Affluent investors abandon traditional wealth managers

As the big banks write off billions, the dissatisfied ‘new rich’ are switching to the rising stars among the smaller independent banks, says Lorna Bourke

Fallout from the credit crunch has seen wealthy individuals leaving the private banking division of UBS Bank – the largest manager of personal wealth in the world – in droves.

With UBS forced to write off nearly £19 billion of subprime mortgage loans, and raise nearly £8 billion in a deeply discounted rights issue to repair its balance sheet, private investors are abandoning ship. The damage to reputation has been severe and many wealthy individuals have taken the view that if the bank cannot manage its own investments, why should they trust it to manage their personal finances?

Some of the staff have clearly come to a similar conclusion. The recent resignation of Matthew Brumsen, head of UK business at UBS Wealth, follows the defection of some 19 senior client advisers who have taken up new positions with Vestra Wealth, a specialist boutique set up last year by former UBS managing director David Scott. Four more have moved to Merrill Lynch, NM Rothschild and Credit Suisse, while a team of seven wealth managers and four assistants from UBS are joining Clariden Leu.

Scott is clear about what is wrong with the big wealth managers – and not just UBS. ‘After working at some of the world’s premier wealth management firms, my partners and I left with the same dissatisfaction many clients feel regarding the increasingly standardised service being offered,’ he says.

The private banking world is changing fast and dissatisfied clients are looking around for alternatives to the traditional wealth managers, some of whom have shown themselves to be less than competent. Banks such as UBS and Citibank, which were caught out in the subprime debacle, have seen a mass exodus in recent months.