The investment advisory arm of embattled UBS AG has gained business in Orange County and is looking for a bigger piece of the local market, according to its new regional director.
UBS Financial Services Inc. has seen its money under management in the county rise 5% in the past year to nearly $14 billion, according to Randall Grossblatt, regional director for the unit of Switzerland’s UBS.
“We’ve certainly done better in the past year than the national trend,” he said. “Our assets are up both in Orange County and Southern California as a whole.”
Precise numbers are hard to come by, but UBS is estimated to be in the top five in OC by assets under management, after leaders Bank of America Corp. and Wells Fargo & Co.
UBS plans to recruit wealth managers from rivals here in a bid gain to more business, according to Grossblatt.
Like others, UBS was hit hard by the investment meltdown of late 2008 and early 2009. The company’s investment banking arm felt the fallout of subprime mortgages and other risky investments, which have hammered corporate profits in the past two years.
Tax Shelters
Then there’s the issue of tax shelters.
UBS has been under fire from U.S. regulators for its role in helping wealthy Americans avoid taxes through Swiss and other overseas bank accounts.
Last year, UBS agreed to pay a $780 million fine and to close its cross-border operation, which was used by nearly 50,000 wealthy Americans. UBS also handed over data on hundreds of accounts.
The most high-profile case was that of Igor Olenicoff, president of Newport Beach-based real estate owner Olen Properties Corp.
In 2007 Olenicoff pleaded guilty to filing a false tax return and paid $52 million in back taxes and penalties related to overseas accounts he had with UBS. He’s now suing UBS, alleging it orchestrated a fraud that led to his federal tax charges.
Olenicoff didn’t use UBS’ Newport Beach office. He worked with Bradley Birkenfeld, a former adviser for UBS in Geneva who’s now serving three-plus years in federal prison.
“The activities concern a different division of the firm in a different country,” Grossblatt said. “Neither UBS’ U.S. management nor its U.S. employees were parties to the investigation of this business.”
He declined to address how the tax scandal might impact UBS’ ability to attract wealthy clients.
“The tax evasion scandals in the U.S. were very serious,” said Erin Davis, an analyst with investment tracker Morningstar Inc. of Chicago. “People had invested in Swiss banks with expectations that those transactions wouldn’t be disclosed. It made the bank look like it wasn’t as smart as it is, even though the scandals didn’t have much to do with wealth management at the local levels.”
Even with gains locally, UBS’ private banking and wealth management operation in the U.S. has suffered a loss of investors during the tax scandal and financial meltdown. When company officials previewed first-quarter results last month, they said money still is flowing out of its accounts, but clients are taking less out.
“Their focus is definitely on stemming outflows and bringing in new business,” Davis said. “A big part of that will be attracting advisers from other firms with established lists of clients.”
Grossblatt took on oversight of UBS’ OC operations after running the Beverly Hills office. From his Downtown L.A. office, he’s charged with ramping up Southern California as a whole for UBS’ wealth management operations.
“Overseeing Orange County is a promotion for him and much more responsibility,” said Michael King, a New York-based recruiter for brokerages and advisory firms.
Recruiting locally is under way with plans to add about 35 people, according to Grossblatt.
In March, Grossblatt recruited Ron Meraz from Bank of America Merrill Lynch to serve as UBS’ managing director in the county.
“Ron has helped us bring in teams from Merrill Lynch and other firms,” Grossblatt said. “He’s also put in place programs to help advisers dissect their practices and make our research more relevant to managing money.”
In all, Grossblatt and Meraz oversee three offices in the county with about 215 employees. Some 175 of those are financial advisers with the rest being administrative staff.
Hiring
UBS locally is expecting to add another 25 advisers and 10 support people in coming months, according to Grossblatt.
Tim Tunney, who joined UBS in Irvine last fall from Morgan Stanley, said he doesn’t believe trouble in subprime mortgages or tax shelters will hold back the company’s local expansion plans.
UBS is large enough to provide stability but still feel like a smaller company, he said.
With some 7,000 advisers nationwide, UBS Financial is about a third the size of Merrill Lynch. That’s a big drawing card likely to attract more advisers, according to Tunney.
“Our analysts and economists are easily approachable virtually any time of the day,” he said. “That’s not only for me but also my clients.”
Grossblatt said he brings in analysts, economists and portfolio managers from across the country to meet local clients and advisers at least twice a month.
“These are usually over a dinner or lunch and are very interactive,” Grossblatt said.
