The growth is in terms of assets under management, sales and clients, he added.
However, it is difficult to determine how low of a base that growth came from because Grossholz would not disclose the bank’s percent of advisory versus discretionary business.
He did say discretionary mandates are lower compared to the bank’s European business. In Asia, clients generally are too heavily exposed in single equity positions, he said. The task is to get them globally diversified, moving them into semi or full discretionary portfolio management.
“DPM is on everyone’s mind, but probably not every client’s mind,” he said. “CEOs are now embracing this theme. Clients still need to let go of home bias, let go of real estate and the risk-doesn’t-matter approach and move into long-term, risk-controlled, well-managed portfolios.”
"We can prove, on a risk-adjusted basis, that over an investment cycle most advisory accounts underperform discretionary by a magnitude of about 85%"
Business model transition
Most of Asia’s wealth management industry runs an advisory business, a product-centric, high fee, high commission model. Discretionary portfolio management is more client-centric. It typically involves a flat fee, perhaps a percentage of client assets under management, and often with no fees for entry, exit or performance.
Several jurisdictions such as the US, UK and Australia have shifted to the more transparent fee-based model, and there is a slow trend among private banks in Asia moving in that direction.
The most successful method of building the discretionary business has been clients topping up their existing mandates, Grossholz said. The rest is split between new clients and existing ones shifting from advisory to discretionary.
The transition to DPM can be promoted to clients through data.
“With a fee-based model, we can transparently show the client he can benefit,” Grossholz said. “We can prove, on a risk-adjusted basis, that over an investment cycle most advisory accounts underperform discretionary by a magnitude of about 85%.”
Fee clarity
“We need to convince the client that what he sees is what he pays for. No hidden fees. There will be more of these discussions in 2016.”
Gorssholz believes UBS Asia can double the business again over the next two years in terms of AUM, sales and number of clients.
“[Discretionary mandates] are not a majority of our business but they will be. We want to move away from being a transaction-driven bank. It’s a global execution and this is what we’ll do for the whole bank the next couple of years.”
