Private Banking and Wealth Management Survey 2020: Can Khan and Naratil make more of UBS Wealth?
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Private Banking and Wealth Management Survey 2020: Can Khan and Naratil make more of UBS Wealth?

Illustration: David Manion

UBS Global Wealth Management is the world’s best wealth manager. It is an accolade the firm has enjoyed for 13 of the 17 years of Euromoney’s annual survey. But its financial performance does not match its scale. A new partnership at the top of the firm has a plan to integrate business lines and streamline processes.

Tom Naratil and Iqbal Khan are sitting in a conference room in UBS’s Weehawken office overlooking the Hudson River when Euromoney arrives to interview them. 

Naratil, an American history buff, is sharing the story of Alexander Hamilton’s death by duel – close to UBS’s office and memorialized in a statue outside – leading Khan, born in Pakistan and relocated to his mother’s native Switzerland as a child, to joke that his new role is an education in America. 

It’s surprising to see the two side by side and so at ease. A year ago the idea that they would be working together seemed ridiculous. Back then, Naratil’s right hand man was Martin Blessing, who had taken up his co-head role of UBS Global Wealth Management in February 2018. 

Khan, on the other hand, was running the international wealth management (IWM) business very successfully at Swiss rival Credit Suisse. 

By the end of last summer, however, Khan had announced he was leaving Credit Suisse, Blessing had been let go and Khan was revealed as Naratil’s new co-head. 

The move came as a surprise. Yes, there were rumours that Blessing wasn’t working out, and that Khan and Credit Suisse chief executive Thiam Tidjane had a strained relationship, but Khan cut a more enterprising figure than seemed a natural fit for UBS. 

Despite Naratil’s steady hand and his success at quarter after quarter of record profits in the US, UBS’s wealth management business elsewhere was stalling. The decision to merge UBS Americas with UBS Wealth Management and create a single Global Wealth Management (GWM) business at the beginning of 2018 was designed to be a moment of change, but markets and clients were left confused about the merger’s purpose. Blessing had seemed too safe a pick to shake up the business outside the Americas. 

We will be exploring whether financial institutions can have a critical role to play in driving the shift to impact through blended finance
Phyllis Costanza

UBS found itself accumulating assets, boosting its position as the largest global wealth manager in the world (now with $2.9 trillion in client assets), meanwhile Credit Suisse’s wealth management business was more profitable with less than half UBS’s assets under management. UBS’s revenues remained stagnant and plans to boost lending at GWM never really took off. 

If 2018 was disappointing, 2019 was something of a mixed bag. There was some relief in the fourth quarter; net interest income over 2019 fell, although pre-tax profit grew 4.4% year on year. However, the bank’s pre-tax profit margin of 21.3% was much lower than US competitors, proving it’s hard to be a European institution right now. 

As a group, UBS missed key targets. It had targeted a return on common equity tier-1 (CET1) capital of around 15% and an adjusted cost-to-income ratio of about 77%. Instead, return on CET1 capital was 12.4% for 2019, while the adjusted cost-to-income ratio stood at 78.9%.

The market has been frustrated. While some of the revenue declines have come from nervous clients holding cash in a continued low interest-rate environment, by the third quarter last year there was a disappointment that costs were not adjusted to compensate the revenue dip, says Andrew Stimpson, financials analyst at BofA Securities. 

“The management plan at the end of 2018 was for higher revenues and flat costs going forward, but instead revenues have come down,” he says. “While costs have been cut, it’s also been reinvested into growth, and that’s hard for the market to appreciate when revenues are disappointing.” 

For a firm that had arguably the biggest buying power, the best wealth management brand, top talent and big technology investments, something had clearly gone awry at UBS. 

Group chief executive Sergio Ermotti had bet on a young and enthusiastic pair of hands for its ex-Americas wealth management as the firm emerged from the financial crisis with the appointment of Jürg Zeltner, whose drive had shaken the business up and driven it forward. 

It was time to do it again by hiring Khan. 

Iqbal Khan

After a quarter of building their new relationship, in early January this year Naratil and Khan announced their plan for GWM and a move back to higher performance. Much of that will be mimicking the US strategy across the globe. 

