February 1, 2022

UBS Group AG Chief Executive Ralph Hamers on Tuesday outlined a comprehensive strategy for its U.S. wealth management business that draws inspiration from some of its biggest peers by focusing on finding new clients in from online and workplace investments and expanding sales of higher-margin banking products.

The company offered $1.4 billion acquisition of robo-advisor Wealthfront Inc. announced last week would be a key part of this plan. The purchase, which is expected to be completed in the second half of the year, will give UBS access to a new set of 470,000 next-generation and mass clients and help it retain more assets from two million corporate stock plan clients and one-and-a-half million employees in the pension plans that UBS currently manages, Hamers said in a strategic update coinciding with fourth-quarter results. of the society.

“It’s kind of the richer customers where we need a more digital wealth offering,” Hamers said. “Introducing a digital wealth offering after their shares are acquired and they’ve sold their shares will actually keep the money in-house.”

Hamers also touted Wealthfront clients as a “very loyal customer base” with long-term value given that they were in the early stages of their wealth accumulation. The main channel led by UBS US advisors would also benefit from the ability to integrate certain Wealthfront services such as tax loss harvesting and indexing, he said.

“It will help us provide a scalable, digital solution for high net worth investors, and it will seamlessly complement our core advisor-led businesses,” Hamers said, dismissing concerns about potential conflict between channels.

Hamers’ plan came as UBS’s US operations, which includes around 6,200 brokers, reported $471 million in pre-tax profit in the quarter, a 24% improvement over $386 million a year ago. This is the company’s best fourth quarter ever, the company said. Revenue of $2.769 billion was up 16% from $2.382 billion in the year-ago quarter, driven by higher fee income and net interest income from loan growth.

Under the leadership of co-heads of the Global Wealth division, Tom Naratil and Iqbal Khan, UBS’s US business has for years been looking for ways to grow more business and increase margins with a smaller brokerage force. Under Hamers’ predecessor, they had focused primarily on servicing ultra-high net worth clients and promoting more sales of banking products.

The acquisition of Wealthfront would bring UBS’s strategy more in line with larger competitors, including Bank of America’s Merrill Lynch Wealth Management, which relies on its Merrill Edge consumer banking business to attract new clients, and Morgan Stanley Wealth Management, which touted its 2020 purchase of E*Trade Financial and its 5.6 million workplace customers as funnel for net new asset growth.

Hamers told analysts on Tuesday that UBS had not yet determined whether it would use Wealthfront under its own brand or market it under a separate name. He expects to be able to increase his revenue beyond the 0.25% fee Wealthfront charges on assets by referring them to other parts of the business.

“We can later introduce other UBS products to their clientele as well as mortgages,” Hamers said. “There are a lot of reasons why we think what we paid was definitely worth it.”

UBS is also investing in analytics, data and artificial intelligence tools to help make its core brokerage force more productive, Hamers said. These services have been adopted by competitors, including Morgan Stanley, which uses its Next Best Action tool to prompt advisers to make potential recommendations to clients.

UBS also planned to expand its banking services, including adding more mortgages, loans and cash management services, which would help advisors cross-sell clients and “make sure we get more from their clients as well.” activities,” Hamers said.

UBS’s Americas unit, which includes a small contingent of advisers in Latin America and Canada, added $4.5 billion in net new lending in the quarter, making it the strongest growth of the four divisions geographical areas of the Swiss bank in its Global Wealth unit in terms of lending. It ended the quarter with $92 billion in loans, up 5% year-over-year.

“We’re widely appreciated for our investing capabilities, but we’re not often recognized for our U.S. lending and deposit capabilities,” said Hamers, who took over in November 2020. is what we’re going to do. change.”

UBS’s workforce, which is less than half the size of Morgan Stanley’s 16,000 salespeople, remained relatively flat at 6,218 brokers, down a net 48 in the past three months and down 87 – or 1.4% – from 6,305 a year ago.

UBS brokers added a total of $21.9 billion in net new paying assets during the quarter. Assets under management grew to $1.8 trillion from $1.6 trillion a year ago.

Overall, UBS Group posted its best annual profit since the financial crisis, prompting the company to increase share buybacks and send the company’s shares up 7.7% at 12:10 p.m.