Financial institutions UBS and Barclays hold differing opinions regarding the pursuit of America's affluent market segment.
UBS and Barclays Shift Strategies in Wealth Management
In the world of wealth management, two major players, UBS and Barclays, are making significant moves to expand their presence and appeal to different market segments.
UBS Expands in the U.S.
Swiss banking giant UBS is aiming to deepen its pipeline of new financial advisers to tap into the mass-affluent market in the United States. The bank is also pursuing a national banking charter, with plans to expand its offerings to include loans, checking accounts, and savings plans. This move could potentially boost UBS's profitability in the U.S., as the interest income wouldn't drive up advisers' bonuses.
In a notable development, UBS agreed to buy U.S. robo-adviser Wealthfront in January 2022. However, the deal was abandoned months later, with UBS Chair Colm Kelleher stating that the bank does not particularly bring alpha in the mass-affluent market, leading to the abandonment of the Wealthfront deal. UBS is now realigning its U.S. wealth business into six divisions, including a focus on internal clients, ultra-wealthy, high net worth, core affluent, and a Wealth Advice Center for clients with fewer assets.
Barclays Focuses on the U.K.
On the other hand, Barclays is focusing its private banking and wealth management growth strategy on the U.K., rather than the U.S. This strategic choice is aimed at capitalizing on domestic demand, achieving greater capital efficiency, and avoiding the volatility and regulatory complexity of international markets like the U.S.
Barclays has grown its net new assets under management by £3 billion, around double the growth seen for the equivalent period last year. The bank is also planning to hire up to 100 more advisers in its private banking and wealth management push, focusing on the U.K. market. Barclays has set a target to bring an annual return on tangible equity above 25% by 2026, a target established in February.
To further strengthen its position in the U.K., Barclays has identified about 4 million U.K. customers with investable assets between £250,000 and £3 million who could benefit from enhanced wealth management services. The total client investable assets in the U.K. market are approximately £3.5 trillion, according to Wiggins.
Barclays is also investing heavily in technology to drive growth in private banking and wealth management. The bank plans to increase its annual tech spend for wealth by more than 75% from its 2021-22 total. This investment is expected to enhance responsiveness to client needs, increase connectivity, and empower field leaders.
As Barclays focuses on the U.K., it is pivoting away from M&A chatter. The bank's CEO has expressed confidence in delivering its plan organically, and Barclays has not mentioned any plans to purchase licensing rights.
Barclays' emphasis on the U.K. aligns with its strengths and growth areas, such as private equity investment in tech, healthcare, and renewable sectors. This strategy is further supported by positive domestic economic and government policy signals, helping Barclays position itself as a leading player in the UK investment community.
Barclays also plans to drive growth in private banking and wealth management, focusing on markets such as Singapore, India, the Middle East, and the U.K., but not prioritizing the U.S. due to fierce competition and high market entry costs.
Meanwhile, within UBS, Rob Karofsky, the bank's chief executive for the Americas, and Michael Camacho, the bank's U.S. head of wealth management, believe that the U.S. push is necessary for growth and profitability. However, it remains to be seen who will succeed CEO Sergio Ermotti, with Rob Karofsky and Iqbal Khan, UBS's other global wealth management co-president, being potential successors.
In conclusion, both UBS and Barclays are making strategic moves to expand their wealth management businesses. While UBS is focusing on the U.S. market, Barclays is concentrating on the U.K., reflecting their unique strengths and growth opportunities in their respective markets.
- UBS's expansion strategies in the U.S. span beyond just wealth management, as they aim to obtain a national banking charter and include offering loans, checking accounts, and savings plans, signifying a foray into broader financial services and personal finance.
- In its growth strategy, Barclays is not only seeking to hire more advisers in the U.K. but also intensifying its tech investment by more than 75% in wealth management, a move that aligns with the bank's commitment to fintech and the importance of technology in the industry.
- As Barclays continues to prioritize the U.K. market, it also looks to expand into other regions like Singapore, India, and the Middle East, while maintaining a cautious stance towards the U.S. market due to difficult competition and high entry costs, demonstrating a balanced approach to business and investing.