There will be a closer relationship with the investment bank and asset management businesses, a de-layering to increase speed and time to market, regionalization of Europe, Middle East and Africa (EMEA) to accelerate growth, more empowerment for local businesses, clients more thoughtfully segmented and a separate lending book put in place for GWM within the investment bank to ensure deals are more competitive. 

It’s a simple plan, unlikely to ruffle clients, who for the most part are happy, even if shareholders may not be so. But with small tweaks to improve efficiency and become a little more aggressive when doing business with clients, the hope is that a year from now UBS GWM will be back on track, targeting 10% to 15% growth in pre-tax profits.

Double act

Khan reminds Euromoney that he and Naratil have actually known each other for eight years. Khan was a regulatory auditor from Ernst & Young, representing Swiss market regulator Finma, back when Naratil was UBS’s global CFO. 

“Tom was a tough client,” jokes Khan. Naratil quips back that their interactions were thankfully good ones. 

The double act works. Both are smart and driven, but different enough to complement each other. Naratil is the industry and UBS veteran via PaineWebber, and is known as being thoughtful and affable. Khan, his junior by 16 years, is sharp, dynamic and eager.

“I was telling Sergio [Ermotti], that our relationship is fascinatingly natural,” says Naratil. “We tend to think the same things about where to take the business.” 

One might infer that Blessing did not. 

“I know Tom and trust him,” adds Khan. “I know I have a lot to benefit from his experience.” 

Given the scandal that followed Khan’s departure from Credit Suisse, where his former employer paid a detective agency to spy on him, it’s understandable how trust might be high on his agenda. 

No one is hiding the advantages of Khan’s background at a chief competitor. 

“When you have someone competing against you and in some areas beating you, then join you, you are presented with the opportunity of asking someone how you can do better,” says Naratil. “What are the things we have been doing that have given our competitors an advantage? And what have we been doing that are competitive advantages that we have not exploited more? It’s been really interesting to view UBS through Iqbal’s eyes.” 

Tom Naratil

Naratil seems genuinely excited to have a co-head who sees the partnership as a chance to co-create, surely made smoother by Khan being free of UBS baggage and career ambitions that would pit the two co-heads against each other – at least in the short term. 

Khan, freed from the tensions of his last months at Credit Suisse, is like the cat that got the cream. Now co-heading a business with more than twice the assets of his former employer – and one that is the core business of the whole firm – Khan gushes about the access, product breadth, pricing advantage, technology platform and brand quality at UBS. It’s clear he sees the potential to make UBS sleeker and faster; and he has a willing partner in Naratil who had begun that journey in the US already.

Analysts seem to like the combination as well. 

We’ve not been an innovative industry when it comes to organizational structure. You marry that with legacy infrastructure and you wind up with a slow-moving industry
Iqbal Khan

Eoin Mullanney, analyst at Berenberg Bank, pointed out in a January note on UBS called ‘What Khan can do’ that during Khan’s tenure, Credit Suisse’s IWM private banking unit more than doubled its profit before tax between 2015 and 2018; that his net new assets outpaced those at the comparable EMEA division at UBS; that general and administrative expenses fell by 10%, whereas at UBS GWM adjusted general and administrative expenses rose by 15% between 2016 and 2018; and that Khan’s loan book grew by 29% compared with loan growth at UBS’s GWM EMEA unit of just 3%. 

“We believe [Khan’s] appointment as co-head of GWM can allow UBS to benefit from best practice elsewhere and to identify areas where it can improve performance,” Mullanney says. 

Stimpson at Bank of America is also optimistic: “Khan is enthusiastic and that can go a long way.”

Regional autonomy

The first part of their new strategy is one that Khan has brought with him from Credit Suisse – creating regional autonomy. 

“One of the first things Tom and I discussed was what global means,” says Khan. “And we both said at the same time that global does not equate to central.” 

“We both share the belief that we should be pushing authority and decision-making down closer to where the client is,” says Naratil. 

Essentially, the goal is to make UBS Global Wealth Management work faster – something Naratil has succeeded in doing in the US already. The small increase in loans has been driven by the Americas business. And Naratil says its advisers in the US have the highest productivity rates in the country – producing $1.4 million in revenues a head versus $1.18 million at Morgan Stanley

“Not every decision made in Singapore has to go by Zurich when it’s something that relates to local business,” stresses Khan, who says the strategy he implemented at Credit Suisse is being taken one step further at UBS. “We’re going local, not just regional.” In EMEA that is beginning by splitting the region into three business units: Europe, central and eastern Europe and Middle East and Africa.

