UBS Targets Less-Wealthy Customers With Advice by Device

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The new platform for US customers is a test case for the Swiss bank’s digital-savvy chief executive, Ralph Hammer

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Now, UBS is moving toward the wealth curve to open up a larger profit pool — people who have $250,000 to $2 million to invest, but don’t want to trade their own portfolio or have one. Don’t want to hire a financial advisor. The target audience is approximately two million people who already have workplace stocks and retirement programs managed by UBS but have little other contacts.

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This strategy puts it in direct competition with mass market rivals such as Fidelity Investments and Charles Schwab Corp., as well as Morgan Stanley’s wealth management arm.

UBS wants to provide digital mentoring to these affluent clients through its tools. Advisors will be on hand by video to talk about planning big investments or life events UBS has found that most investors still want. UBS says Secret Sauce, a global team of 200 market forecasters, will stream investment ideas from its main investment office.

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The new platform is a test case for UBS’ digital-savvy chief executive, Ralph Hammer. That’s three decades after ING Groep NV. joined in 2020,

A pioneer in expanding through online-only banking.

A former digital-human channel UBS developed called My Way tripled investment assets last year to $5.1 billion, Mr Hammer told analysts in October. It allows clients in Switzerland and other parts of Europe and Asia to build and maintain portfolios in online sessions with advisors and UBS Research.

Consultants said the new US push takes a cue from rival Morgan Stanley, which has successfully brought in new clients by managing the company’s stock-compensation programs, then pushing those clients to pay for more lucrative services.

On Friday, analysts at BNP Paribas raised their rating on UBS stock to outperform from neutral, saying the digital-money project could be a game changer.

“They’re going to get great UBS content, great UBS intellectual capital, just distribute them in a different way,” said Tom Nartil, president of America at UBS. He added that UBS has a global perspective and capabilities that American money managers do not have, and “that’s our real difference in America”.

UBS expanded its footprint in the US by purchasing US brokerage Penweber in 2000. This further advanced the brokerage while trading on UBS’s global reputation. UBS also got into hot water with regulators and in 2009 admitted to helping thousands of US customers hide income from tax officials.

The move to online advice will reduce the share of client revenue that goes to UBS’s army of personal financial advisors. Its profit margin in the Americas wealth division was 20% in the third quarter, less than half that in Europe and Asia. UBS had 6,266 financial advisors in the US at the end of September.

The bank accumulated deferred tax assets in the US after huge annual losses in the 2007–08 global financial crisis, meaning earnings go to the bottom line, an incentive for the country to make more of its profits. Those tax assets are not finding value in the stock price of UBS, which has outperformed most European peers but traded at a discount to large US banks, analysts at BNP Paribas said on Friday.

Some of the bank’s old guard had previously been cautious on the so-called largely thriving market, fearing it would undermine the exclusive attractiveness of UBS. Shortly before Mr Hammer took office, former CEO Sergio Ermotti said UBS was focusing on the richest Americans and did not need to follow US wealth rivals going “downstream”. At home in Switzerland, UBS has customers at all ends of the spectrum, but maintains a more distinctive brand elsewhere.

US rivals have continued to wholesale. Online and discount brokerages such as Schwab and Fidelity are raking in the most digitally advised assets at the end of 2020, with about $118 billion at the end of 2020, according to William Whit, strategic advisor at Eight-Novarica Group.

Startups and digital financial institutions such as Betterment reported $86 billion in advisory at the end of 2020, while full-service advisory firms such as Morgan Stanley and Merrill Lynch fell behind with only $37 billion. Eight-Novarica estimates that the market is growing by 32% annually and will reach $960 billion in 2025.

At the $250,000 to $2 million level for the new platform, “they’re heading to the top where hybrid digital is best placed to offer,” said Mr. Whit.

Write to Margot Patrick at [email protected]

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