With a few days to run before UBS announces its first-quarter results, one of the Swiss bank’s top executives was in bullish mood about what he says is the forward momentum of its wealth management business.

With a few days to run before UBS announces its first-quarter results, one of the Swiss bank’s top executives was in bullish mood about what he says is the forward momentum of its wealth management business, recovering from a series of blows that might have mortally wounded a lesser firm.

Instead of navel-gazing and worrying about losing existing clients amid concerns about tax disputes and turbulent markets, Switzerland’s biggest bank is drawing in new clients, and the sense of optimism in the firm is palpable, Nick Tucker, managing director, head of UK domestic wealth management at UBS, told this publication in a recent interview.

“We are now much more on the front foot than we were 15 months ago. Client advisors are more focused on looking for new clients and in the case of existing clients, looking after them in a more proactive manner,” Tucker, speaking at his firm’s offices in the Liverpool Street area of London, said.

 “I think we are better positioned than many of our competitors. We went into this [economic crisis] earlier and came out of it earlier,” he said. “We are now again expanding and look to widen the product range and solutions; and we’re hiring. We were challenged earlier than most, went through the pain earlier than most and implemented solutions earlier than most,” Tucker continued.

The last time WealthBriefing sat down with Tucker, who has been at UBS since joining from Merrill Lynch in late 2010, the Zurich-listed banking and wealth management firm was only beginning to see better performance after recovering from heavy losses linked to the US sub-prime debacle, and a damaging legal row with US authorities over UBS’ alleged help for US tax evaders. There have still been some bad moments, however: last year, UBS discovered $2.3 billion of losses at its investment bank had been caused by unauthorised trading (a court case on the matter is ongoing). Oswald Grübel, the ex-Credit Suisse executive who had been at the helm to help UBS through its troubles, resigned last autumn, eventually replaced by Sergio Ermotti, another ex-Merrill man.

UBS’ wealth management businesses collectively logged SFr5 billion (around $5.5 billion) in inflows over the final quarter of 2011. UBS reported robust inflows in regions such as Asia as well as a lessening of the negative impact of the recent strength to the Swiss franc. For the full year, wealth management pre-tax profits rose 16 per cent year-on-year in wealth management to SFr2.7 billion; for its wealth management Americas arm, full-year profit was SFr504 million, representing a turnaround from a loss of SFr130 million in 2010. UBS had $1.555 trillion of assets at the end of 2011, making it the third-largest wealth manager by assets behind Bank of America Merrill Lynch and Morgan Stanley in first and second place, respectively. (Source: Mediobanca). On some measures, the Swiss firm is still the biggest international firm in terms of the geographic reach of its clients.

Forward momentum

And so although Tucker could not disclose performance figures ahead of the 2 May quarterly figures, he was certainly upbeat.

“It is about helping client advisors getting on the front foot. Everyone got introspective in this business in the years after 2008,” he said, arguing that this mindset is now changing.  

Tucker echoed a theme from some of his rivals at BNP Paribas and Credit Suisse – the days when people think that small is better than big are over, as regulatory and other pressures bite.

“In the last five years, the perception has been that small is better than big. We have to stress what are the benefits of being a big firm,” he said, mentioning such things as the infrastructure and efficiency of such a firm, its depth of research, breadth of geographic reach. “This is particularly important with clients who have international needs,” he said.

A large firm, said Tucker, can create specialist teams able to serve certain client groups effectively. He gave the example of UK resident non-doms. UBS managers dealing with such clients are specially qualified for the role. “We spent 18 months from the end of 2009 to 10 months ago almost not doing any new business but re-educating ourselves on this [non-dom] business,” he said.

“We don’t want to be all things to all men,” he said, stressing the firm’s total focus on the high net worth and ultra HNW segments.

Tucker briefly mentioned the work of the Global Family Office Group, headed by Jerry Wattenberg since it was set up in 2010 (Michael Bishop runs the UK side of this business segment). “This [GFO] really plays to the strength of our bank and investment bank; you have to bring that through to bear with family offices,” he said.

The importance of wealth management to everything UBS now does is now very clear, Tucker continued: “It’s empowering to walk into the investment bank here and to see how wealth management is now seen at UBS”.

One of the most important decisions to get right is client segmentation, and not surprisingly, Tucker spent some time explaining how UBS approaches this issue.

“There are a lot of ways you can segment clients; there is the traditional one over the size of wealth; another way is on client sophistication and a third way is to place where they created or acquired their wealth. We all do all of this; more latterly, we have client account teams who are focusing on specific areas of wealth,” he said.

There are 18 different streams across the segments dealing with different sources of wealth, such as biotech, private equity, hedge funds, oil and gas, media, professional partners, women , sports and entertainment, technology; Asian residents in the UK, and acquirees of wealth (divorce settlements, compensation awards, etc).

“They [clients] need advisors who understand all the nuances of the sector,” Tucker said, giving the example of clients from the private equity world.

“We believe it is essential for Resident Non Domicile clients to deal with a client advisor who has specific qualifications on how to advise RND clients as the area is getting ever more complex. Thus we have a specific programme our advisors need to have passed to advise RND clients and RND clients' needs make up a significant part of the book so they remain current as RND issues evolve,” he said.

“The [client] streams where we are having good results include the oil and gas group, which is doing very well; the tech group, which is doing surprisingly well,” he said (referring to the industry in the UK); private equity is, not surprisingly, doing quite well and the hedge funds group is doing well,” he said.

In the regions

Tucker stressed the importance of UBS’ regional network in the UK. “Our regional business has come out of the economic malaise significantly earlier than our London business has. The importance of the regional basis cannot be overestimated,” Tucker said. (The firm, for example, recently added to its office in Birmingham).

“The quality of people we are seeing and the number of businesses that are quietly exiting the regional space is a huge opportunity for us,” he said.

Regulation

Rather like its Swiss rival, Credit Suisse, UBS treats the UK’s programme of wealth management regulatory reforms – the Retail Distribution Review – as an opportunity to show the benefits of being a large institution. “We consciously made the decision to embrace the principles of the RDR, and did so early on,” Tucker said.

“We believe those principles [higher qualifications and transparent, professional advice] are central to what we do.”

The firm insists on Level-6 PCIAM qualification – the highest qualification for advisors (higher than the minimum required under the RDR). “We have spent a lot of time working with our advisors on what our proposition is as we go into 2013 [when the RDR starts]. “If one embraces the principle of the RDR, you don’t have to sweat over the details too much. We are proactively talking to clients about what we are doing over the RDR from the beginning of May,” Tucker said.

Swissness

Swiss private banking has come in for a lot of criticism in recent years, given the secrecy laws and constant jibes about tax havens. So how does the Swiss ancestry of UBS go over with clients in London and other centres these days? 

“Wealth management is part of our DNA and every day UBS is driven by what happens in wealth management and not where we come from. We are European and not from another continent; that’s important because we understand Europe better than our non-European competitors, I think,” replied Tucker.