UBS AG, Switzerland's biggest bank, plans to cut costs at the wealth management Americas unit and improve advisory services for clients to help the business reach earnings targets, Robert J. McCann said.
“We realize that being lean and efficient is critical,” Mr. McCann, who heads the division, told investors at a conference in New York today. “Our vision is to be the best wealth management business in the Americas; not the biggest, the best.”
Mr. McCann, 52, the former Merrill Lynch & Co. executive who joined
UBS in October 2009, is reorganizing the division that aims for annual pretax profits of more than 1 billion Swiss francs ($900 million) in the next three to five years after earning 32 million francs in 2009. He is “confident” that the unit will be able to reach its targets, Mr. McCann said today.
Cost initiatives, such as relocating support functions to cheaper real estate and downsizing branches, will help improve pretax earnings by 250 million francs ($225 million) in the medium term, Mr. McCann said.
“We've got to get our real estate costs down,” he said. “We have seats for 10,000 financial advisers, and we're going to be at 7,000.”
The unit employed 6,867 financial advisers and managed 714 billion francs ($644 billion) of clients' assets at the end of March. The division will book a charge of about 150 million francs ($135 million) in the second quarter related to real estate,
UBS said last week.
McCann said he cut 300 jobs in Weehawken, New Jersey, where the division has its headquarters, by the end of the first quarter to save $60 million in annual costs. He plans to produce additional savings of $40 million in the next two quarters. The division aims to reduce its cost-to-income ratio to between 80% and 85% in the next three to five years from 97% in 2009.
UBS also plans to train financial advisers to service its clients better, focusing on the high-net-worth and ultra-high- net-worth customers, McCann said.
Clients “don't want products,” he said. “The crisis has created a trauma, and it has created demand for investment advice and
financial planning.”
Mr. McCann insisted that
UBS can fill that demand with its current crop of brokers. “Clients are not in any way clinging to the self-service model but they do want to be more intimately involved,” he said. “We're working diligently with our FAs to make sure that they are in regular and frequent contact with their clients.”
Mr. McCann said that, unlike some of his competitors, he believes “the independent channel does deserve close watching.” But he added that smaller outfits “don't have the range of solutions and capital to consistently serve” high net worth and ultra high net worth clients with the advice they demand.
Morgan Stanley Smith Barney,
Wells Fargo Advisors and his alma mater,
Bank of America Merrill Lynch, for their part, are undergoing disruptive transformations and have yet to clarify their “value proposition” and cultures, he said. “It's equally unclear how soon, and if, they are going to be able to integrate the vast and diverse technology platforms they have,” Mr. McCann said.
He did concede that
UBS has much work left on its own transformation. His predecessors paid “steep prices” in 2008 and early 2009 to attract advisers but haven't realized increased productivity per broker because it simultaneously suffered high turnover from disgruntled veterans. “The quickest death bell within a company like this is high turnover,” he said, vowing to work on retention that will be supplemented with occasional recruiting and training classes for new advisers.
UBS plans to run a small training program at the end of 2010.
Mr. McCann also said that advisers will be trained to sell more mortgages and other loan products to their wealthy clients, and that
UBS needs to ramp up its offerings of annuities and “alternative” investments for its wealthy clients.
[
Bloomberg contributed to the this article.]
