UBS hails profitable wealth industry

The importance of wealth management as a profitable industry for global banks has been highlighted by Peter Wuffli, chief executive officer of UBS, one of the world’s largest financial institutions. Mr Wuffli hailed the attractive economics of this growing SFr46,000bn (?30,000bn) business during an address to the CFA Institute in Zurich, during which you could almost hear a pin drop. He talked about sustainable margins, the possibility of generating recurring revenues and the golden combination beloved of Swiss bankers: low capital requirements matched with high barriers to entry. His claims should not be taken lightly. If they came from a boutique manager searching for cheap self promotion, they would need a lot more careful and sceptical scrutiny. Yet UBS is one of the few global institutions for which private banking really matters. Around 40 per cent of UBS revenues are generated by wealth management, compared to 10 per cent or less for other cross-border players. Of course, Mr Wuffli, like other Swiss bankers obsessed with controlling the media and putting across a ‘message’, would take such as chance to sing his bank’s praises. But UBS really does have a focus on this business. It set up an Investment Solutions unit to make sure that there is a unified approach to product creation and design right across the bank, both for internal and third-party products. And it has made sure that this unit is properly involved in the training of advisers. The man who sets global private banking trends predicts that the forces and demographics driving wealth management are quite sustainable and will be boosted by diversification opportunities away from core European markets to Asian clients. However, he also warned against complacency and suggested service on its own is not enough for most clients, as greed represents one of the key characteristics of human nature. Returns are vital to client retention. But that is not to say the service proposition is redundant. Clients want to be with a bank and adviser that will always be around to serve them, conceded Mr Wuffli. Although there was a hint about US authorities perhaps over-extending their reach when it comes to taxation and regulation, the UBS chief talked about the importance of the new age of regulations for banks, their advisers and clients. And as for what’s on the horizon, Mr Wuffli was keen to quash any conspiracy theories in relation to the Swiss bank’s plans for Julius Baer, a once declining private client player enjoying a healthy resurgence after a recent corporate restructure. In response to a question from PWM, he said UBS has no strategic ambitions for Julius Baer, despite the fact that it retains a significant stake in the smaller bank and has installed some of its best-known senior managers at the helm. Staff at UBS offices in Zurich, however, are keeping a very keen watch on their investments at Baer. And it appears to be more than a case of simple curiosity.