Private banking architects: Jürg Zeltner – the pioneer of the CIO

The first thing that landed on Jürg Zeltner’s desk in his new role as co-chief executive of UBS Wealth Management back in 2009 was the file on its US cross-border ‘matter’. 

“And it changed the entire nature of where we would have to go,” he says. “It was clear we would have to entirely reinvent ourselves.” 

And that reinvention, spearheaded by Zeltner, would ultimately not transform just UBS, but the whole industry in its wake, because it led to the greater professionalization of the industry, and it was driven by the introduction of the chief investment office (CIO). 

The CIO was the vehicle that would allow UBS to shed its past and regain trust, says Zeltner. It had a lot of ground to cover. The first time Zeltner reported earnings in his role as chief executive, he was explaining the biggest net outflows of client assets the bank had ever seen. 

“We had lost the support of the public, political authorities, clients, employees and regulators. We had regulatory change coming at us at light speed and we were in the midst of a financial crisis. I didn’t want to be private, Swiss or a bank any longer, but a global investment company that managed money better than anyone else – and the CIO was going to get us there.”

It meant developing a central office within wealth management that pooled research from the firm globally – from the investment bank, as well as content from its asset management business – to form a cohesive house view. 

“We wanted to say: ‘Here is what we think about the world and here is what we do with your investments,’” says Zeltner. 

The CIO also had to be global and quick to respond – global information was becoming more important for high net-worth clients. For the first year, Zeltner was up at 2am in Zurich for every Asia report. 

“We wanted it to be public so the client could agree and disagree – to be fully transparent about the choices we were making and demonstrate our conviction that we could build up one-year, three-year and five-year track records,” says Zeltner. 

When he ran it by the board, they thought him crazy – private banks didn’t talk about how to manage money. That was the role of asset managers. Within two to three years, every large global wealth manager had their own CIO. 

One of the first house views Zeltner recalls was to go long the US. In 2009, that was not an obvious decision to make. 

“We had a view that the US would recover fast, and I wanted that view on every news channel around the world,” says Zeltner. “Clients watch TV, and I wanted them to know that what their client adviser was telling them was what we believed as a firm.” 

Today, wealth management chief investment officers are regular market commentators, but at the time it was radical for a wealth manager to be making investment calls and not just following them. 

By managing the firms’ discretionary funds according to the CIO’s views and thanks to good calls, UBS was able to build up the track record Zeltner needed. It also changed the relationship with asset managers he adds. 

“Now all managed under one view, the discretionary funds were one of the largest sourcers of real estate, hedge fund, private equity funds and indices, which meant UBS was first to see new products.” 

What the CIO office also did was focus attention on developing the skills of the bank’s advisers. The house view had opened up the chance for advisers to have more in-depth conversations with clients about topics such as volatility, yield and duration, but Zeltner noticed that advisers were struggling to explain asset allocation.  

After approaching universities to see if there was specific training for advisers, Zeltner opened UBS’s internal university in Singapore that would enable all advisers to go through training. 

“People thought it was inconceivable for advisers to take at least two weeks out a year for training, but then they saw that it increased the market value of our advisers,” he says. 

He went to every graduation party during his time at the firm. 

“I was proud of them,” he says. “Clients were reporting that our advisers were more in tune with what was happening in the markets and faster to respond than those at our competitors.” 

Zeltner jokes that when competitors started hiring advisers away, then he knew the strategy was working. 

Given UBS is one of the largest sources of talent, its focus on training also meant that the whole industry got an upgrade. Zeltner’s plan to professionalize UBS had the knock-on effect of shifting the private banking industry to a model of professional wealth management.

What now for Zeltner? He prefers not to disclose details, but there are hints at his plans. Change is in the air for the industry once again he says. 

“Markets are volatile, the bull run is ending and the need for advice is greater than ever. Performance is coming under scrutiny and high net-worth clients will be questioning the fees they are paying for investment management and advice.” 

Those who can add value, who are close to clients will be relevant, says Zeltner. 

“Given clients will be prepared to pay more for good advice, and that technology and outsourcing capabilities allow for lower entry costs, the model for serving them is just as likely to be small and focused as it will be large and broad.”