Private banking is pretty much the same wherever you go in the world, right? Wrong. And every wealthy private-banking client is surely different, bearing their own unique set of needs, urges and desires – right? Wrong again.
Like everything in life, a lot of what we think we know to be correct could not, in fact, be further from the truth.
Take the first point. A relationship manager serving the wealthy from their office in Zurich will typically draw a salary and, assuming the year was a beneficent one, also pocket a bonus at year’s end. That is how it works pretty much across the globe, from London to Dubai to Singapore.
Not so in the US, where wealth-facing RMs typically eat what they kill. “Private banking in the US is very entrepreneurial,” says John Mathews, head of ultra-high net-worth (UHNW) Americas and group managing director at UBS in New York. “Financial advisers [here] are entrepreneurs: they set up their businesses the way they want and go after their own type of client. Our job is simple: it’s to help them serve clients better so they can grow faster.”
This ‘grid’ model is what attracts so many emotionally intelligent financial minds to enter private banking in the world’s largest economy. The rivalry for clients is fierce: UBS is up against some of the most driven operators on the planet, from mainstream firms such as Merrill Lynch, to niche players such as Los Angeles-based City National Bank, widely known as Hollywood’s go-to private bank.
Everyone thinks we’re just in the investment business. But we only do that 49% of the time; for 51% of the time, we’re really in the life counselling business
John Mathews, UBS
Every one of these private banks is, on the domestic stage, less a single, cohesive operation than a group of highly enterprising teams, each of which hunts and gathers, largely on its own.
In this sense, they are like matryoshka dolls: containing teams within teams within teams. One grouping of wealth managers might target only elite athletes. Another might hang around backstage at the Oscars, chatting to the movie stars whose wealth they serve and protect. In the US, private banking contains multitudes.
It is a model that works. RMs get to keep a hefty share of the revenue they generate – so in theory, there is no ceiling on personal income. Private banks nurture these teams, celebrate when they poach one from a rival, and fume when the poacher becomes the poached.
Thus, when JPMorgan snagged the Los Angeles-based Gray-Polverini Group from Merrill Lynch last month, it was front-page news in the industry. The five-member team, led by Eric Gray and Lance Polverini, specialises in serving UHNW clients, including founders and C-suite executives of private and public companies. More pertinently, the group oversees $28 billion in client assets and generates $10 million in annual revenues.
One might also assume that when a RM and a wealthy client connect, all they talk about are the markets, investment ideas and the performance of their portfolio. Again – not so.
Mathews glances out at New York’s skyline – the view south along Avenue of the Americas, with the Empire State Building twinkling in the middle distance, is nothing short of stunning – and takes his time explaining how he and his team serve the super-rich.
“I call it ‘51/49’,” he says carefully. “Everyone thinks we’re just in the investment business. But we only do that 49% of the time; for 51% of the time, we’re really in the life counselling business, talking to clients not only about investments, but about critically important aspects of their lives, like trust and estate planning, family advisory and philanthropy.”
Fixing communications
‘Life counselling’ might sound like a way of talking up the bank’s ability to meet a client’s non-financial needs, in order to further insinuate itself into their life. Surely the wealthy know what they are doing with their own money, particularly at home?
Often – though not always – that isn’t the case. Family units are notoriously poor at communicating with one another about money; this is true at every level of the wealth scale, the only difference at the apex of the pyramid is the plethora of white-shoe advisory firms eager and willing to dispense advise.
Mathews cites the example of a long-time client whose company was about to go public.
“A few weeks ago [he] said to me: ‘John, I know how to speak to lawyers, to regulators, to attorneys and to bankers. But I have no idea how to talk to my kids or my wife about money. Do you have someone who can help us with that’. And we said: ‘Yes – that’s what we do’.”
UBS reaches into its bag of tricks at this point to help clients: a values-based card game for instance is designed to get families sitting around the table and talking about money.
“Wealthy people all over the world, including in the US, are worried about their wealth,” says Mathews.
First-generation wealth creators in particular fret about losing their shirt even before they have even managed to remove the tags.
“All of a sudden, their life changes. And they’re very concerned they’re going to lose it somehow by getting the wrong advice, or by someone stealing it.”
He cites the example of a star American football player who recently visited the firm in New York.
“When he first got drafted, he lost millions of his signing bonus because of a scam involving a no-name [small-time] firm.
“He said he was only going to do business with a firm that was recommended to him – and our name was given to him by a colleague of his.”
This problem is particularly commonplace among young athletes who secure a hefty signing bonus at an elite team – but with little or no clue about investing for success.
US footprint
UBS has assembled its US business in a very Swiss way, piecing it together steadily and imperturbably. It is, as Mathews correctly notes, the only non-US firm to have established a sizeable presence in the world’s largest private wealth market.
Over the years, European rivals have come and, in some cases, gone: Credit Suisse, now part of UBS, notably chose to exit wealth management in North America in 2015. Today, UBS employs 6,000 financial advisers in the US. Mathews himself leads the bank’s global private wealth-management division, a 600-strong team that delivers global insight and opportunities to the world’s most sophisticated families.
The key moment of acceleration for the Swiss bank came in 2000, when it bought New York investment bank PaineWebber. Mathews, who was working at PaineWebber when the deal was struck, says it gave UBS an “immediate footprint” in the US.
Today, the world’s largest wealth manager by client assets under management, is also the fourth-largest American firm by AuM. Its global team pulled in $131.7 billion in 2023 (up from $89.2 million a year earlier), and $65 billion in net new money (versus $40.5 billion in 2022).
Every year, our US business becomes more and more of an ultra-high net-worth wealth management firm
John Mathews
In recent times, UBS has shifted its gaze to focus more on the UHNW segment. Today, more than 50% of the assets it oversees in the US are on behalf of such clients, against half that number 10 years ago.
“Every year, our US business becomes more and more of an ultra-high net-worth wealth management firm,” Mathews says.
There is any number of good reasons for tacking to this approach. For one thing, even though we perceive ourselves to be individuals with mysterious and unique needs, urges, desires and fears, underneath the wrapping paper we are all remarkably alike.
“I meet clients all over the world, in Singapore and London, and the clients are exactly the same,” notes Mathews. “It’s just the way they’re served that’s different.”
That makes it easier to predict and meet the needs of the ultra-wealthy in multiple markets, including the US.
For another, wealth is growing faster at the top of the ladder than in the middle or at the foot: by common consensus, the UHNW demographic in the US is growing at around two and a half to three times the projected rate of any other wealth sector.
Plus, serving the super-wealthy opens a lot of doors. The margins aren’t better with elite clients – in fact, they’re usually lower. But, notes Mathews, “overseeing more assets lets us do so much more for clients. It allows us to be their asset allocator; to hold their bonds and handle their children’s accounts; to do their alternative investments and private equity, among other opportunities.”
Another false assumption when it comes to wealth generation in the US in recent years, is that its foundations are built atop the traditional power of the primary markets. In reality, most of it is predicated on a super-long M&A boom that, reckons Mathews, dates back to quantitative easing, as well as the ability to invest heavily in the financial system amid super-low interest rates.
“We all hear about the big IPO trades, but it’s really the person selling the $250 million business to a private equity firm, or to another family, where most of the wealth is being created in the US today,” he says.
Does UBS have plans to add headcount, perhaps snapping up or poaching new high-end wealth-management teams as and when they become available? Mathews shakes his head at the question.
“We like our size for now,” he replies. “We don’t want to be all things to all people; we want to be most things to very wealthy people.”
