It was a difficult fourth quarter for UBS Wealth Management, which, as leader of its industry, doesn’t bode well for other private banks.
UBS Wealth Management profits declined to SFr344 million from SFr646million in the fourth quarter of 2014. Its cost income ratio – which has always been low – jumped to 81.1%, compared with 67.7% for the same period the year before.
The firm also saw net new money outflows of SFr3.4 billion – mostly from Europe and emerging markets. The firm said in its earnings statement the outflows reflect “significant client deleveraging, cross-border outflows, and disciplined balance sheet management”.
The Americas fared better. UBS Wealth Management Americas registered net inflows for the fourth quarter of $16.8 billion. However, profits took a hit due to litigation and regulation expenses – profits fell to just $13 million for the period from $217 million for the fourth quarter the year before.
Pressure is mounting on private banks as markets continue their volatility. The trend towards automated advice has left the focus on performance. And with markets choppy, clients are opting for safer bets.
Asset management has now become the focal point for many private banks. Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Julius Baer and UBS are all investing in their asset management divisions.
However, they will find it hard to compete against the stalwarts of the asset management industry. BlackRock, Fidelity, Schwab, Vanguard, Invesco, Schroders, Aberdeen Asset Management – all are moving into the advisory business by buying or creating automated services for advisers or end-investors in need of asset management.
Speaking to Euromoney for the February magazine issue, UBS Wealth Management’s president Jürg Zeltner said: “Clients have changed. They are more knowledgeable and they require information that is relevant to their investments. There are so many things happening at once it’s a huge challenge to be constantly and consistently relevant. You have to be on top of things 24/7. You cannot sell privacy and call it diversification.”
A full interview with Zeltner will be published on February 10, alongside the results of Euromoney's Private Banking and Wealth Management Survey 2016.