Other than the companies like Lehman Brothers that went bankrupt, there was probably no organization that was hurt more by the financial crisis of 2008 than UBS Wealth Management Americas. Until that crisis, UBS was the largest wealth management company in the world; however, their reputation was damaged considerably in 2008, which led to a large outflow of customers from the bank. As such, UBS Wealth Management Americas has fallen behind both Bank of America Merrill Lynch and investment bank Morgan Stanley in terms of total client assets.
UBS Wealth Management Americas has been beset by numerous problems over the past several years. As clients were defecting, costs within the division continued to spiral out of control, which gave UBS precious little margin for error in rebuilding its wealth management unit. In addition, the division has been besieged by lawsuits, many of which relate to the sale of auction-rate securities that became essentially worthless during the credit crisis. Because of these lawsuits, UBS Wealth Management Americas has had to set aside hundreds of million of dollars for potential litigation costs, money that can not be used to rebuild its client base.
To fix all of these problems, UBS hired Robert McCann away from Merrill Lynch to become the CEO of its wealth management unit. McCann immediately set out to fix the problems that were plaguing UBS Wealth Management Americas and boldly set a one billion dollar profit target for the division within the next five years even though the unit, which was better known as Paine Webber before being purchased by UBS in 2000, had never reached such a target before.
That task was originally far more difficult than expected: in the fourth quarter of 2010, the unit lost $34.6 million despite attracting $3.6 billion in new assets. Indeed, the losses that UBS Wealth Management Americas accumulated in the aftermath of the crisis were so large that they eradicated all the profits the division had made since the unit was acquired.
However, as the economy continues its slow recovery, the wealth management unit of UBS may finally be seeing the light at the end of the tunnel. In the third quarter of 2011, the division earned $158 million, a figure that was helped by a 17 percent decrease in costs and a 16 percent increase in revenues.
McCann and the 7,000 financial advisers of UBS Wealth Management Americas still have a lot of work to do in order to reach that one billion dollar goal, but this latest news does give hope to the idea that the new strategy is helping the wealth management unit return to its pre-crisis glory.
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