The Credit Suisse acquisition “would damage UBS’s reputation.”Why wealthy customers don’t like the merger of two big banks

Wendy Kraft, who runs the family office of New York estate heiress Kent Swig, said:

“I am concerned about whether UBS will have anything to gain from this merger or whether it will have any impact on UBS. Those who don’t are in a wait-and-see situation.”

Michael Oliver, co-founder of Global Partnerships Family Offices, said he had received many inquiries about the acquisition from members of the UK-based Family Office Association. Most of them, he said, feared losing the kind of service they’ve come to expect from UBS. Credit Suisse’s “belongings” to be acquired will not contribute anything to the UBS brand, he said.

“Credit Suisse’s reputation pales in comparison to UBS in the family office ecosystem. Sure.” (Oliver)

But this is just one factor in the decision-making process of clients choosing a wealth manager, he said.

Whether many customers stay or leave depends on how quickly UBS takes in the best parts of Credit Suisse and cuts down the rest. If the takeover leaves UBS management with its core business of wealth management, Credit Suisse’s wealthy client base will look to other options, many outside of Switzerland.

Customer assets are not “1+1=2”

Credit Suisse’s U.S. wealth management business is said to be largely unchanged since it sold it to Wells Fargo in 2015 (investment banking is another story). Insider spoke to two North American-based private wealth advisors who said they weren’t worried about UBS’s business, and that their clients hadn’t raised any concerns.

But outside the United States, the impact will be felt. With a large number of layoffs expected at Credit Suisse, clients may choose to leave with the bank’s advisors and bankers rather than stay in the new organization, said analysts at London-based Third Bridge. List, Max Georgio speaks.

“With thousands of job cuts slated, according to our experts, some of Credit Suisse’s executives are likely to use their extensive contacts to launch their own wealth management business. The emergence of these start-ups and the resulting increased competition may drive some customers away from the acquired bank.”

Moreover, these customers prefer to deal with multiple financial institutions. Since there are only two major banks in Switzerland, many customers already had accounts at both banks. With this acquisition, they may move some of their assets to other private banks to reduce their exposure. Mid-sized private banks such as Lombard, Julius Baer and Pictet may benefit greatly from this customer shift, Georgio said.

Credit Suisse Wealth Management employees in Zurich said at a staff meeting on March 20 that the combined bank would come together like a “big family,” according to a Reuters report. They said UBS was considering financial incentives to reassure its employees. UBS has not commented on the matter.

Integration with Credit Suisse is not easy

Firdous Ibrahim, senior equity analyst at CFRA Research, based in Kuala Lumpur, said the deal will provide UBS with more cross-selling opportunities and a stronger foothold in Southeast Asia. He says there are some advantages. That said, while UBS is well suited to solve Credit Suisse’s problems, it’s a tough one to actually do.

“There are no quick or easy solutions. UBS is committed to restructuring and restructuring underperforming businesses, bringing in the right people, improving risk and management measures across our customer support business, and preventing a recurrence of past mishaps and scandals. It requires a lot of time and effort from management,” said Ibrahim.

Swiss banks, despite their shadowy side, are no longer as secretive as they used to be and have been sharing account data with foreign tax authorities since 2018.

“The proposition has evolved. In recent decades, it has become as discreet as it is confidential. Swiss banks are still expected to provide excellent service. A high level of customer service is key,” Oliver says.

The costs associated with acquiring Credit Suisse may be a drag on UBS’s domestic growth. New York-based recruiter Lewis Diamond said those costs could hamper UBS’s aggressive recruiting efforts.

“The big question is, can UBS be profitable enough to keep investing in the business, as opposed to Morgan Stanley and Wells Fargo, who are big investors in the business?”

What really matters to your customers

But the deal, Ibrahim said, was not just about bailing out Credit Suisse, it was about restoring confidence in the Swiss banking system. The Swiss government’s decision to provide government guarantees worth 9 billion Swiss francs (approximately 1.28 trillion yen, equivalent to 1 Swiss franc = 143 yen) suggests that the new bank is “too big to fail.” .

“This gives customers and investors peace of mind that their interests are being protected by regulators.”

Oliver said deposit safety and asset protection are the top concerns for customers in the short term, despite concerns about the bank’s future offerings.

An Irish billionaire client of Credit Suisse also said:

“I’ve been told there won’t be much of a change. Maybe we’ll change people, but that’s it. Deposits are safe and that’s what people are really worried about.”