It’s part of a larger de-layering. Both Khan and Naratil say it is the future not just for UBS but for wealth management as an industry – streamlining procedures and processes. 

“The bureaucracy has to be fought,” says Khan. “We’ve not been an innovative industry when it comes to organizational structure. You marry that with legacy infrastructure and you wind up with a slow-moving industry. What you need to do is simplify the structure.” 

“You need to relentlessly ask: ‘What is slowing us down?’ So you can create an environment where your people can thrive,” adds Naratil.

UBS is known for being the wealth manager that has the broadest reach globally and therefore access to ideas and solutions that its competitors cannot match. But if clients can’t get loans on the ground in a prompt manner, are spending too much time onboarding or are not getting competitive pricing on deals, then UBS loses out to local banks and fierce competition from its few remaining global peers. 

In a period when clients are invested heavily in cash, financing and deals become crucial for revenues for the group – and not just GWM. 

In a memo the two put out in January, they clarified: “We will significantly increase regional authority, simplify segmentation by moving from five segments to four, and flatten hierarchies by removing up to three management layers.” 

The headcount cut will be around 500 from managing directors to middle managers in the belly of GWM, which is 2% of the workforce. 

Our industry is bad at over-marketing things to the point where we kill the client appetite – and some players are running a risk right now of doing that in the sustainability field
Tom Naratil

Also listed in the memo is a plan to better integrate investment banking with GWM – something that has been working already in the US. That plays out most obviously with internal changes to how UBS will now serve its ultra-high net-worth (UHNW) clients. 

It has always been a coveted segment and UBS alongside JPMorgan has long led the industry in serving these clients. UBS ranks first in Euromoney’s 2020 private banking survey for UHNW and is second in the mega-wealthy and billionaire pool to JPMorgan. Some $45 billion from UHNW clients came into GWM in 2019.

The UHNW and mega wealthy may be the fastest growing segments in terms of assets under management, but they are not the most profitable. Indeed, one of the challenges GWM has faced is that while the UHNW segment has been the biggest source of net new money, a large amount of that money has stayed in cash. 

But the UHNW segment is not homogeneous. To this end, Naratil and Khan announced those clients that need daily access to trading desks, complex derivatives, block trades and IPOs – essentially access to the investment bank – will now be served out of the Global Family Office (GFO) headed by Josef Stadler, who formerly ran the UBS UHNW business unit. 

Some 1,500 clients will now be served by the GFO, more than doubling the current number, with the remaining UHNW clients, who don’t need daily investment banking coverage, being served by UBS’s regional business units. The firm is hoping to see 15% compound annual growth rates in the GFO revenues over the next two years. 

Stadler comments that by opening up the GFO, UBS will be able to increase the share of wallet among its global UHNW clients that want ongoing institutional-like coverage. “At the same time, covering less complex, non-institutional UHNW clients through the regional markets will increase our proximity and speed of execution.”

Changes to the UHNW segment have raised eyebrows outside the firm, but Naratil and Khan point out that more than 50% of revenues at GWM come from the $2 million to $5 million and above high net-worth segment. It was a segment that Khan at Credit Suisse had commented is often neglected by the industry despite being the sweet spot in terms of profitability. 

Through de-layering, the goal is that advisers to this segment will now be closer to both Naratil and Khan, and the clients will have a broader offering including lending, access to private markets and thematic investing. 

That broader offering is going to matter a lot over the next decade according to Naratil. “With short-term interest rates predicted to remain at historically low levels, markets at record highs and higher volatility expected for most financial assets, clients are going to need more diversification and better advice than ever to secure a given level of return.” 

It may also mean a better chance at reaching the goal set out by UBS GWM in 2018 for $20 billion to $30 billion in net new loans per year. That, however, will be dictated in part by client confidence in markets more generally point out analysts. 

Naratil and Khan also note that the client segment below the $2 million to $5 million level (depending on the region) is also an attractive profit stream they intend to tap. While not generating large net new money amounts, the use of technology allows for the segment (and its simpler needs) to be served at scale. 

