UBS and Credit Suisse Rediscover Their Clients

UBS and Credit Suisse have courted the richest of the rich for many years – it became an end in itself. Now, the signs are that a rethink is underway.

The two big banks have not been shy to show off their efforts to cater to ultra-rich clients, hoping to attract even more of what they claim is a lucrative business.

Despite the fact that margins take a nosedive when banking with demanding clients, investors were told that the ultra-high net worth (UHNW) segment was lucrative and more stable than other segments. The investment banks are depicted as a competitive advantage for uber-rich clients to use their infrastructure for complex transactions.

Still: the story as it was told by the banks didn’t convince their shareholders. They seem to put a lower value on the big banks than on private banks such as Julius Baer and Vontobel, with its focus on investment-related business.

The two Swiss wealth management giants seem to have come around belatedly and now both simultaneously announced the launch of a push into the business with clients who have a little less money to invest.

UBS, for instance, pledged to serve clients with assets of $500,000 to $5 million in a faster and more targeted fashion – and no longer according to the classic high net worth (HNW) approach. Credit Suisse will subsume the business with the not-so-rich in a sub-division. The banks say that this will help them respond better and more efficiently to demands in this segment.

Two major areas of concern can be identified in the strategies and developments at the big banks, which prompted the repositioning. «Big banks realized that the focus on the UHNW business wasn’t enough to make successful and full use of their capacity,» said Robert Buess, financial services practice adviser at Oliver Wyman.

With the focus on the richest clients, the erosion of margins accelerated despite the higher volumes of net new money.