Swiss bank UBS on Tuesday confirmed in a release it has discontinued its domestic Australian wealth management business following a global review of the business.
Former head of UBS wealth management in Australia, Mike Chisholm, will join several other former executives of the division to start an independent firm called Crestone Wealth Management.
Most of the client advisers and the senior management from the defunct UBS unit have indicated their intention to join the new partnership, Crestone said in a release.
It is understood that UBS did not receive any financial consideration from Crestone, according to a source familiar with the matter.
UBS declined to comment beyond its release but a spokeswoman confirmed the withdrawal and said the bank will concentrate on its investment banking and asset management business in Australia.
UBS's partial retreat from Australia is noteworthy as it runs counter to the Swiss bank's strategy in Asia -- a region where it has emphasised its wealth management franchise as a crucial piece of the business, and has focused on more closely melding its private wealth and investment banking arms since the global financial crisis of 2008.
UBS has long touted its private wealth arm as a distribution platform for high-yield bonds and also originated initial public offerings and bond deals from its very wealth clients.
In a release, UBS's global vice chairman for wealth management Alain Robert said the decision to pull out was a difficult one and cited a number of challenges.
"The wealth management industry is experiencing substantial changes due to increased regulatory and client requirements which have led to increasingly complex operational processes," said Robert in the release.
"UBS's global wealth management business model of providing holistic client advice has become increasingly difficult to fully operate on a sustainable basis in the local market, which is dominated by a brokerage based system," he added.
Regulatory requirements have been rising in Asia, notably in Singapore, which has faced tightened compliance, raising the cost of doing business, though there is no suggestion that UBS is withdrawing from Singapore.
Scale, or the lack thereof, is likely a factor contributing to the UBS retreat. The bank has significantly more assets under managment in Asia than Australia.
Another factor is likely the differing profiles of private wealth clients in the Asian and Australian markets.
In Asia, a higher percentage of wealth is held by first and second generation entrepreneurs, which have greater corporate finance needs compared to elsewhere. About 70% of UBS private wealth clients in Asia are entrepreneurs and most of the wealth is still in the first and second generation. As such, Asia private wealth clients have proven to be fertile ground for cross-selling investment banking services.
In Australia, by contrast, mega deals have focused on the privatisation of government assets. UBS, for example, is one of two banks advising the New South Wales government on the privatisation of its electricity transmission assets, transactions with an estimated value of A$30 billion ($23 billion). The Swiss bank is ranked third in Australia ECM and M&A league tables according to data provider Dealogic.
UBS's retreat from Australia comes as global banks, under pressure to shore up capital, have sold off private wealth arms. For example, RBS sold its overseas private banking business Coutts International to Switzerland's Union Bancaire Privee in March while Société Générale sold its Asia private bank to DBS last year.
Crestone, which will be employee-owned, intends to access UBS's global macro-economic and local equities research and its capital markets deal flow, it said in the release. It expects to be operational from October 2015. Senior advisers including Geoff Stansen, Gary MacKenzie, Andrew Lees, Leigh Birtles and Don Chandler together with senior management led the push to create Crestone.
