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Best Wealth manager: UBS Wealth Management |
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Also shortlisted: BNP Paribas and Credit Suisse Private Bank |
It has once again been a challenging year for those managing assets for the world’s wealthy. Despite the recent back-up, fixed-income yields remain low. “You can’t think in terms of cash and bonds,” says Jürg Zeltner, CEO of UBS Wealth Management. “Cash is expensive, the risk-return profile in the bond markets is unattractive – especially in some European government bonds.” And although many developed equity markets have performed well, emerging market equities have generally struggled and there has recently been increased volatility.
Despite this, UBS’s house view over the past year with regards to asset allocation has been successful. “We were early to call US equities and get into high yield. We got currency plays right and exited some trades at the right time,” says Zeltner. “We didn’t do everything right, but many of the big calls we made had positive results for clients.” As a result, more than 90% of UBS’s client portfolios had a positive performance last year.
Moreover, as a result of UBS Wealth Management’s reinvention as a private bank with an over-riding focus on managing investments, high-net-worth individuals are moving to the Swiss bank. In 2012, net new money inflows (ex-Americas) were SFr26.3 billion ($27.67 billion) and in the first quarter this year they were SFr15 billion – the highest quarterly net inflows since 2007. In the Americas, in 2012 there was an increase of $8 billion in net new inflows, taking the total of net new money to $22.1 billion. The strategy is translating into profits. In the first quarter, UBS reported the highest profit since 2009 for its wealth management business (excluding the Americas) and the Americas reported a record quarterly profit. This year, UBS Wealth Management wins Euromoney’s award for best global wealth manager.
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| Jürg Zeltner, CEO of UBS Wealth Management |
Asset allocation, now at the centre of how UBS interacts with clients, comes from the chief investment office, headed by Alexander Friedman. Those views are implemented for all clients with discretionary portfolios – some $100 billion in assets. “Clients are savvy and have access to information from multiple banks. Only those that can advise on asset allocation in a high-quality way with a global reach will gain market share,” says Zeltner.
The desire to create an advisory workforce that is of the highest quality led the firm to enforce vocational education among its employees. Last year the bank began requiring all client advisers to take a diploma course in markets and portfolio management that is approved by Switzerland’s State Secretariat for Economic Affairs. And this year, the bank began offering a masters programme – which results in a recognized degree. “For one, we realized that it is important for some of our advisers to have this next level of training so they can better serve clients,” says Zeltner. “And on the other side, it is important for the company in order to retain employees. Banking is an attractive job despite what the public sentiment has been since the crisis. It can be very rewarding and very demanding, and supporting advisers in a masters programme is something we can do.” UBS pays for the study unless the adviser leaves within three years.
UBS has also invested in the management of risk in its portfolios. Last year, it launched an automated tool that tracks all clients’ portfolios for deviations from their risk profiles – even those who do not have discretionary mandates with UBS. Clients who opt for the service pay a fee of between 0.8% and 1.25%, less still for those client with assets over SFr500,000. In return, client advisers alert them to any portfolio issues that seem to deviate from their risk profiles or market developments. The tool also forces advisers to sell only appropriate products and increases transparency around advice. At present the tool is operating only in Switzerland, but it will be rolled out in Asia and Europe over the next 12 months. “It will be the UBS way of doing business,” says Zeltner.
With its new strategy of asset allocation, advice and education in place, UBS Wealth Management is now turning its eye once more to growth. “We are no longer consumed with thinking about stopping outflows or turning the business around. The real question now is how do we sustainably grow?” says Zeltner. Asia and emerging markets remained the key focus, but Zeltner says that there are pockets of growth within Europe – in particular in such onshore markets as Germany, Italy and the UK. Organic growth is the first priority, he adds, although an acquisition in a new market that was a cultural fit and economically sensible wouldn’t be ruled out.
“We’re not in a rush,” says Zeltner. “We are pleased with where we are. We feel we have the ingredients to be able to advise clients correctly, source investments from around the world, and price the advice effectively. There are not many in our industry who can do that.”