As stated in the memo: “This client group will be a fast growing and important profit contributor in the decade ahead so we will continue the rollout of regionally tailored solutions in each market.”

Our preferred route is to tailor an experience based on feedback – so if you liked what an adviser sent you, then we would try to offer you more of that
Wiwi Gutmannsbauer

The asset management business is also going to be better integrated with GWM – with cost benefits as the goal. UBS Americas, for example, formed a joint partnership between GWM and asset management last year to eliminate the investment management fee on separately managed accounts (SMAs). 

“We’re simplifying SMA pricing and reducing overall client cost, expanding choice and transparency, and positioning financial advisers to deepen their relationships with clients,” says Naratil, who considers this a win for both clients and advisers.

It makes for considerable buying power. 

“We are a good client to have if you are a fund manager because we won’t be cyclical,” says Naratil. “Sometimes our clients in the US are interested in LBOs when those in Asia or Europe aren’t.” 

It’s not just the geographic mix that the pair believe gives UBS a competitive edge in getting access and competitive pricing terms. 

“I was talking to a fund manager recently and reminded him that if UBS moves just 1% of its wealth management assets under management in any direction, that’s $25 billion. That’s a big number and a massive advantage we can leverage for our clients,” says Khan.

That buying power and access should help retain both clients and advisers and make UBS even more competitive – especially in the US where UBS doesn’t enjoy the same brand reputation as Morgan Stanley. 

“Twenty years ago in the US, the importance to clients of the adviser versus the brand was about 80/20 – it was the opposite in Swiss offshore banking. Those ratios are now converging,” says Naratil. 

That’s important in the US where competition for advisers has been fierce. In a bid to gain net new assets, entire teams are poached among the top wealth management players. A reminder of this occurred in September last year when Morgan Stanley hired a team managing $1 billion in assets from UBS.

Indeed, $9 billion in outflows were seen at the Americas wealth management business in the last quarter of 2019. In January, however, the roundabout of assets continued when UBS poached an $11 billion team from Merrill. 

But Khan and Naratil both dismiss net new money as the key indicator of success for the reasons mentioned before. 

“For too long parts of our industry have been far too obsessed with net new money,” says Khan. “We’re proud of the fact UBS is one of the safest institutions, because stability and safety really matter. But with low or negative rates we cannot be a car park for cash. That’s not a smart strategy for our clients, nor for any bank.” 

They argue that productivity per adviser is a better measure – and in the US productivity per adviser at UBS is the highest in the country at $1.4 million in revenues per adviser (Morgan Stanley’s is $1.18 million) and the US is the most profitable of UBS’s regions. GWM wide, however, the gap between UBS and US banks is noticeable. 

Morgan Stanley’s pre-tax profit margin in wealth management over 2019 was 27% versus GWM’s 21.3%. In the latest round of earnings, Morgan Stanley’s chief executive, James Gorman, said he wanted that to increase to 28%-30% over the next two years, becoming 30% thereafter. 

Technology investments

To Naratil's earlier point about the growing balance between brand and adviser, in the US it will become all about the platform. 

“Our job is to create the best framework and platform to serve both the client and adviser. It creates a stickiness throughout the chain,” says Khan. 

Technology investments are therefore key – both to ensure the adviser wants to stay by having an unparalleled platform and product breath, and the client by having an exceptional client user experience. UBS Group’s technology spend is $3.5 billion a year and will remain steady through 2021 the firm says. In the firm’s Weehawken building alone, 35% of staff – more than 2,000 people – work in technology roles. 

Large investments when revenues are low have not been well received by the market, but Naratil comments that some industry observers don’t always understand that it would not be beneficial to take a short-term view on costs and slow that investment down. 

“That would be a huge mistake in our industry,” he says. 

The investment has paid off for clients. UBS ranks first globally for technology in Euromoney’s 2020 private banking and wealth management survey. 

Naratil points out that technology will dominate the decade ahead in wealth management and that scale will ultimately decide who comes out on top: “You could start a wealth manager tomorrow and maybe even get to $30 billion in size, but at some point you’re going to be capped because you will not be able to make the spend on technology investment. In a world where technology will be crucial for serving clients and advisers, we will likely see the biggest wealth managers that have the ability to invest extend their lead.” 

