Global but still local

Global but still local

Investment specialist Rikky Shoker and regional head Karan Sejpal tell Mike Hughes how the global reach of UBS is giving its clients the confidence and security to look further afield to find the best home for their portfolios.

In a world full of investment potential, a little guidance from the experts can open an investors eyes to all sorts of new investment targets as markets and industries rise and fall in a wave of possibilities that crosses the globe.

At UBS more than 900 analysts in more than fifty offices around the world have been creating, discovering and expanding new investment opportunities for generations. Their success in using such a vast network of the world’s leading investment experts to highlight changing markets and advise investors to focus further afield is spearheading a key change in strategies for thousands of individuals and organisations.

“If you look at our philosophy and the way we construct portfolios, it is all about diversification,” says UBS Wealth Management investment specialist Rikky Shoker. “If you look at Harry Markowitz, the founding father of modern portfolio theory, he said it was basically the only free lunch in investing – and it pretty much comes calorie-free. The more diversification you have in portfolios, the better the chance of a strong return.

“But as well as that return, the way we look at it here at UBS is that diversifying the risk is also so important because what is at the top of our priorities for our clients is not losing money,” said Shoker, who joined UBS in 2014 after working at Rathbones, Deutsche Bank and Merrill Lynch.

“People measure risk differently, but it is basically uncertainty about which outcome will occur and the possibility of loss when there is an unfavourable outcome. Wherever our investment experts are in the world, they have been telling our clients for many years that the best way to protect against that is by being diversified and managing risk first, and then returns.”

The reason that approach has been so successful is that more than fifty UBS offices in all the major international financial centers work in perfect synchronisation, building up an unrivalled matrix of information about the industries and regions that will provide the perfect combination for each investor.

What has always been at the core of the UBS philosophy is its relationship with its clients. Wherever they are based, knowing what sort of people they are, beyond the formal agreements that are being signed, means the investment advice can be targeted even more accurately; and advice which may differ from a client’s original instincts can be delivered in a constructive way that develops that relationship.

RikkyUBS analysts are already masters of behavioural finance, a fast-growing field based around knowing your client so well that you understand their behaviour and therefore what influences their spending and investing. These can be very personal, emotional and instinctive drivers of a person’s financial decisions, so redirecting those instincts without being dismissive of their importance to the client is a key skill.

That skill exists in abundance across the UBS group, which means that a client will get the same level of investment expertise anywhere in the world and the highest level of co-ordination between its offices allows a highly-prized matrix of information to be drawn up for every potential opportunity, from Edinburgh to Hong Kong and from Leeds to Brazil.

Shoker adds: “Investment advice is very much an art as opposed to a science, which is when managing a client’s investment psychology really comes into it. If you look at our principles as a bank, near the top of our list would be ‘challenge’ because we will already have built up a deep relationship with a client, so we will feel in the right place to challenge them if we feel there is room to do so.”

One regional expert in building up such relationships for UBS is North West & Yorkshire regional head for UBS Wealth Management Karan Sejpal, who says confidence in the quality of the group’s own information coupled with a strong client relationship means changes can be made and the best outcomes made and understood.

“There is a natural and understandable familiarity bias, where investors presume they know everything about a direction they might be taking because they have been following it for a long time, but financial and academic theory has proved that is not the best approach,” said Sejpal.

“When we take on a client, they generally come with pre-conceived notions about what they want, and for UK investors property is a big element of that. Of course, we understand where that approach comes from, so we go through a process of explaining how different things react in different markets and why what we might suggest could be more suitable for them.

“Rikki is right, it is an art, but one that is always backed up with the science, and one of the biggest reasons I joined UBS was the way the group was structured, with each of us looking after only about 30 clients each, meant we were able to spend the time getting to know people, their families and what drives them. That is hugely rewarding for each of us.”

The mutual respect between client and adviser clearly plays a big part in how UBS has built its reputation, and Shoker say the success of any investment project is down to how the two sides work together.

“Essentially, we are trying to protect them from their initial instincts and the way we do that is by using the evidence our offices have gathered to show the benefits of diversification and looking further afield, away from some of those behavioural biases that can result in people doing what they feel is right rather than being open to another option.

“If you look at the UK market, it seems as if it is very domestic, but it is quite the contrary with 75% of FTSE100 earnings generated overseas. So that is quite a good bellweather for global growth and allows us to cater for a little of that home bias.

“Also, our clients are very intelligent, have earned a lot of money and are very successful and so they feel that they may have a full grasp of certain financial matters and can read markets and gather enough information. That can lead to a home bias and a familiarity bias, which are often linked, and our research has shown that it can be futile to address this approach head-on because you are trying to change a client’s behaviour and expose those shortfalls, and nobody likes to be told that.

“So we might suggest putting them into a discretionary portfolio – as we do with about a third of our assets in the UK – because that is the best way of having a full and proper process that limits the client’s exposure to those biases. It is systematic and is all taken care of for you, and when they look at our capabilities and resources, clients are reassured that we can make those decision in thousands of situations and with multiple asset classes on a global basis.”

KaranFor Sejpal, he relishes a challenge – and says his clients do too. “As well as the brand recognition we have, I think people come to a place as huge and experienced as UBS because they want to be challenged,” he said. “It is a personality trait that a lot of our investors have, particularly those who have built up highly-successful businesses themselves and want to be impressed by that same sort of innovation and drive at UBS.

“That high expectation of what UBS’s experience and reach can do for investments is just as strong in the regions, although our use of discretionary portfolios is higher there, emphasising the fact that the regional clients can be more open to accepting discretionary management of their funds and allowing us to implement a strategy.”

Brexit, and its uncertainty both leading up to a deal and after one is in place, is a new influence on where people feel their money will be most productive and has sharpened an awareness of the possibilities and helped with the diversification argument. A lot of UBS clients have businesses based outside the UK, or at least trade links with other countries, so there is a heightened interest in what the group can do and how it can give an insight into the perfect market timing.

Sejpal says: “As far as Brexit is concerned, people here have been more conscious of a home country bias and an active move away from it coupled with a need to diversify out of the UK.”

Shoker adds: “The process is designed to ensure clients can demonstrate the best possible returns for a given level of risk and we have products and services available to offer that confidence in any situation. But the way we deliver that work is very human – and very rewarding for those of us fortunate enough to deal directly with our clients. We are there to empathise with our clients, understand their needs and deliver the best solution.

“And we are more than capable of doing that. We have attracted some of the best talent in the industry, with our Chief Investment Office having more than 200 analysts who work for them exclusively and globally more than 900 who have a hugely valuable input into the investment process.

“They are all collecting local views and feeding them back into the Investment Office for us to make a decision on asset allocation and the instruments we select so that we can react to any challenge anywhere in the world.”

Having a local view from anywhere in the world is what UBS is all about. With a knock on the door of any office that has the familiar crossed keys symbol outside, a world of investment opportunities will be unlocked, each personally tailored and globally supported.

UBS AG is authorised and regulated in the UK by the Prudential Regulation Authority and the Financial Conduct Authority.