In Wall Street parlance, investment banking is the sell-side of finance, while wealth management is part of the buy-side. Investment banking culture is frequently seen as higher-pressure – creating and selling services for full-time financial professionals. Wealth management is typically viewed as more relaxed – advising private, often non-professional investors who frequently make decisions over a longer timeframe.
However, my own career shift at UBS – from the research department at UBS investment bank to the chief investment office at UBS Wealth Management – has proven that these differences are not nearly as pronounced as they may seem.
Here are three reasons why I think having worked in investment banking can pay dividends when it comes to a wealth management career.
A large number of our wealth management clients own or operate businesses. Unless they hire other people to manage those businesses on their behalf, they may seek the services of investment bankers or – if their companies are listed – deal with investment banking analysts who cover their stock.
If they are ultra-high-net-worth – which UBS defines in Switzerland as having more than 50 million Swiss francs ($52.34m) to invest – then they may employ professionals to invest their money as part of a family office. As well as using wealth managers, these professionals will often turn to investment bank employees for advice or to help them execute trades.
When I was working in UBS Investment Bank’s research department in Australia and later in Hong Kong, our clients included family offices and ultra-high-net-worth individuals.
In my current role – chief investment officer for Ultra High Net Worth at UBS Wealth Management, based in Zurich – those client types are the core of my work. In fact, the overlaps between investment banking and wealth management in this area are so significant that UBS's Global Family Office is structured as a joint venture between UBS Investment Bank and UBS Wealth Management.
With respect to clients, there is a meaningful continuity between my career at UBS Investment Bank and the job I now do for UBS Wealth Management.
When I worked in investment banking research, my tasks included researching investments, producing reports on them, marketing those reports to clients, and presenting my views and those of my firm at large-scale industry events and across the financial media.
In the chief investment office, the situation is no different – and in some cases, as I mentioned, the clients are similar. The research, writing and marketing skills have a lot in common.
The investment banking background also proves helpful when engaging with clients on their businesses, and understanding the industries they're working in. And wealth management in reality is also an interesting hybrid of the conventionally perceived buy side and sell side – we manage money directly on behalf of clients on a fully discretionary basis, while also providing advice across a much larger pool of assets, which clients choose to follow or ignore.
That said, my current role is more global and general than my sell-side roles have been.
In the investment bank, I focused on telecoms, media and internet in Australia and then Asian investment themes in Hong Kong.
In my current role, I cover strategic and tactical asset allocation, derivatives, hedge funds, private markets, impact investing, sustainable investing and short-term cross-asset trading, along with running UBS CIO's investor and client networking efforts.
But the rigorous intellectual environment in investment banking, plus the demanding nature of the clients, has certainly prepared me well for my job in wealth management.
As mentioned, investment banking and wealth management are sometimes seen as very different cultures within finance. But anyone who has worked in the financial industry before and after the crisis will have noticed big cultural shifts that cut across industry divides, specialties and sub-sectors.
One example is attitudes to risk. On average, clients and financial services firms were much more willing to take risk pre-crisis than over the past seven years. Whether you work in investment banking or wealth management, clients are much more risk-averse. Advising clients how to invest their cash and where to take risks is a harder conversation than it was before 2008. In wealth management, this is reflected in the fact that our ultra-high-net-worth clients still hold as much as 30% of their investments in cash, roughly as high as in 2009.
Of course, differences still exist between wealth management and investment banking. Even if they have family offices to guide them, wealth management clients are typically experts on the fields and countries in which they and their families have made their fortunes – not necessarily on global investment. And although many of them do make shorter-term trades, they tend to invest over longer timeframes and scrutinize daily developments less intensively than investment bank clients.
But that longer-term, more unconstrained approach can also be liberating, both for wealth management employees as well as their clients.
In short, investment bankers who wish to try out a new area of finance would be unwise to rule out the unique attractions of a wealth management career.
Simon Smiles is managing director and chief investment officer for ultra-high-net-worth at UBS Wealth Management.
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