UBS is moving towards running two platforms – the US and ex-US. Over the last few years the bank has been rolling out the Swiss platform, which was the most advanced, across the rest of the world. 

Wiwi Gutmannsbauer

“Prior to that we had numerous platforms across Europe and Asia,” says Wiwi Gutmannsbauer, COO for UBS Asia Pacific, who has overseen much of the technology investment for GWM in Apac. “Every time a new regulation was launched, every platform had to be altered.”

It underscores Naratil’s point that investment has to be constant. From back to front, technology is constantly evolving – with different evolutions in different countries. 

In Asia, for example, Gutmannsbauer points out that the mobile phone is the preferred method of banking: “As a bank you need to integrate WeChat or WhatsApp into services, and we are very aware that other messenger platforms will arrive in the future.” 

Greater personalization is where technology is now headed, says Gutmannsbauer – either through the adviser platform or the client experience. 

“It’s not without its challenges. We can theoretically gather data on clients from their digital footprint outside the bank and combine it with what we already know to create a very tailored experience, but we don’t view that as appropriate,” he says. “So our approach is that we use what we have but the clients are in the driver's seat on how we use it. Our preferred route is to tailor an experience based on feedback – so if you liked what an adviser sent you, then we would try to offer you more of that.” 

In the US, the firm has been playing catch-up in workstation technology. It’s hoped that gap will have closed since partnering in 2018 with technology solutions provider Broadridge to upgrade the back and middle office platforms. 

Naratil and Khan both stress that technology will not replace the adviser, however. 

“For 36 years I’ve been hearing about the death of the adviser and it hasn’t happened yet,” says Naratil. “Try asking Siri what you should do with your wealth if your children don’t share your values and it becomes clear why humans will always be needed. We’re investing in technology not because we’re afraid it will take over from advisers, but because it will deepen the relationship they have with clients.”

Sustainable investments

In addition to trends in speeding up decision-making and technology investments, both Khan and Naratil highlight sustainability and philanthropy as differentiators for wealth management firms in the decade ahead. 


Mark Haefele

In a future when sustainable investments will become standard investments, UBS is undoubtedly in pole position – with much credit to Mark Haefele, UBS GWM’s CIO. A study from the University of Zurich in November 2019 showed UBS to be the only financial institution it researched with a sustainable investment vision, offering and service (such as reporting and training) that exceeded the industry average. 

In Euromoney’s 2020 private banking and wealth management survey, UBS ranks first globally for environmental, social and governance (ESG) and impact investing. 

In 2018, UBS launched its 100% sustainable portfolio across asset classes with a little over $1 billion in assets under management – that has grown to over $9 billion. At the start of 2017 the firm also announced a commitment to raise $5 billion in impact investments related to the United Nations Sustainable Development Goals over five years. 

Halfway along the timeline, in mid 2019, 60% had already been allocated. UBS also works with several external partners to engage as a shareholder with companies around social and environmental target setting.

“Sustainable investing is one of the big trends for the decade ahead and we know a lot of money is going to flow into it,” says Haefele. 

He says the firm has tried to make it less of a niche side product but rather embedded within all investments.

Last year UBS GWM piloted a programme that scored equities, bonds and funds on six individual ESG issues and allowed clients to construct portfolios based on their personal affinity with those issues. Due to the success of the pilot, it’s now being rolled out on a permanent basis. 

Rather than rely on external ESG methodologies and ratings that tend to vary, we have developed our own internal scoring that we and our clients can use
Mark Haefele

These offerings have required large investments that have put it ahead of competitors. 

“Rather than rely on external ESG methodologies and ratings that tend to vary, we have developed our own internal scoring that we and our clients can use,” says Haefele. “Once you do that you can begin to see huge sums start to shift towards sustainable investments in a way that is much more meaningful than just launching an oceans fund for example.” 

It also gives clients the ability to choose investments that align with their values, rather than being told what their values should be. Every wealth manager will have wealthy clients in the fossil fuel sector after all. Like the client digital experience, sustainability is also becoming personalized. 

