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John Mathews, head of private wealth management, UBS

Financial Planning > UHNW Client Services > UHNW Client Advice

Ultra-Wealthy Clients Are Sitting on Cash, Ready to Invest

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The fastest-growing client segment at UBS in the United States has been “heavier in cash than they’ve been historically,” John Mathews, head of Private Wealth Management, tells ThinkAdvisor in an interview.

That segment is ultra-high net worth clients, made up of multimillionaires with $100 million and up and billionaires.

Their decision to put aside lots of cash is “about being in a position to take advantage of moves in the markets. [Indeed], activity over the last few months has really picked up because of what [these investors] think are opportunities [brought by] the market sell-off or even rising interest rates,” Mathews says.

Hence, last week — the stock market’s worst in three months — didn’t particularly faze UBS’ UHNW clients. They were poised to “take advantage” of such “market dislocations,” managing director Mathews says.

He has led the division, with 600-plus private wealth advisors, since 2013. Starting out at E.F. Hutton, in 1994 he joined PaineWebber, which was later acquired by UBS.

In the interview, Mathews, 57, discusses UBS’ UHNW clients’ “insatiable demand” for alternative investments: “To them, it’s outsized returns without the day-to-day volatility that’s in the market,” he notes.

Mathews also explores what sorts of investments family offices are seeking. Their growth is “exponential,” up from “3,000 about seven years ago” to more than “13,500” in the U.S. now, he says.

ThinkAdvisor interviewed Mathews, based in New York, on Monday. He was speaking by phone from Palm Beach, Florida.

The conversation includes UHNW clients’ interest in ESG investing and family offices that have “dabbled” in crypto, but not through UBS: The bank has no crypto platform.

UBS serves numerous families of the 34,500 in the U.S. with a net worth of more than $100 million and “a very high percentage” of the 975 billionaires in the nation and around the world, according to Mathews.

The firm manages $1.7 trillion in the U.S., and the UHNW segment is “a very large portion” of that, he notes, but reveals no specific AUM.

Here are highlights of our interview:

THINKADVISOR: What are ultra-high-net-worth clients most concerned about today?

JOHN MATHEWS: Before the pandemic, what was on their minds was “Let’s make money in the markets.” During the pandemic, the focus went from investments to making sure their life was in order — their trust and estate, succession planning [and so on].

But in 2022, they flipped back to focusing on “Do I have the right investments in place?”

Did they get upset last week when the market plummeted?

No. They’re very opportunistic investors. So when there’s a dislocation in the markets, the ultra-high-net-worth investors [multimillionaires and billionaires] are usually taking advantage of those big moves.

Our UHNW clients have kept a large portion [of their assets] in cash. Most UHNW investors have been heavier in cash than they’ve been historically. That gives them a chance to take advantage of market dislocations.

What’s that specific strategy?

I think it’s a new time now where these clients will keep cash on the sidelines to be able to deploy it [in a market downturn] when they think there are opportunities.

Usually it’s not broad-based like “Let’s invest it in the S&P.” It’s “Let’s be very specific in what we think will work.” It could be private equity or a hedge fund.

Activity over the last few months has really picked up with our clients because of what they think are opportunities [brought by] the market sell-off or even rising interest rates.

We’re seeing clients now saying, “Fixed income is actually attractive.”

How much emphasis do UHNW clients put on corporate earnings?

A minority is very involved, including some family offices. But the others have a plan in place and don’t worry about the day-to-day fluctuations and earnings reports that are talked about on TV.

They’ve created a portfolio that’s durable; if [a corporation] has bad earnings, it creates an opportunity. They have the liquidity to take advantage of it. 

Have alternative investments become more important to the UHNW?

Yes. It’s alternatives, alternatives, alternatives. Our clients have an insatiable demand for them across the entire spectrum, from private equity to hedge funds.

They’re comfortable with the liquidity premium of a private equity fund. They understand it’s nine- or 10-year money, but they’re comfortable with the potential outsize returns that go with that.

Many have built their wealth in private equity to some extent: They own their own business, for example. So to them, it’s outsize returns without the day-to-day volatility that’s in the market.

Our average client’s alternative [investment] balances continue to grow every year and even more so this year.

Do the UHNW invest in crypto?

Not through us, because we don’t have a crypto platform, though I’ve noticed that, especially in the family office space, many have dabbled in crypto mainly because they don’t want to be left behind potentially, I guess. But they’re skeptical as well.

So why do family offices bother to invest in it?

