Wealth Management US

Business

With CHF 824 billion in invested assets, our focus is on providing wealth management services to private clients. We offer sophisticated products and services specifically designed to address the needs of core affluent clients (more than USD 500,000 in investable assets), high net worth clients (more than USD 5 million in investable assets) and ultra-high net worth clients (more than USD 10 million in investable assets or USD 25 million net worth). More than 7,800 financial advisors in 440 branch office locations develop, build and maintain consultative relationships with our clients.

Organizational structure

PaineWebber merged with UBS in November 2000, and its US private clients business became a separate Business Unit within UBS’s Investment Bank. The US private client business became an independent Business Group on 1 January 2002.

In 2003, we sold our wholly owned subsidiary Correspondent Services Corporation (CSC) to Fidelity Investments. CSC provided investment products and services (including clearance, execution, settlement, administrative and management information services) to the clients of 148 US broker dealer firms.

That same year, we launched UBS Bank USA. The bank, headquartered in Salt Lake City, Utah, offers collateralized lending products and bank deposits insured by the Federal Deposit Insurance Corporation (FDIC).

Wealth Management US became part of the new Global Wealth Management & Business Banking organization in July 2005, while our municipal securities unit was transferred to the Investment Bank.

In August 2006, Wealth Management US acquired the private client branch office network of Piper Jaffray. In February 2007, we bought McDonald Investments’ branch network.

In June 2006, the US-based bank branches of UBS AG became part of Wealth Management US, giving clients the option of receiving services from both financial advisors and private bankers. The integration will enhance our product offering while strengthening and broadening client services, enabling us to better penetrate the ultra-high net worth market.

Legal structure

In the US, we operate through direct and indirect subsidiaries of UBS. Securities activities are conducted through three registered broker-dealers.

Competitors

Our major broker-dealer competitors include Citigroup’s Smith Barney business, and the private client group businesses of Morgan Stanley, Merrill Lynch and Wachovia. In addition, we compete with domestic and global private banks, commercial banks, trust companies, and other financial services firms offering wealth management services to US private clients.

Clients and strategy

Changing legislation and basic market forces have steadily eroded the long entrenched boundaries separating trust, banking, and brokerage in the US, creating an opportunity to deliver a seamless set of services to affluent and wealthy private clients. With 38% of the world’s wealth located in the US, the growth prospects are substantial.

We believe we are in a position to capture this strategic opportunity with a unique approach – within the current regulatory framework and the prevailing competitive landscape. Following our successful shift into the firm’s global wealth management business, we have now embarked on a long-term strategy that focuses on the delivery of a client experience that sets us apart from competitors.

The strategy comprises a number of organic growth initiatives and infrastructure enhancements aimed at fundamentally improving the way financial advisors approach and service individual clients. It will also allow for targeted strategic investments while making more use of the global wealth management support platform, bringing scale efficiencies. We will also closely look at any suitable acquisition opportunity that potentially complements our organic growth drive.

Internally, asset-gathering efforts benefit from our established strategy of treating client feedback systematically and seriously. Extensive proprietary survey data sampled annually is used to create an index for every individual financial advisor. The index is the base by which each financial advisor gets specific feedback in terms of the four consultative steps of UBS’s client experience – understanding the client’s needs, proposing solutions, agreeing and implementing them with the client, and, finally, reviewing performance on a continuous basis. This will help to generate an accurate, overall picture of what clients think about the advice they receive.

Our business has also aligned its strategy with regard to advisor compensation. Specifically, financial advisor compensation now incorporates net new money growth as a key component.

At the same time, there is a large-scale effort to collaborate more closely with UBS’s other businesses. With the help of the global wealth and asset management businesses, and by pursuing an open architecture framework, we will enhance the number of structured products and hedge funds we offer in the US – and expand in-house research capabilities for private clients.

The other strategic investments focus on enhancing internal infrastructure and technology – while evaluating the opportunity for potential acquisitions, such as the Piper Jaffray and McDonald Investments branch networks. Such acquisitions enable us to expand our financial advisor network while leveraging our existing product platform, gaining access and increased representation in important client markets. As always, potential acquisitions must meet UBS’s financial and cultural criteria.

We are also expanding our ability to address the specific needs of ultra-high net worth clients. We opened the first of a series of dedicated offices for such clients in New York City in July 2006. There, specialized financial advisors who have completed a specific accreditation program giving them the skill and knowledge to deal with wealthy clients, work together with private bankers, trust officers and multidisciplinary product experts. We believe the pilot office has a particularly promising future as we have a very high share of the market in New York, and we are taking advantage of the fact that no other major firm delivers trust, banking and brokerage comprehensively and effectively from a single source.

Products and services

We offer a full array of both proprietary and non-proprietary offerings, giving clients access to a wide array of investments that suit their specific needs and goals. Our size means that individual clients can gain access to investments that would otherwise only be available to institutions.

Clients have the option of transaction-based or assetbased pricing for their relationships. For those choosing an asset-based pricing approach, we offer solutions in the following categories: client-directed brokerage accounts; discretionary portfolio management, in which qualified financial advisors make investment decisions; investment management consulting, where assets are invested in a mutual fund asset allocation program, or are managed by affiliated and / or non-affiliated investment managers; and clientdirected advisory accounts.

Clients have access to a broad range of transactional products, including individual securities such as equities and fixed income instruments. We have robust offerings in structured products and alternative investments that can be leveraged to enhance portfolio strategies. In response to high investor interest in hedge funds and funds-of-funds, we have also strengthened our ability to create, structure and manage a range of alternative investments for qualified high net worth individuals and institutions.

We complement these services with competitive lending and cash management services, including our Resource Management Account (RMA) product, credit cards, FDIC-insured deposits, securities-backed lending and mortgages.

Our offering includes comprehensive planning to support clients throughout the different stages of their lives, such as retirement planning, education funding planning, estate planning strategies, charitable giving, tax management strategies, insurance, trusts and foundations. Our financial advisors can draw upon the knowledge and experience of our products and services consulting group, which includes subject matter experts across our product and service offerings.

Through Corporate Employee Financial Services, we provide stock option and other related services to many of the largest US corporations and their executives.

Industry trends

We are already one of the premier US wealth managers. In 2007, we aim to increase our market share by further improving the delivery of our client experience, making use of the increased range of products and services available from our integration into Global Wealth Management & Business Banking. Further growth will depend on a continued commitment to recruiting, retaining and developing top-performing financial advisors and providing them with the resources that will lead to increased asset growth. We believe our various strategic initiatives, including our focus on the high net worth segment and the development of dedicated offices for wealthy private clients, will provide us with a competitive, individual profile in the market.

The long-term outlook for our business remains strong. The aging of the “baby boom” generation suggests an increased need for retirement and estate planning. The line between banking and brokerage continues to blur, providing opportunities to further expand our business. We believe that we are well positioned to exploit these market trends.

By 2020, people aged over 55 will own 67% of the assets in the US, or 20% of the world’s investable assets. Historical patterns indicate that clients who tend to use banking and brokerage services in their younger years increasingly turn to trusts when they get older as the preferred method for wealthy clients to transfer their assets to younger members of their family, an institution, or a company. It is therefore a vital imperative for UBS to continue to build its capabilities and deliver those services effectively, easily and comprehensively to wealthy clients in the US – helping to ensure UBS perfects its client experience and maintains its leading global market position in the long term.