• Sanjeev Kumar & Risav Chakraborty

WealthTech's Wealthy Wins: Mega M&As

Innovation and investments have been the key trends in the WealthTech industry over the last decade. Its recent claim to fame with the high value mergers and acquisitions is driven not only by incumbents like Goldman Sachs, JPMorgan Chase, and Charles Schwab, but also by FinTech players such as SoFi, Acorns, and NuBank. While the financial details of most of the deals remain undisclosed, the sheer size of the acquirers has been sufficient to garner attention. In this post, we take a closer look at some of the mega mergers and acquisitions that the sector witnessed in the recent years.


Incumbents Flex Their Financial Muscle

One of the biggest transactions in the WealthTech world was unveiled on 26th Jan, 2022 – when Swiss Banking Giant UBS announced its acquisition of robo-advisor Wealthfront in an all cash deal valued at $1.4B. With an asset size of over $1T, UBS will be able to support its growth plans in the US by leveraging Wealthfront’s state-of-the-art digital platform tailored for the next generation of mass affluent investors. In a bid to compete with established retail banking and FinTech rivals, JPMorgan Chase acquired British digital wealth management platform Nutmeg in a blockbuster transaction valued approximately around $1B. Nutmeg will not only complement the newly launched Chase digital bank in the region, but will also help the largest US bank expand into the UK retail banking and investment market. The sector witnessed an identical mega money merger in Aug 2020, when Empower Retirement announced the complete acquisition of Personal Capital for up to $1B in enterprise value – composed of $825M in closing, and an estimated $175M for planned growth. Boasting over $680B in assets, Empower’s acquisition of the hybrid advisor is expected to boost its ambition to build a complete financial wellness platform for the clients of the retirement service provider.


Competition Heats Up: Behemoths Go Big On Investments

US banking and investment behemoth Goldman Sachs has also been strengthening its portfolio with a number of acquisitions in the WealthTech and personal finance management space. Its investment spree can be traced back to 2016, when the bank’s Investment Management Division acquired retirement savings platform Honest Dollar for an undisclosed amount. This investment was centered around Goldman’s effort to serve approximately 45M Americans who do not have access to employer sponsored retirement plans. In a bid to create the digital bank of the future, the Wall Street bank acquired personal finance management startup Clarity Money for $100M just two years later. By leveraging the startup’s technology, Goldman Sachs rolled out an updated version of its digital platform Marcus—which now featured a new Insights service—a significant step in creating a complete money management platform for its customers. Within a couple of years, the investment giant was grabbing headlines again as it announced the acquisition of boutique wealth management custodian Folio Financial in an undisclosed deal. This transaction is integral in Goldman Sachs’ vision to further enhance offering to registered investment advisor clients. With competition aplenty, 2020 remained a witness to a number of such mega money investments. Financial Services goliath Charles Schwab, custodian to more than 7500 RIAs, purchased thematic brokerage platform Motif in an all cash deal, with the terms of the transactions remaining undisclosed. The complete asset acquisition of Motif’s technology and intellectual properties will facilitate Charles Schwab in accelerating the development of thematic and direct indexing solutions for retail investors and RIA clients.


Challenger Banks Crossover With Digital Investments

As the incumbents went on a shopping spree, FinTech players joined the WealthTech buying binge as well. Several digital-only banks have ramped up on their plans to bring digital investment services to their customers in order to monetize the relationship; and also to aid their quest to become a financial super app. Challenger bank SoFi made its first expansion outside the US when it announced the acquisition of Hong Kong based investment platform 8 Securities for an undisclosed amount. According to the terms of the transaction, 8 Securities will be rebranded as SoFi Hong Kong, becoming the only brokerage service to deliver free stock trading of more than 15000 US and Hong Kong stocks along with ETFs with zero commission and zero platform and custodian fees. Nubank, the largest independent digital bank in the world, acquired Easynvest in September 2020 in order to take the leadership position in the digital investments category. Starling Bank has partnered with Moneybox and Nutmeg to bring their services to its marketplace. Monzo has also announced its plan to build investments and wealth businesses in their quest to balance growth with profitability. In 2021, Sequoia-backed Indian neobank Jupiter also followed in the footsteps of global counterparts with its acquisition of Y Combinator backed savings app Easyplan to expand their customer base as well as enhance their savings and investment capabilities.


FinTech's earliest attempt to disrupt the traditional WealthTech industry can be traced back to 2017, when one of USA’s fastest growing micro-investment platforms Acorns acquired Vault, a developer of retirement fund investment services. This move was pivotal in their plans to launch a new individual retirement account called Acorns Later the following year. In an identical move, US-based FinTech Oportun, in a bid to enhance their A.I. and digital capabilities, acquired neobanking platform Digit in a deal valuing roughly around $213M.


In the last half a decade, the WealthTech industry has undergone a massive development, drawing attention from incumbents and FinTechs alike. Evolving at an exponential pace, this subsector now has a plethora of facets and models. The steady increase in the number and amount of investment deals every year only ascertains the ever growing competition in the industry, matched by equivalent levels of innovation and expansion.


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