The profitability of Swiss wealth managers is being eroded by a global crackdown on tax evasion. Agreements last month to end disputes over tax evasion with Germany and the U.K. may trigger outflows as clients question the value of cross-border accounts as Swiss banking secrecy crumbles.
In the future, private bankers "will spend more time with their clients with less effect on the bottom line," Lukas Ruflin, deputy CEO of EFG International AG, a Swiss private bank with about 80 billion francs in assets under management, said at a conference in Zurich on Sept. 27.
The loss from unauthorized trading has sapped morale among UBS wealth and asset managers, according to a bank executive, who requested anonymity because he isn't authorized to speak publicly.
"I know that over the past several years you have heard plenty of entreaties to continue doing your utmost and avoid being distracted. I imagine by now you are tired of them," interim CEO Ermotti said in another memo to employees. "I have no magic recipe to inspire you to redouble your efforts. I can only appeal to your professionalism, your loyalty and your determination to succeed."
While the trading loss is a "severe setback" to the company's efforts to regain trust, the investment bank remains an "essential part" of meeting the expectations of UBS clients, he said.
"This is a big knock and will put the client advisers on the defensive again rather than the offensive," Swaffield said.
About 35 percent of the 3,500 job cuts announced by UBS on Aug. 23 will come from wealth management while 45 percent of the reductions are at the investment bank.
In UBS's Zurich headquarters, investment bankers can make pitches to relationship managers in a bid to tap the funds of millionaire clients. UBS hopes the ability to leverage investment-banking expertise and repackage ideas for wealthy clients gives it an edge over smaller Swiss private banks.
"It's very important that we have the investment-banking platform to support our clients," said Allen Lo, the bank's head of wealth management in Hong Kong. "Asia-Pacific offers enormous long-term growth opportunities."
Growth in Asia and other emerging markets is driving the rebound in UBS's wealth management business and will help counter withdrawals by clients in the U.S. and Europe, analysts said.