UBS is poised to potentially strengthen its position as one of the world’s largest wealth managers. $3.3 billion forced takeover A blockbuster partnership with rival Credit Suisse could draw more star advisors to the megabanks.
Major mergers usually involve cultural clashes between the two companies. Even the two Swiss companies have traditions steeped in client secrets. It also comes with different management styles and bureaucratic entanglements. Wealth advisors around the world are watching closely how the merger of the two financial powerhouses plays out.
If successful, UBS will oversee $5 trillion It could outperform rival Morgan Stanley. report $4.2 trillion in total customer assets by the end of 2022. UBS said he will have $4 trillion in assets by the end of 2022.
But merging two global banks into one entity is a daunting task. Whether UBS continues to grow or needs to put the brakes on its US asset market ambitions will depend on how well he sells the sudden merger to advisers at the two banks and elsewhere. increase. A combination of institutions announced March 19th.
“It’s not easy to take on so many advisors and clients at once and keep them all happy,” Michael Wanderli, managing director of San Francisco investment bank Echelon Partners, said in an email.
“If it doesn’t work out, the impact on UBS will be very bad. Many advisors will leave your firm and don’t want to speak ill of you.”
Future challenges could dampen UBS’s expansion plans in the US market. Grow a renowned wealth management franchise By gathering high net worth and ultra high net worth advisors and clients.
Wunderli said the bank would face risks if it took over unforeseen problems from Credit Suisse or weren’t prepared to deal with them. One of the parts of $17 billion convertible The ‘CoCo’ bond was written to zero and became worthless under trading. Other thorny parts of the Credit Suisse absorption may still surface.
At this point, Credit Suisse advisers and clients are likely to breathe a sigh of relief with “relatively minimal business impact,” Wunderli said.
But that could quickly turn into suspicion, he added.
“Advisors and clients alike are cynical and very sensitive to every detail during the transition, and if they don’t like what they see they won’t hesitate to go elsewhere,” says Wunderli.
If UBS maintains these relationships, Wunderli said, it would “strengthen their business significantly and, as a result, attract more resources from the company,” making banks more attractive to outside advisers. This leads to a virtuous cycle of becoming something.
Are you pressing the “pause button”?
Wealth-management industry recruiter Mark Erzweig said large mergers usually deter advisers who might have considered joining a deal with a company.
“Prospective advisers typically hit the pause button during a merger because they want to stop and see how the new company forms,” he said.
At the same time, he added, “it’s easy for current advisers to see a problematic merger as a reason to move to another company.”
Wunderli said: “I don’t think recruiters and advisors will be rushing to his UBS while this drama unfolds. They will be vigilant and want to see things calm down.”
Case in point: Former UBS adviser Phil Fiore as CEO of a registered investment advisory firm Procyon Shelton, Connecticut Partner Retires from Merrill Lynch 2009, he rejected an offer from Morgan Stanley in favor of UBS over concerns about how the ongoing merger integration would affect his business.At the time, Morgan Stanley was just started buying Citigroup’s Smith Barney in the wake of the 2007-2008 financial crisis.
“We intentionally didn’t go to Morgan Stanley because we were afraid the transition wasn’t complete yet. And what does that mean for us post-transition,” Fiore said. .
stay on course
In persuading its advisors, UBS said:capital lightbusiness centered on organic growthHowever, with the acquisition of Credit Suisse, it pushed Banks risk losing their identity and focus by Swiss regulators.
UBS almost 167 years old global institution over the years scandals, management changes, bad business decisions and lawsuits, and unwieldy investment bank. Credit Suisse shares plunged last week as panicked investors lost confidence in the bank and customers retreated. $10 billion in a day. Regulators feared that the collapse of the mega-banks could trigger a meltdown of the global financial system.
On a Sunday evening conference call with investors, UBS CEO Ralph Hamers said the deal, while unexpected, would be mitigated by generous financials. backing from the Swiss government.He presented it as a growth opportunity for the company that could help with its initial plans for markets such as Asia, Latin America and the United States.
“This acquisition strengthens our position in the asset collection business by further expanding the scale of our assets and asset management,” he said.
Hamers has tried to explain the past week’s massive inflows to UBS as evidence of his bank’s attractiveness to customers and its ability to manage the crisis. “We are announcing this acquisition from a strong position.
UBS has no plans to change its strategy, including “focusing on growth in the Americas,” including the Asia-Pacific market, the company said in a report. release About the acquisition.
Given the costs associated with consolidation, this may not be practical.
“What does it do to me now?”
“If I were still a financial adviser to UBS, what I’m thinking about now is what that would mean for me,” Fiore said.
“There has to be a question about what this means. We just spent $3 billion on something we didn’t want. We need to consolidate it.”
UBS advisers are likely to be concerned about the company’s ability to keep ships running smoothly while paying attention to their needs in product development and growth, he said.
“Because it wasn’t planned. I don’t know how you can unexpectedly swallow something this big and adjust your organization so quickly.”
Motley Fool Asset Management investment analyst Shelby McFadyen said: rear Agreed, based in Alexandria, Virginia.
“It’s costly just to expand the company,” she said in an interview. “If synergies can’t be achieved quickly, they have to make a decision.
UBS leadership had to say, ‘Okay, we can’t do this yet. We may need to postpone this as we need to be able to meet the cost targets we’ve already set.’ may be required. McFaddin spoke of the bank’s US expansion plans.
Ideally, UBS would be able to quickly assess what it needs to do at Credit Suisse and not over-represent its wealth management advisors, according to Jody Papike, president of industry recruitment firm CrossSearch in Encinitas, Calif. Things need to change quickly without impact.
Most UBS advisors are likely to “take a wait-and-see approach,” and if “compensation or bonuses start to change or some of your resources are taken away,” UBS advisors will stop and look at other options. He added that he would consider it.
Advisors at UBS can also be proud. “Their company was able to pull off such a large deal,” she said, so the merger might make them “pretty confident.”
Credit Suisse exited the U.S. wealth management business in 2015, so we don’t expect the advisor to be added to UBS’ U.S. wealth headcount anytime soon. Credit Suisse’s fourth-quarter earnings show that at the end of 2022, there will be 1,790 “relationship managers” serving high net worth clients in its international wealth management business and 1,670 in the Swiss banking sector. has been reported. report.
UBS will end 2022 with 9,215 financial advisors across global markets. 6,245 were in the Americas.
“There is an opportunity to gain market share, but there is no guarantee,” McFadyen said of UBS.
“If they can’t maintain their own brand, it leaves little room for smaller asset managers as well as the large asset managers that already exist.”