Zeltner strikes an upbeat note about the impact of the shock move by the Swiss National Bank to unpeg the franc from the euro.
"The sharp fall in the Swiss equity markets and the currency turmoil highlight the importance of portfolio diversification," he says. "Anyone who follows this principle and holds securities in all the world's major markets, hedging their currency risks, is financially better equipped to cope with this decision. [That gives] us the opportunity to demonstrate to clients why they need us."
Zeltner's comments reflect UBS's business strategy, more generally, which has shifted to a sharper focus on advising clients. UBS Wealth Management was known as something of an asset gatherer and product manufacturer.
Post-financial crisis, the business model shifted and its capabilities in advisory and research on asset allocation and investment management took centre stage, amid a complex macro trading environment and in response to client demand.
Zeltner explains the shifting sands in the industry. “Back in the old days, you could claim to be managing assets and have a sweet spot that you were particularly good at, like fixed income or equities," he says. "Today, though, it is asset allocation where you need to excel, and then having a multi-manager platform that sources the best and delivers in a tailor-made way. That is unbelievably demanding.”
For one, markets are moving at such a pace that asset allocation is not a static once-a-year review.
“While volatility is not at all-time highs, there is absolutely no time to stop,” says Zeltner. "Things change more or less overnight. Greece leaving the euro was not on the radar four months ago. Oil at $60 a barrel three months ago would have been a crazy assumption. You therefore need an investment DNA and investment processes that can cope with the complexity of today’s markets.”
Secondly, you need smart advice about how to position portfolios amid this complex macro trading environment, says Zeltner.
“It’s easy to hire a good analyst to be smart with a view on the dollar," he says. "The question becomes: what do I do with that? The way to make money used to be information arbitrage, but the world now is very sensitive. Clients can look at four screens of data, but they don’t know whether to buy, hold or sell. They are looking for smart market insights. That is the value of the bank.”
This shift in focus to superior asset allocation and investment advice has served UBS well. In the third quarter of last year, it registered the highest profit before tax since 2009 in its wealth management division (excluding the US), taking in $31 billion; and almost $5 billion in its US business. Recurring net fee income, which shows the growth of discretionary and advisory mandates, grew 10% year on year.
Zeltner says client scrutiny over portfolio performance is fierce. “The more you become an investment house, the more your clients want to know what you are doing and that means you need to build a track record," he says. "What were your calls? Were they right? Decisions are much more visible these days. You cannot take your eye off the ball.”
UBS is tough on costs, says Zeltner, and the demand for advice will add to the costs for the industry amid tighter regulation.
"I don’t hear enough discussion around cost increases,” he says. “It is going to be very challenging for the mid-tier player. You can be lean if you are a one-market player with no global aspiration, but if you want to be global then you need to have three-digit billion in AUM. Regional, two digits is enough and domestic, single digits.”