UBS

Overview: UBS (formerly Union Bank of Switzerland) has significant operations in the U.S., headquartered in New York, New York and Stamford, Connecticut. The latter location boasts the world’s largest trading floor. The UBS of today is a successor company to these venerable securities firms:

  • PaineWebber
  • Kidder, Peabody
  • Dillon, Read
  • S.G. Warburg

While its retail and commercial banking operations are centered in Switzerland, the activities of UBS in the U.S. are in these fields:

  • Wealth Management
  • Investment Management
  • Investment Banking

Job Openings: See this current list of job openings.

Size: UBS reported these figures for its Wealth Management Americas division as of March 31, 2010:

  • Financial Advisors = 6,870
  • Client Assets = $721.6 billion

Positives: UBS is a global banking, asset management and securities giant, with over 70,000 worldwide employees and operations in 50 countries. UBS boasts the fourth-largest contingent of financial advisors in the U.S.

Near the end of 2009, UBS Wealth Management Americas announced a financial advisor retention and incentive program called Growth Plus, in an attempt to stem attrition. Financial advisor attrition rates in the first quarter of 2010 were 8.8% for those with over $250,000 in annualized revenue (versus 24% in 2009) and 6.1% for those with over $1 million (versus 32% in 2009). See “UBS’s McCann Outlines Turnaround Effort,” The Wall Street Journal, 5/12/2010. The firm sought to reduce these rates to under 5%.

Negatives: Federal regulators have investigated UBS, alleging that the firm has systematically aided U.S. clients with tax evasion through cross-border asset transfers. On November 12, 2008, the CEO of UBS Global Wealth Management and Business Banking was indicted by a federal grand jury, and resigned his position. In cooperation with U.S. authorities, UBS has suspended cross-border asset transfers for U.S.-based clients.

UBS was in a great deal of turmoil in 2007-08, with profits in its other divisions swamped by huge losses in investment banking, traceable to fixed income trading, specifically in mortgage-backed securities. This forced the ouster of its corporate CEO in April, 2008.

UBS has been reducing staff aggressively, having shed about 10,000 employees (out of 80,000) from September 2008 to June 2011. It currently is in the process of eliminating another 3,500 positions, or 5% of total headcount, as announced on 8/23/2011 (“UBS Joins Wall Street in Job Cuts,” The Wall Street Journal, 8/24/2011). The reductions are mainly in investment banking (45%) and wealth management and Swiss banking (35%). This number grew from about 700 as announced earlier in the same month.

In November 2011, UBS announced further plans to downsize, particularly in investment banking. An additional 300 positions in investment banking are slated for elimination, in addition to a cut of 1,575 already included in the firm wide 3,500 contained in the August 2011 announcement. See “UBS unveils its shake-up plan,” Financial Times, November 18, 2011. Poor earnings results reported for 3Q 2012 led to an October 29, 2012 announcement of yet further staff reductions, again principally in investment banking, and putting as many as 10,000 positions at risk.

Especially distressing is how the latest round of layoffs is being handled. In London, large numbers of traders were literally locked out of work. When they tried to report to work, they found that their keycards had been deactivated, without any prior warning. This highly insensitive attitude indicates that UBS is treating employees as liabilities rather than assets.

However, in return for a forgivable five year $20 million loan from the State of Connecticut, UBS has pledged to maintain 2,000 jobs in that state, while also investing in infrastructure, technology and employee training. Additionally, despite recurring indications and rumors that UBS intends to sell its U.S. Wealth Management division, the company asserts that no financial advisors will be laid off in the U.S. However, 350 other positions in its Wealth Management Americas division will go.

UBS experienced a huge outflow of private banking client assets in 2008-09, spurred in large part by declining confidence in Swiss banking secrecy laws, and by legal proceedings launched by various governments, including the U.S., against alleged tax evaders who have been using Swiss bank accounts. A tax amnesty in Italy contributed to the 4Q 2009 outflows. Recent net outflows for UBS have been (currency conversions at exchange rates as of 2/11/10):

  • 4Q 2009: CHF 33 billion (about $31 billion)
  • 1Q-3Q 2009: CHF 57 billion (about $53 billion)
  • Full Year 2008: CHF 107 billion (about $101 billion)

By 3/31/2010 UBS client assets of $721.6 billion were 34% below the 9/30/2008 figure of $1.1 trillion.

Defections of dissatisfied private banking client advisors are also contributing to the losses of client assets. In 2009, 710 were lost, leaving 3,182 at year end (per the 2/12/10 Financial Times).

UBS Wealth Management Americas entered 2010 with an extensive cost-cutting initiative underway, mainly involving headcount reduction and the elimination of management layers. Management and support positions in the division were staffed up to support 10,000 financial advisors, but the current number of financial advisors had dipped below 7,000 as a result of heavy attrition in recent years. Executive management was looking to bring its number of financial advisors up to 7,000.

In September 2011, UBS suffered an unauthorized trading loss of $2.3 billion, indicating severe flaws in its risk management processes. However, the firm announced that there would be no reduction in employee bonuses as a result, which provoked negative comments from analysts and shareholders. This move probably was calculated to stem the ongoing defections of key producers mentioned above.

Then, shortly after a change of CEO in November 2011, came news that another rogue trader finally had been discovered four years after the fact. This person was based in London and his unauthorized trades stretched back to 2007, involving African securities.

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