Soaring profits at UBS suggest that the move from investment banking to wealth management has paid off, writes Arun Kakar
Needless to say, UBS has had a good year. Net profit for the first half of 2018 soared 15 per cent year-on-year, beating its most optimistic expectations and leaving rivals scratching their collective heads.
The plan has worked - seven years after the bank cut down its investment bank division and shifted toward wealth management, gains are being powered by equities, foreign exchange and credit trading.
But what of the next generation? What of those oft-touted, pesky, ‘hard-to-reach’ millennials? Despite already having half of the world’s billionaires as its clients, and nearly $2.5tn of assets under management, UBS has a plan in mind when it comes to winning the next generation of UHNWs as the tech-focused millionaires of today, become the overnight billionaires of tomorrow.
One reoccurring theme stands out from UBS’s results. While several major private banks are shifting their focus to higher value clients by raising their thresholds to $5m, UBS ruled out a similar move last month with its head of global wealth management in China, Marina Lui arguing that we live in an age of wealth when a $2m entrepreneur client can become a $2bn client ‘overnight.’
This overnight change comes alongside a paradigm shift in wealth management, forcing a renewed focus on this new generation of ‘entrepreneurial’ clients whose personal wealth could explode alongside the technology revolution.
Photo credit YesManProductions @pixabay
UBS is not alone in this approach. ‘We have a huge focus on entrepreneurs and business owners,’ HSBC’s Private Bank CEO told Spear’s last month and UBS is following the same path, keeping thresholds relatively accessible to attract the UHNWs of the future.
And these UHNWs are very different from the generation that preceded them. A recent report from HSBC Private Bank said that the millennial entrepreneur currently - ‘changing the face of the business world’ – is no longer focused solely on financial gains.
It’s a common theme, in fact, one in four of entrepreneurs in their 20s surveyed by HSBC said that they wanted to have a positive impact in their communities, and the prevalence of ESG (environmental, social and governance) investments among millennial investors is well documented.
Photo credit TY Nigh @flickr
UBS also announced today that the size of its 100 per cent sustainable portfolio has more than doubled from £947m to £1.93bn in less than seven months. The cross-asset portfolio offered private clients diversified exposure to ‘high-grade’ fixed income through development bank debt and opened to UK investors in June.
It also launched a suite of development bank indices this April in conjunction with Solactive, comprising 36 total return indices covering bonds issued from development banks, the World Bank and multilateral development banks.
‘Our new sustainable portfolio has helped show clients that their investments can be fully sustainable without compromising on diversification and returns,’ said Eva Lindholm, head of wealth management UK at UBS. ‘We are pleased to see such significant demand for this solution both in the UK and beyond’, she adds.
UBS finds itself positioned with enviable strength for tapping into new pools of investors and entrepreneurs, employing its significant capacity to modernise and adapt. No wonder growth is continuous.
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Photo credit Jeff Djevdet @Flickr