When Robert McCann took over the wealth management business at UBS Group Americas in 2009, brokers and advisers were fleeing the Swiss bank, which was recovering from trading and tax-evasion scandals.
Today, he is chief executive of the group and wealth management is the core business for UBS, where more than 7,000 financial advisers managed $987 billion in assets as of the end of the first quarter.
For McCann, 56, a key to success was attracting talented advisers who would earn the trust of the group’s clientele — high-net-worth and ultra-high-net-worth investors.
Before joining UBS, McCann spent more than two decades at Merrill Lynch, where he ran the securities and trading desks. He recently chatted with The Washington Post about the turnaround he staged at UBS, financial advice he offers to millennials — including his two daughters — and what baseball has to do with your finances.
The excerpt below was edited for length and clarity.
Forbes has said you’re the best thing that ever happened to UBS. What was instrumental in helping you turn around the wealth management business?
Yeah, that’s ridiculous. [Laughter]
There were a lot of good things there when I got there. I don’t know if you guys follow sports, but I’m a huge baseball fan. And baseball is a game of numbers. The great time to take over any team is when they’re in their worst shape, and UBS had a lot of problems in 2008 and 2009.
But I competed against UBS for 25 years, and I knew the people there and I knew the strength of the brand. I also knew they had a deep commitment to wealth management. What did I do? I provided people with a strategy, I put a good team in place, and we executed it. We primarily did that through our financial advisers, who I think are the key to making any wealth management business work, since they are the people who have the relationship with the client. My job is to create the culture, platform and capabilities to provide advisers with a tool kit so they can then solve their clients’ problems.
Our strategy is a very direct strategy in wealth management. We are focused on the high-net-worth and ultra-high-net-worth client in 25 metropolitan areas in the United States, and we reach them through our financial advisers.
How do you recruit and retain talented advisers?
Retention is much more important than recruiting. What really drives the business is keeping good people. And you keep good people by paying them fairly, by creating the capabilities within the company globally and within the United States that allow them to give their clients holistic wealth management advice. So if you are a stocks salesperson or a bonds salesperson and all you do is sell a product to somebody, you better be really, really good at it.
I grew up as a trader. For the first 25 years of my career, I was in investment banking on the trading side. I know how hard it is to beat the market, because I did it for 16 years — or I tried to — as a trader. But if you understand somebody, really get to know them, and you’re able to understand where they are in life and what their goals are, what their ambitions are, and you can give them holistic advice on both the asset and liability side of the balance sheet, then the products part of it is easy. But you have to create a culture where people feel, “If I go there, there will be the capabilities and the resources for me to be able to do what I do for a living and take care of my family.” And if you do that, people want to stay.
When I got to UBS, we had about 15 or 16 percent financial-adviser turnover. Now it’s about 3.5 or 4 percent. Better markets help. I’m in a cyclical business, and it’s better when markets go up than down. But a lot of it was putting the right strategy in place and the right team.
How much did it help that when you stepped into the leadership role, you had competed against UBS?
It helped to be knowledgeable. I could talk with credibility because I knew Merrill Lynch’s wealth management business, and I could talk with credibility because I had years of experience in the market. So I know about wealth management, but I also have an informed view on the markets. I’m a markets person that happens to be in wealth management. I was never a financial adviser.
Why is wealth management a big area of growth for the bank?
It isn’t a big area of growth — it is the core of the company.
My boss, Sergio Ermotti, in fall 2012 said wealth management was going to be the core of UBS. We’re the only company in the world who has global footprint in wealth management. We have $1 trillion in client assets in the United States and a little bit more than that dollar equivalent outside of the United States. We’re in the major mature markets like the U.S., Germany and England, and we’re also in fast-growing markets like Brazil and Asia.
Sergio took that bold move and said wealth management is going to be who and what we are. It’s not a business we happen to be in. It’s not a distribution channel. It’s who we are.
Now to be the world’s greatest wealth management firm, I believe you need a strong investment bank. It is your eyes and ears into the market. It’s your solutions engine, your product engine. To really give people financial advice, you need to have an investment bank to inform that advice. And because you have $2 trillion worth of client assets, a lot of people want to do business with you. We realize we can’t hire all the smart people in the world, but we hire a lot of smart people and we have relationships with investment management companies, private-equity firms, hedge funds, et cetera, that help us also inform our view and communicate with our clients.
What should investors look for when choosing an adviser?
I take that question really seriously when people ask me that. I think I’ve been right more often than I’ve been wrong. But I’ve been wrong. I gave my cousin the wrong adviser. I know the person was a great adviser; they just weren’t the right adviser for my cousin. I learned from that.
Now whenever somebody asks me for an adviser, I give them two or three choices and tell them to interview them. It’s one thing if you just want a salesperson, but if you want somebody who is really going to give you advice, they’re going to ask you questions that are very personal and very exhausting.
I’ll use myself as a client for example. I have a wife and two daughters. My adviser asked questions like: “If you died on the way home tonight, what do you want in place for Cindy and the girls? If you and Cindy died this weekend, what do you want to put in place for the girls?”
And my girls are now 23 and 26, so the answer is different today than when they were 16, but it would be different five years from now. So you have to have real conversations with people, and you have to respect and be comfortable with the person across the table asking these questions.
I strongly encourage just about anybody that comes to my attention that if you want somebody to pick stocks for you or if all you’re looking for is, “I have a little mad money, and I want to trade it,” we’re probably not the right firm for you.
