Wealth advisers closely watching UBS’s integration of Credit Suisse

Swiss bank UBS is set to become one of the largest wealth managers in the world after its $3.3 billion (about R60 trillion) takeover of Credit Suisse. However, whether the merger will be successful or not remains to be seen as culture clashes, different management styles, and bureaucratic tangles often accompany such large combinations.

Wealth advisers have been watching the integration of the two financial powerhouses closely to see how it unfolds. If UBS manages to successfully sell the merger to advisers, both at the two banks and elsewhere, it could oversee $5 trillion in total assets, which is potentially more than its rival Morgan Stanley.

Both Swiss authorities and UBS are working to finalise the acquisition as quickly as possible in an effort to retain the bank’s clients and employees. However, the process of integrating Credit Suisse into UBS may take several months due to the requirement for regulatory approval in numerous countries. For instance, this morning, Bloomberg reported that UBS has offered retention packages to wealth-management employees in Asia who currently work for Credit Suisse.

UBS is planning to expand in the US market, and the wirehouse (non-independent broker working for a wirehouse firm or a firm with multiple branches such as a national brokerage house) aims to grow its wealth management franchise by collecting high net worth and ultrahigh net worth advisors and clients.

However, it will face risks if it inherits unanticipated problems from Credit Suisse or is unprepared to manage them. The bank also faces the risk of advisers and clients leaving the firm if the merger is poorly executed, according to Wealth Management industry recruiter Mark Elzweig.

Elzweig says big mergers usually prompt advisers who might have considered joining a firm in the deal to hesitate. Prospective advisers usually hit the pause button during a merger because they want to stand back and see how the new firm takes shape. Current advisers may also use a problematic merger as a reason to move to a different firm.

UBS has branded itself a “capital-light” business focused on organic growth when wooing advisers. However, with its absorption of Credit Suisse, the bank risks losing that identity and focus. The absorption of Credit Suisse means that UBS is taking over a nearly 167-year-old global institution that has been roiled by years of scandals, leadership changes, poor management decisions, and lawsuits and saddled with an unwieldy investment bank.

Credit Suisse shares plunged last week as panicked investors lost confidence in the bank, and customers pulled out as much as $10 billion (approximately R18.5 billion) in a day.

UBS’s plan to expand in the US market will hinge on how well it manages to sell the sudden merger to advisors, both at the two banks and elsewhere. UBS faces the risk of advisors and clients leaving the firm if the merger is poorly executed.