It’s their job to make sure they diversify the wealth of the family, and they view crypto as potentially the next thing — and they don’t want to miss out.

They have some sort of allocation, but usually not that large. They have enough wealth where they can diversify into it — and if they’re wrong, they’re wrong. It’s not that big a deal.

To what extent are family offices growing?

Exponentially. It’s accelerated growth. It’s estimated that there are over 13,500 family offices in the U.S. today, up from 3,000 about seven years ago. 

There’s massive growth in both the single-family office and the multi-family office. They’re looking for bespoke one-off types of investments. They’re heavy in private equity, primarily in direct participation of purchasing businesses.

In working with our family offices, half the discussions are on investment opportunities; the other half is on trust, estate, philanthropy, succession planning and educational programs for family members.

Do UHNW clients do retirement planning?

Not necessarily “retirement planning.” But don’t kid yourself: Financial planning, no matter how much wealth they have, is imperative. They have to get their life in order; and the wealthier they are, the more complicated their life becomes.

Dealing with wealthy families is less about a retirement plan but more about a family plan.

Our job is to try to uncomplicate things. It could be around family matters or a trust-and-estate issue or setting up a strategic philanthropy plan for educating their children.

The investment selection is actually the easy part. The other [aspect] is the hard part.

Are the UHNW into ESG investing?

We’re seeing more and more of the families we cover specifically request that — especially when the children are involved in decision-making and especially if there’s a wealth transfer coming.

A family office will include family members of the next generation, who are very in tune with ESG investing.

In a survey we did, we found that 56% of our family office clients said ESG investing is an important component of their selection of managers. We think that will continue to rise.

What’s the difference between a private wealth advisor and a financial advisor when it comes to targeting clients and their approach to helping them?

A private wealth advisor has many fewer clients — probably around 50 — but much larger ones.

And it’s less about the traditional investment advice and more about life advice. So it’s more a life discussion that includes investments.

What else does a private wealth advisor need to be well versed in?

These large families [they] go after tend to be much more global in their thinking — they may have a house overseas, for instance.

You have to have a global perspective when serving really wealthy families.

When you say “go after,” do you mean prospecting?

Most of our client acquisitions come from introductions from existing clients. There’s really no prospecting, per se.

[New clients] could also be from a trusted attorney, CPA, a neighbor or a friend.

Our acquisitions primarily come from associations with other people.

How many UHNW clients does UBS serve?

We don’t quote that publicly. But there are 34,500 families in the U.S. with a net worth of over $100 million, according to a number of consultancies.

We have a good number of those. The number of those families is growing at 11% a year. That [UHNW] segment happens to be the fastest-growing segment for UBS in the U.S.

Are some of your clients multibillionaires?

Yes. According to Wealth-X, as last reported, there are 975 billionaires in the U.S. We serve as wealth advisors to a very high percentage of those. So we have quite a large number of the U.S. billionaire population, as well as globally.

I imagine that UHNW clients expect a lot from their advisors. True?

Yes, they do. You can’t digitize those relationships. There’s so much growth today in digital wealth management online — robo-advisors, let’s say. 

But with the UHNW space, you can’t provide advice digitally when it’s trust- and estate- or family-related, and that’s what we specialize in. It’s advice-led.

Have you returned to meeting with clients in person?

There’s a huge demand for in-person, face-to-face meetings. I feel that clients are videoed out. 

But now you have the best of both worlds: meeting with clients virtually, and they want to see us in person as well.

Lots of benefits came out of pandemic video meetings.

Such as?

Instead of the typical meeting with a husband and wife or a husband or a wife, with video we would have the whole family on the call because two years ago they were worried about their mortality and getting their life in order.

So we started to meet with the entire family at once. That was good. And it has continued to flow over to [the present]. 

It’s not uncommon for the patriarch or matriarch to have members of their family at these meetings because now they’re used to it, and they want to make sure the next generation is in tune and aware of the decisions they’re making. They want them to be part of the decisions, too.

You were a private wealth advisor for many years before you were appointed to lead UBS’ Private Wealth Management Division. Do you miss working directly with clients?

Though I don’t have any clients per se, I’m a senior UBS relationship manager for them and spend a lot of time with them.

I’m not the actual private wealth advisor, but clients have my business and cell numbers and can call me for anything.

One day I’ll be a private wealth advisor again.

What makes you say that? 

I love helping clients so much. I love making a difference in their lives. Probably my last job in the industry will be as a private wealth advisor instead of being in charge of the entire business.