With so much negative attention on fees, how do you keep your fee structure competitive?
We study the market closely, and wherever there is reportable information — again, I’m a real data guy. And I also know business that we win or lose and when fees play a role in either the victory or the loss. We do not define ourselves by being the low-cost provider. I have good advisers and we’re a good company in wealth management, and I want to be thought of as someone who charges market rates. I believe that if you give away your intelligence or your balance sheet, you fail.
Many investors missed out on the market gains of recent years. Do you think investors are still overly cautious after the recession? Should they be?
Our clients are holding between 28 and 32 percent in cash, based on our surveys. That doesn’t mean that in their UBS portfolios they’re holding that much, but maybe at UBS and at their bank. We do these research pieces: What is rich? What is old? Rich is now $5 million. Eighty is the new 60.
One thing we determined is that people have redefined the word “risk.” Risk used to mean the volatility that you could live with in your portfolio. And today we think a big group of people have redefined risk to mean, “What can I afford to lose permanently?” So everybody talks about the fact that people have missed out on the market move. If somebody has missed out for conscious reasons, I don’t know that I can be critical of that. We have clients who decide they want to do 30 percent in cash, and we help them do that — and with the other 70 percent, we try to help them invest for the long term.
What differences are you seeing in investing approaches between generations?
I have two millennials in my house. There are all these generalizations about millennials and how they act. Our work would indicate that millennials aren’t as self-directed as a lot of people want to portray them and that they are going to want advice. When they make a big financial decision, which for most of us is a mortgage, they often get referrals from family members or somebody that they know or trust. We also think millennials are going to be more like their grandparents than their parents.
My dad’s view on investing in the stock market is that’s something rich people do. Now, if I go to my daughters, both of them are working. But they had to work really hard to get jobs and have watched their friends struggle just as hard to get a start.
My older daughter only gets to work 30 hours a week. She would work 50, but if she works more than 30 they have to give her health benefits. And my younger daughter works 60 hours a week and she can buy health benefits, but they’re not automatically part of her getting hired. I think a lot of companies, especially smaller companies and nonprofits, have figured out that you can be on Mom and Dad’s health insurance until you’re 26.
When I was getting started, nobody hired you for 30 hours a week. You got a full-time job, and benefits came with it. That is not the case now. The bottom line is our work would indicate that millennials might be savers. It’s been hard to get a job, and they keep seeing people lose jobs and then they say, “Okay, I’m going to save.”
What advice would you drive home with millennials?
You have to get started. My daughter went to Bucknell University. They solicited her to make a donation, and I told her she should do it. She said, “Dad, I’m not making much money.” I didn’t say how much she should give. I said: “Give something. Give $10. Bucknell did a lot for you. Give back.”
When I came to New York I was broke, in 1982. I had college loans. I was making what sounded like a lot of money when I got the job offer — my salary was about $34,000 — until I got to New York. I went to graduate school in Texas — where I was paying $214 a month, and that included utilities — and I moved into a crappy walk-up on 34th Street between First and Second that I wouldn’t let my daughters walk into for four minutes. And it was $660 a month. When my dad came to visit me, he said, “What in the hell are you doing, boy?” It’s all worked out quite nicely. But I think you just have to get started.
And I always put a little money aside. If I earned one dollar I didn’t spend one dollar, let alone a $1.10. Sometimes people can look and they say: “I’m just barely getting by. That’s such a small amount of money, why even bother?” Well, I think you’ve got to start. You open a 401(k). You’re eligible to buy your company’s stock at a discount. Do it. Open it. And even if you only put $100 into it, put $100 into it.
How are you positioning portfolios to brace for the reduced bond purchases and the possibility of the Fed raising rates next year?
You have to know the individual. But if I think of our prototypical client, we may think rates are going to go higher, but that doesn’t mean we’re in zero fixed income. We might shorten duration so they’re shorter-term bonds. I have slightly less in fixed income than I did a year ago, and the duration is a lot shorter — in both municipal bonds and in corporates.
Income inequality is a big topic of conversation these days. Do you think that the market’s strong comeback, combined with slow economic growth, has created an unequal recovery?
The markets have done really well. So if you look at the stock market between the low point of 2009 and the end of 2013, you had compound annual growth rate of about 16 percent, 18 percent, something like that. If you had financial assets, you benefited from that. If you don’t have financial assets, you didn’t benefit from that. And that is a real thing in the economy. We have some work that will show you wealth creation in the country in the last four years and the percentage that is from financial markets moving. If you’re in the markets, you benefited from that. If you’re not in the market, you didn’t. I don’t know what social programs need to be put in place to correct it.
And what do you read?
So I took this class when I was a freshman in college. I went to a little college in West Virginia called Bethany College — changed my life. I took a class called “Cowboys, Gangsters and Private Eyes.” First we read the great westerns. Then we read Robert B. Parker — “Spenser: For Hire” — and gangsters was “The Godfather.” That kind of set me off. I like westerns. I like detective novels. From the same professor I took an independent study in John Steinbeck, and I read Steinbeck’s books over and over.
I’ve started to read more political things. I read the book on President George W. Bush and Dick Cheney. And I read the book on Tip O’Neill and Ronald Reagan that Chris Matthews wrote.
I get sent a lot of books by financial advisers about leadership and about business — and I don’t read any of it. I believe leadership is learned, and I learn it by watching other people.
And I’m always interested in baseball, year-round.