An adviser’s adviser invigorates UBS

When Robert Mulholland took the job of leading the U.S. financial adviser force at UBS AG in the fall of 2009, the Swiss bank’s wealth management operation was in shambles, losing money, losing assets and losing a lot of advisers.

“It was a relatively difficult time in 2009,” said Mr. Mulholland, who has spent 34 years in the advice industry — 25 of them at Merrill Lynch & Co. Inc., where his boss, Robert McCann, also worked. “The situation proved to be more difficult than I thought it would be.”

The financial crisis and the four years since have proved difficult for more than a few leaders of financial services companies. By most accounts, however, the two former Merrill executives have dealt effectively with the difficulties and have engineered an impressive turnaround both in UBS’ financial performance and, more importantly, the morale of the more than 7,000 advisers who work at the smallest of the four wirehouses.

Mr. McCann is chief executive of UBS Group Americas, while Mr. Mulholland is head of wealth management and investment solutions at UBS Wealth Management Americas.

For the quarter ended March 31, the U.S. wealth management unit reported revenue of $1.74 billion, 11% higher than a year earlier. It earned a record $251 million in pretax profit and employed 50 more advisers than it did a year earlier.

Mr. Mulholland’s favorite stat from the first quarter is the $9.2 billion in net new money the firm attracted.

“It’s the most we’ve brought in of any quarter since I’ve been here,” he said. “It speaks to our advisers, who are bringing in more clients and bringing in more money.”

It also speaks to the value of having a veteran field manager in a senior leadership role. Recruiters and consultants said that the 61-year-old deserves much of the credit for improving morale in the UBS adviser ranks and re-establishing the firm as an attractive destination for advisers.

“Mr. Mulholland is seen as a broker’s guy,” said Danny Sarch, president of Leitner Sarch Consultants Ltd., who has been recruiting advisers for UBS and Paine Webber, which UBS acquired in 2000, for the past 20 years.

“He’s one of the few people that has a following in the industry, and advisers respond to him,” Mr. Sarch said about Mr. Mulholland.

“He comes from the trenches and he knows how advisers do business,” said Tim Welsh, president and founder of Nexus Strategy LLC.

FIRST PRIORITY

Mr. Mulholland’s first priority in 2009 was to “stop the outflows out the backdoor.”

He used a 12-member council of advisers to help stabilize the ranks and stop big producers from bolting.

Voluntary turnover at the firm has been cut in half every year since then, according to Mr. Mulholland.

Like his wirehouse competitors, however, he was forced to downsize, cutting lower-producing advisers, consolidating offices and reducing overhead costs to get the business on a more profitable path. The number of UBS advisers was at 7,065 at the end of the first quarter, down from a peak of 8,760 in the first quarter of 2009.

Mr. Mulholland quickly endeared himself to advisers by launching a comprehensive review of all work flow procedures.

“The advisers told me this was an extremely hard place to do business, so we looked at everything with fresh eyes and questioned everything about how we were doing business,” he said.

The result was about 400 changes to policies and procedures.

Mr. Mulholland also delegated authority to branch managers.

The efforts have contributed to a surge in adviser productivity.

At the end of the first quarter, the average UBS adviser was managing $126 million in client assets and producing $984,000 in revenue annually, according to the company.

Merrill advisers managed an average $113.7 million in assets and produced annualized revenue of $971,000 in the first quarter. Morgan Stanley advisers managed $110.2 million and produced $851,000 in annualized revenue — though the firms all dispute one another’s calculations.

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It hasn’t been all champagne and caviar. UBS advisers have had more than their share of scandals and gaffes — mostly on the investment banking side of the business — to explain to clients over the past several years.

Allegations that the wealth management division helped U.S. clients evade the Internal Revenue Service nearly prompted a criminal indictment by the Justice Department in 2009.

Like many other large banks, UBS has had to deal with messy litigation from investors over auction-rate securities and subprime mortgages. More recently, the $2.3 billion loss racked up by a London-based UBS trader and the manipulation of the London Interbank Offered Rate by employees at UBS and other large banks over an extended period have kept UBS in the headlines.

And the outsize $356 million loss the bank suffered on the botched Facebook Inc. initial public offering last year has been a source of embarrassment.

Since assuming leadership of the firm after the huge trading loss, chief executive Sergio Ermotti has been getting the bank out of trading fixed income and focusing more squarely on its wealth management operations. One investor recently suggested that the bank should spin off the investment bank entirely, leaving UBS a pure-play wealth manager.

Mr. Mulholland disagrees.

“One of our stated objectives is to work with ultrahigh-net-worth investors like corporate executives and business owners and those people demand investment banking services,” he said.

UBS, like Merrill and Morgan Stanley, has trained its sights on high-net-worth clients who bring more assets to the table and generate more revenue for the firm. The new mantra is comprehensive financial planning.

“Investment management is important, but it’s not enough to retain clients anymore,” said Sophie Schmitt, a senior analyst at Aite Group LLC. “The ability to offer more-comprehensive services is the name of the game for advisers now, and UBS is ahead of the other wirehouses in terms of its focus on financial planning.”

Whether the bank can continue to deliver on that front will be its biggest challenge in the near future.

“The competition for high-net-worth clients is intense,” Ms. Schmitt said. “UBS is now earning strong profits, but with the woes they face in Switzerland and Europe, the question is whether they will have the resources to invest to compete in the HNW space here.”

Mr. Welsh has his doubts.

“It’s expensive to serve the $5 million-plus households and it’s a crowded market,” he said. “UBS has a great brand, but I think the wirehouses are still trending down.”

For his part, Mr. Mulholland is putting his trust in his advisers.

“It was the financial advisers that got the firm through 2009,” he said.

“Clients don’t deal with a firm; they deal with their adviser,” he said. “The financial adviser is our brand.”

Related Topics: UBS Wealth Management, Wealth Management