Numbers don’t tell you everything, but sometimes they shout pretty loud. Apac profits for UBS Global Wealth Management grew from $560 million in 2019 to $1.1 billion in 2020; a near doubling of profitability in the middle of a pandemic. Along the way invested assets in the region passed the $500 billion mark for the first time, hitting $560 billion by the end of the year, with $25 billion of net new money.
Numbers like these have no equal in the industry. They were also mightily important to UBS globally, representing about 30% of total and about 70% of incremental profits in 2020.
How has it done this? There’s no question that in difficult times, scale creates scale. Clients trusted UBS and rewarded it with a ton of business. Much of the profitability increase was transactional, as people traded their way through volatility and sought to both position themselves defensively but ready for emerging opportunities. Transactional income in the region was up 62% year on year.
But that can be fleeting and Amy Lo and August Hatecke, co-heads of wealth management Asia Pacific, have taken care to focus on recurring revenue, clearly illustrated by the proprietary Chief Investment Office views and the My Way portfolio management tool that helps discretionary mandates to follow house views with a degree of customization.
UBS has also been skilful in positioning itself for the varied sources of growth in Asia. It has had a global family office business since 2011, way ahead of the game, and in Asia that business recorded strong growth through the year. It also still dominates the ultra-high net-worth segment – three out of five billionaires in Apac have a relationship with UBS – and it has given client advisers more latitude to make decisions with the next tier down, high net-worth clients.
Alongside this, UBS has also long recognized that entrepreneurs are the most prized commodity for a private wealth business in Asia. Lo says 70% of UBS clients are entrepreneurs and the bank makes great efforts to serve them; in this respect, the investment bank’s return to sponsor business in Hong Kong after a suspension is useful.
No private bank gets anywhere without a digital transformation and UBS like many others saw dramatic increases in the use of digital channels by private clients. But that is pretty much a given these days. So is a sophisticated approach to sustainability, although UBS does impressive work here through its Optimus Foundation, whose contributions to the Apac region more than doubled in 2020 to over $40 million.
UBS has also differentiated itself with some distinct regional ventures. It has the complete domestic platform in China, with the first domestic investment banking joint venture not only to be given permission to operate but also to have majority foreign ownership.
An intriguing wealth management joint venture with Sumitomo Mitsui Trust Bank is too early to judge just yet. But if it can tap into one of the region’s most elusive opportunities – getting a whole generation of ageing Japanese to move money from low-interest savings accounts and into fee-earning wealth management products – it will be well worth watching.
