Switzerland's largest bank views the U.S. as a major growth market for its wealth arm. That's why it is offering interest rates that its domestic clientele can only dream of.
UBS' goal is to manage as much of its clients' money in mandates – where it can lock in regularly-booked fees. The performance of mandates should be better than if clients manage their own buying and selling.
But for growth, UBS needs to attract new money – and in the U.S., that means competing with newer entrances like Marcus, Goldman Sachs' fledgling wealth management app. Marcus recently lowered its interest rates by ten basis points, but clients are still earning a relatively comfortable 2.85 percent on their funds.
Interest Fillip
By contrast, UBS is launching a summer special in order to win customers: for those investing at least $10,000 with the Swiss bank, it will pay 2.35 percent interest until the end of September.
From October, interest will drop again; in order to get at least 2 percent interest off UBS, clients need to park at least $2 million with the bank, it said. To be sure, many UBS clients are pretty close to that: four of five households with money at UBS have at least $1 million with the bank, U.S. wealth head Jason Chandler told «Bloomberg TV».
Fearing Market Fizzle
A sharply higher interest rate is an attractive proposition for UBS' wealthy: because clients fear the extended boom in financial markets could fizzle, they have roughly 25 percent of their funds in cash.
The well-heeled Americans the Swiss bank is after are very safety-minded, according to Chandler (see video). «It's about being able to sleep well at night.» Chandler, who took over the U.S. business six months ago, said he wants to ensure clients are liquid enough beyond the average 25 percent cash piles – for example by offering loans against homes, airplanes, or fine art.
«We offer our clients flexibility. They should be in a position to react when they spot an opportunity,» Chandler said. «If they want to buy something, the can.»
Lending Boost
Lending has become an essential part of wealth management's offering: it is one of the big reasons Iqbal Khan, who recently left his job as Credit Suisse's top private banker, was able to consistently hike assets and revenue. Unlike UBS, Credit Suisse has a very modest U.S. offering which is focused on the super-wealthy.
UBS' lending in the U.S. has also climbed in the last three years; at the same time, the bank suffered outflows in the region in 2017 and last year. The U.S. forms a huge part of overall wealth co-heads Tom Naratil and Martin Blessing's goals to deliver on up to 4 percent net new money growth.
