Weeks after saying that UBS, the world’s greatest wealth supervisor, could be embarking on a push into the crowded US market late final yr, chief govt Ralph Hamers obtained an fascinating proposition.
Advisers for Wealthfront, a Californian start-up that makes use of synthetic intelligence to promote funding merchandise, prompt UBS should purchase the enterprise.
A deal would enable Hamers, who made his title as a digital champion working Dutch lender ING, to place his stamp on the financial institution with its first massive acquisition because the monetary disaster.
Yet after agreeing to pay $1.4bn in money for Wealthfront, UBS ditched the deal this month with out an evidence. Days later the financial institution introduced it might return more cash to shareholders, although senior executives mentioned the 2 selections had been unconnected.
Hamers, who was handpicked two years in the past by then UBS chair Axel Weber to succeed Sergio Ermotti, has made rising UBS’s presence within the US and creating a digital wealth supervisor for so-called mass prosperous prospects a central plank of his technique.
But the aborted acquisition has set again these plans and now the 56-year-old Dutchman is below stress to ship, together with three influential executives on the financial institution’s prime desk.
Colm Kelleher, the financial institution’s internationally revered chair, Naureen Hassan, the just lately put in tech-savvy head of the financial institution’s US enterprise, and the fiercely formidable Iqbal Khan, whose function as wealth administration chief has simply been expanded and is broadly seen as a future CEO, all have a eager curiosity within the technique for the American market.
“There are a lot of internal politics going on,” mentioned a banking govt near the UBS hierarchy. “The market is closely watching how the dynamic will play out.”
By a number of measures, Hamers has loved a profitable first two years on the helm. The Swiss financial institution emerged from the coronavirus pandemic with a sequence of record-breaking outcomes as its rich shoppers benefited from central banks pumping liquidity into the monetary system.
The turmoil at its fierce rival Credit Suisse has additionally been useful, permitting Hamers to settle into the function with out an excessive amount of scrutiny. Although outwardly it seemed to be enterprise as ordinary, Hamers has spent the time reorganising his govt workforce and making inside structural adjustments.
“Everyone in Switzerland has been focused on Credit Suisse for the past two years,” mentioned a Zurich-based banker. “No one has been too concerned by UBS because it has been delivering through the cycle.”
When UBS introduced an $861mn buying and selling loss tied to the collapse of household workplace Archegos final April, for instance, the information was overshadowed by the $5.5bn loss at Credit Suisse.
Hamers started unveiling his grand technique for the financial institution final October. When Kelleher was named chair a couple of months later, his expertise as a former president of Morgan Stanley was heralded as a great match for the technique, given the US financial institution’s main place within the nation’s wealth market.
Kelleher has taken Hamers below his wing, in response to folks accustomed to their relationship. The 65-year-old Irishman has coached Hamers in learn how to talk with worldwide traders, who’re much less within the financial institution’s agile working tradition and extra targeted on three-year revenue targets.
At their weekly hour-long catch-ups, the plain-speaking Kelleher banned Hamers from utilizing administration buzzwords similar to “ecosystems” and “purpose”, the folks mentioned.
The pair launched into a US roadshow to influence extra US asset managers to change into prime shareholders in an try and drive the financial institution’s valuation nearer to Wall Street friends. The suggestions, in response to folks with information of the talks, is that traders had been receptive, however that they’re ready to see Hamers ship on his technique.
UBS declined to supply a remark for this text.
While UBS is certainly one of Europe’s most respected banks, with a worth to e-book ratio — which compares its market worth with its complete property — of 1, it trades at a reduction to Wall Street lenders JPMorgan on 1.3 and Morgan Stanley on 1.56.
“Colm is getting increasingly important and having more and more influence on the long-term strategy,” mentioned a prime 10 shareholder in UBS. “He is very present and is having a lot of interactions with clients, high net worth individuals and investors.”
The abandonment of the Wealthfront deal got here concurrently a reshuffle on the prime of UBS, with Khan turning into sole head of the financial institution’s wealth administration enterprise, taking over duty for the Americas with the retirement of his former co-head Tom Naratil.
The financial institution additionally recruited Hassan as total president of the Americas enterprise from the Federal Reserve Bank of New York, the place she was first vice-president and chief working officer.
Hassan, who had beforehand been chief digital officer at Morgan Stanley’s wealth enterprise, has been tasked with main UBS’s strategic progress and digital plans within the Americas, a short that had initially included integrating Wealthfront.
“She’s very smart and would have looked at that Wealthfront deal with a forensic lens,” says a banker who is aware of her effectively.
A senior govt at UBS mentioned that whereas the general technique for the US remained the identical, Hassan had her personal concepts on the way it ought to be delivered.
Analysts seen the Wealthfront acquisition as extra symbolic than transformative, given the dearth of readability over the fintech’s financials and its $27bn of property below administration in comparison with UBS’s $3.9tn.
The financial institution made the case to traders that Wealthfront would supply funding providers to UBS’s Workplace Wealth Solutions platform and in addition herald hard-to-recruit tech employees, in response to folks briefed on these discussions.
But the tumbling valuations of fintech corporations this yr — dropping on common greater than 50 per cent, in comparison with a 29 per cent fall within the Nasdaq Composite — left Wealthfront’s $1.4bn price ticket trying costly.
Hamers’ file on earlier tech offers has additionally come below current scrutiny. This yr ING accomplished the wind-down of a controversial funds subsidiary, Payvision. In 2018, below Hamers, ING purchased a majority stake in Payvision that valued the enterprise at €360mn. ING has additionally closed down Yolt, a private finance app launched in 2016.
With the lengthy bull run in inventory markets over and the worldwide financial system slowing, Hamers should now execute his technique in opposition to a far much less forgiving backdrop.