“There’s a difference between turning up with a solution, or having a client share their values and then building them a solution or giving them the ability to build their own,” says Naratil. “The former is clearly about making money and not about the client, and clients can sniff that out. Our industry is bad at over-marketing things to the point where we kill the client appetite – and some players are running a risk right now of doing that in the sustainability field.”

Khan adds that UBS’s overall approach to serving clients helps prevent the hard sell. He mentions UBS’s foundational philosophy, which it calls the UBS Wealth Way or Three ‘Ls’: liquidity, longevity and legacy. 

“When you start conversations about these three points and let them lead to solutions being created, rather than coming in first with mandates and products, it’s a very different result,” he says. “Wealth management is emotional and not many firms understand that mindset difference.” 

In Euromoney’s 2020 private banking and wealth management survey, UBS also ranks first globally for philanthropic advice

“The difference between us and a lot of wealth management firms is that elsewhere 20 minutes into a philanthropy discussion, it turns into an asset management pitch. We just talk about philanthropy,” says Naratil. 


Phyllis Costanza

Khan points to the UBS Optimus Foundation run by Phyllis Costanza: “There’s no other offering at a bank like it.” 

The foundation works with clients to identify philanthropic opportunities and then co-create ideas and solutions with them, while also putting its own funds in to support programmes.

Within the foundation are development impact bonds and investments that recycle any returns back into the overall pool – which is expected to reach $100 million by the end of 2020. It has provided a testing ground for new philanthropic ideas and applies measurements around impact. 

“It goes beyond saying we delivered X number of malaria nets, to finding out whether those nets created a positive change – actual reduction in malaria incidents,” says Costanza. 

She says the foundation plans to increase its focus on systems change over 2020: “We will be exploring whether financial institutions can have a critical role to play in driving the shift to impact through blended finance. Philanthropists could provide the first loss portion of a deal that could help drive additional funding from the private sector. Banks could play a key role in structuring such deals.” 

While the foundation has focused largely on social impact related to health, education and child protection, it is making a series of hires this year in the environment and working with the Climate Leadership Institute in California to identify the best opportunities for clients to drive impact in this space. 


Both Naratil and Khan stress that their strategy is more of a clean-up than an overhaul. In the January memo they choose the words “realizing our full potential”. It’s a theme they both reiterate together in Weehawken: all the pieces are there for GWM, it just needs a few screws tightened. 

As confident as the pair seem, the pressure is on. The relationship between Khan and Naratil has to work because it’s hard to see the market tolerating another change in the co-head team. And as Ermotti’s departure draws closer – he has been running UBS for nearly a decade now – they will both be in the running as a successor. 

In an interview with Neue Zürcher Zeitung last year Ermotti said of his future replacement: “We have at least three good internal candidates and if somebody leads our core business as co-chief, it’s pretty clear that this person should have the potential.” 

Those three are thought to be Naratil, Khan and Sabine Keller-Busse, group COO and president of UBS EMEA.

Ermotti is certainly coming under increasing pressure. UBS announced in January that it had missed its financial targets for 2019 and cut its future goals. Ermotti said “2019 was not an acceptable outcome.” Is he now on borrowed time?

And could the competition for the top threaten Naratil and Khan’s current partnership? It’s hard to say. While Khan is receiving a lot of media attention, one can’t help think that Naratil, despite being the same age as Ermotti and surely close to retirement himself, makes the more compelling choice given his background as CFO, oversight of the core business and proven track record in the US. 

Naratil feels like a mentor to Khan – at least in these early stages – and some suggest that Naratil could take over from Ermotti for a short period while Khan runs GWM alone, giving the latter a couple more years under his belt before ultimately becoming group chief executive. That strategy would likely deepen their relationship rather than drive a wedge between them. 

In the Swiss media interview Ermotti added that: “It’s just going to depend on the needs of the bank at the time of the change,” suggesting that it will ultimately come down to whether the market desires a steady pair of hands at the helm or a shake-up. 

There is a lot at stake for Naratil and Khan therefore, as ultimately that desire will be dependent on whether their new strategy delivers. 


Helen Avery head.jpg
Contributing editor Euromoney
Helen Avery is a contributing editor. She covers social and environmental finance, and topics of diversity and ethics within the financial industry. Helen is also a director at the Green Finance Institute.
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