Updated Sunday, September 21, 2014 as of 2:07 PM ET

UBS Wealth Management Provides Winning Formula

(Bloomberg) -- When UBS AG wealth manager Abdallah Najia came to Switzerland from Dubai in March for a week of training, he was as stunned by the message as by the scenery.

“The first couple of days have been shocking,” Najia, who advises clients with more than $50 million to invest, said during a break between lectures on March 20 at UBS-owned Hotel Seepark on the shores of Lake Thun with views of pyramid-shaped Niesen mountain. “They sort of cut our legs off and said you guys are at risk of extinction. We need to evolve.”

The shock therapy was offered to Najia and 34 other client advisers of the world’s second-biggest private bank as part of an effort to jolt them into reinventing the wealth-management business. Boosting profit at the unit is paramount for the success of the Zurich-based lender, as UBS Chief Executive Officer Sergio Ermotti is cutting 10,000 jobs and shrinking the investment bank by exiting most debt trading.

“The success of the wealth-management business is fundamental to where the stock goes over the next five years,” said Christopher Wheeler, a London-based analyst with Mediobanca SpA, who has a neutral recommendation on UBS shares. “It’s the core business, and a number of other businesses feed off it, not the least asset management.”

LOST ASSETS

The challenges are as large as the Swiss peaks visible from the shores of Lake Thun. UBS wants its wealth-management units, which lost 20 percent of assets under management during the financial crisis, to contribute half of pretax profit by 2015 compared with 32 percent a decade earlier. Profit has been squeezed since banking secrecy came under attack after UBS admitted in 2009 to helping Americans evade taxes. Customers pulled funds or have been reluctant to trade amid Europe’s sovereign-debt crisis.

Juerg Zeltner, who heads UBS wealth management outside the Americas, says his business is going through the biggest changes he has seen in his quarter-century career. Zeltner, who has led the unit since 2009, said the crisis and the dilution of Swiss secrecy convinced him that UBS had to become more of an investment house than an asset gatherer.

“It wasn’t that transparent historically how private banks manage money,” Zeltner, 45, said in an interview this month at UBS headquarters on Zurich’s Bahnhofstrasse. “I didn’t want to be a Swiss private bank only. We always had access to global demand. We always had clients from around the world. What we lacked was content.”

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