Financial technology experts say that the reason that robo-advisor Wealthfront replaced CEO Adam Nash with former CEO Andy Rachleff is because the company’s assets under management (AUM) are now trailing those of its competition. Nash will remain with the company as a member of the board of directors. He was named CEO in 2014. Rachleff stated in a company blog that he wants to “spend more time” leading the company and will strive to make it “the only financial advisor our clients will ever need.”
On Wednesday, January 26, 2022, Wealthfront announced that it has agreed to be acquired by one of the premier brands in wealth management, UBS, in a transaction valued at $1.4 billion. In a blog post on the company's website, David Fortunato, Wealthfront’s Chief Executive Officer, alleviated an concerns on the part of current and prospective customers by stating, "You will see no change to your experience and can look forward to benefiting from UBS’s breadth of products, services, and intellectual capital. Rest assured that nothing will change with your account or the cost of our service. 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."
Wealthfront is facing stiff competition from several other robo-advisor providers, such as Betterment, Vanguard and Fidelity Investments. Charles Schwab and BlackRock Inc. also offer robo-advisor platforms. TD Ameritrade, meanwhile, recently announced that it now has an automated service available as well, named Essential Portfolios. (For more, see: Wealthfront Versus Betterment.)
One of the reasons why Wealthfront has fallen behind its original rival Betterment is because Betterment also serves financial advisors in addition to retail customers. Wealthfront has no plans to do this. Company spokeswoman Kate Wauck made a statement on Tuesday that, "Our strategy to build a standalone direct-to-consumer business has not and will not change.”
Betterment has had more assets under management than Wealthfront for about a year now. The latter company now manages about $4 billion in assets for approximately 90,000 clients. Betterment has about $6 billion in assets under management and about 188,000 clients. But both companies fall far behind robo-giants Vanguard and Schwab, which have $40 billion and $10 billion in assets under management, respectively.
Craig Iskowitz, founder of Ezra Group, a technology consulting firm in the financial advice industry told Investment News, “This change means that the Wealthfront board has lost faith in Nash's ability to execute his plans to become the market leader. The combination of Vanguard and Charles Schwab has already sucked the lion's share of AUM in the self-directed/automated-investing space. Now it's a race to see who gets to pick through the scraps.” (For more, see: 9 Top Robo-Advisors for Financial Advisors.)
Other experts also believe that Wealthfront is heading in the wrong direction. Tim Welsh, president and founder of Nexus Strategy, also told Investment News that the company’s failure to expand its technological offerings could spell the beginning of the end for the robo provider. “Wealthfront is clearly heading south,” Welsh said. “Wealthfront's corporate mission to stay on course solely at their one target market will ultimately be its downfall.” Other observers speculate that the company may go up for sale.
Wealthfront's spokeswoman in a comment in the Investment News article said that the robo-advisor is on track to double its clients for the year and the firm's monthly net deposits are growing "at an accelerated pace." (For more, see: What Blackrock's Roboadvisory Entry Means.)