Wells Fargo has done a good job of keeping itself out of the news. In today’s wealth management and banking environment that is a feat unto itself. The quiet bank and financial services company has been quietly having conversations with some well known and “finally up to scale” firms in the robo-advisor space. The understanding being that their own high margin call center type of concept isn’t nearly as robust as the likes of Merrill Edge or UBS’ for that matter. Wells believes that any acquisition could be quickly scaled and begin managing accounts < $250k immediately. As the conversations develop, internally Wells executives are concerned that this could adversely affect their bank channel advisors. It is believed that those concerns would be swiftly set aside by the margins generated by the new robo platform. Here are several emails that we’ve received describing talks that Wells is having:
One Wells Fargo source said the following, “the case has been made that we should just do this internally and that there really isn’t a need for an acquisition. The counter to that focuses on the belief that robo platforms are here to stay and by acquiring one we affectively have moved to eliminate a long term competitor. That is the philosophical play here. Of course there are benefits with ‘margins and millennials’ but WF takes a much longer view of these types of issues. One name that I’ve heard is Wealthfront. They’ve done a nice job with marketing and would make a bit of a splash for us. Not to say that talks are in deep or developed, but that is the one name that I’ve heard.”
Another source at Wells Fargo had this to say, “you are going to see every bank come out with some sort of robo platform over the next two years. The question is do they develop them on their own or acquire one of the robo startups. If I had to put a nickel on what we do, I say we end up acquiring a place like Wealthfront. It is a plug and play deal and a portion of the investing public would have knowledge of the name already.”
A Wealthfront source gave us a brief comment, “I can tell you that there have been all sorts of overtures made but commenting on them and giving any specifics wouldn’t do us any good. That is all I can say right now.”
The robo movement continues to gain steam and isn’t all that dissimilar to the deep discount movement in the late 90’s. We all remember those commercials. In the end, all of the pop up discounters ended with significant consolidation and a couple still remain. That same movement is already under way in the robo-advisor world.