybe semi annually. If you traded daily you would run into tracking error quickly as you ran out of similar funds to jump between for your tax loss harvest.
  - prepend 4y ago

deleted 4y ago

[deleted]

mcqueenjordan 4y ago

> UBS will, however, buy a $69.7 million note that is convertible into Wealthfront shares. I wonder if this is the effect of a sort of acquisition equivalent to a 5% earnest money clause/agreement? 5% of $1.4bn is $70m.

balderdash 4y ago

What’s amazing is how far behind the large wealth managers are with regards to offering services that the robo advisors do (at 1/4 the price)

asah 4y ago
HNW folks who are wondering: old school retail wealth managers attached to large institutions can be good human contacts when you have urgent needs and exceptional situations. To optimize the cost, just give them a small portion of your portfolio to manage, and put the rest in a mix of funds, robo and self-directed.

funstuff007 4y ago

> UBS is paying $3,000 for just $117 of annual recurring revenue (ARR), That's 25X revenues. According to a fintech banker, I spoke to this past week those multiples are just not getting done anymore. As to how UBS was able to pull a Musk (in a much cleaner fashion), I'm not sure.

rst 4y ago
Among other things, UBS probably didn't let the seller (Wealthfront) totally dictate the terms of the deal. (The convertible note that they bought might have been the fee for a much more liberal termination clause than the one in the Musk/Twitter deal.)