UBS and Julius Baer are ditching new money targets – long the primary way private bankers measured their worth. What does this mean for advisers to the well-heeled?

UBS boss Sergio Ermotti and his colleague at Julius Baer, Philipp Rickenbacher, made a surprising admission in their respective full-year profit reports: growth is no longer the main goal for either wealth manager.

Both UBS and Julius Baer adjusted their financial targets, which sent their shares tumbling. Remarkably, neither the world's largest wealth manager by assets for Switzerland's biggest purely private bank defined goals for winning new money – a sign of a deeper shift in the wealth industry.

Seven-Year Erosion

Unlike loss-making finance start-ups like neo bank Revolut or robo adviser Nutmeg, established banks don't have the luxury of pushing back profits to an undefined date in the future. Listed wealth managers are under immense pressure from their investors to perk up margins.

In the seven years since Ermotti swivelled UBS' strategy to focus on wealth management, interest rates have plumbed record lows while spending to meet new regulations as well as the technology arms race have climbed.

Animate Passive Clients

This comes as wealthy clients in major markets still seem to be fearful of very actively managing their wealth – and holding it in cash means the private banks are stuck with huge bills from the central bank due to surcharges on Swiss francs. One of the most urgent priorities for UBS wealth co-head Iqbal Khan is to figure out a way to entice clients back into investing with UBS.

Both Julius Baer and UBS are cutting jobs in order to slash their spending – neither are sparing their influential cadre of private bankers to do so.

Drilled on Revenue

It ultimately falls to the advisers to squeeze more revenue out of their clients. Khan, of course, is the architect of Credit Suisse's successful strategy to do so, including by offering lucrative loans to the wealthy. 

If growth of profits was until now one of several goals, the consultant-turned-banker Khan must find a way to make it clear to UBS' 10,077 private bankers that it is now the sole aim.

Armed With Stopwatches

Like at Julius Baer, UBS wants to lift pre-tax profits in the wealth arm by at least ten percent annually. Simply collecting and overseeing inactive assets won't do it – both wealth managers need to get clients to put the money to work.

At UBS, Khan and co-head Tom Naratil are introducing steps to measure how much time private bankers spend with clients. Simply winning over the wealthy and convincing them to deposit a chunk of their assets isn't enough anymore.