Oct. 27 (Bloomberg) -- UBS AG, the Swiss bank seeking to stem outflows of clients’ funds, hired former Merrill Lynch & Co. executive Robert J. McCann as the head of wealth management in the Americas.

McCann, 51, replaces Marten Hoekstra, 48, who is leaving the firm, and assumes responsibility for the domestic wealth- management units in the U.S. and Canada, and for all of the international business in the U.S., the bank said in a statement today. He will be paid a fixed salary of $850,000 with no guaranteed bonus, which compares with basic pay of $350,000 and $4.69 million of compensation including stock awards and options at Merrill in 2007.

UBS, which in August agreed to pass on data on as many as 4,450 accounts to the U.S. to settle a lawsuit related to tax evasion, has seen wealthy clients pull 156.3 billion Swiss francs ($153.9 billion) in net assets since March 2008. Chief Executive Officer Oswald Gruebel, who has described the U.S. wealth-management unit as “non-core,” told staff last month he had no plans to sell the division.

“The appointment of a senior man from Merrill Lynch does not reduce the strategic challenges of the unit,” Peter Thorne, a London-based analyst at Helvea, said in a note. “He seems a credible person to lead the unit to an initial public offering or a merger with another company.”

McCann will lead almost 8,000 financial advisers and be responsible for 695 billion francs in assets under management.

$20 Trillion of Assets

After Bank of America Corp. acquired Merrill, McCann was named head of the combined brokerage unit. He settled a lawsuit with Bank of America this month over a contract provision that restricted his ability to take a job with a rival.

McCann “will apply his long and deep client relationship and business experience to gain market share, increase profitability and grow our wealth management Americas business,” Gruebel said in the statement. “In the Americas alone, the wealth-management market opportunity represents high net worth assets in excess of $20 trillion.”

UBS fell 0.6 percent to 17.88 francs in Swiss trading. The Zurich-based bank’s shares have gained 20 percent this year, lagging the 44 percent increase in the 63-company Bloomberg Europe Banks and Financial Services Index.

“There is nothing about Bob McCann showing up at UBS that is going to instantaneously restore the reputation of UBS in the United States,” McCann said in an interview on Bloomberg Television. “You win people’s trust one day at a time, one client at a time.”

Paine Webber

UBS, which bought Paine Webber Group Inc. for $11.5 billion in 2000 to gain a bigger presence in U.S. wealth management, has had total pretax losses of 2.4 billion francs from the business since then. The Paine Webber brand was scrapped in 2003.

“My goal here is to build the best wealth-management business in the Americas,” McCann told reporters on a conference call. “You can’t call yourself the best wealth- management business in the world and not have it make money.”

In June 2007, then head of wealth management in the U.S. Hoekstra told investors his business could hit $1 trillion in assets under management in 2010, compared with $713 billion at the time. That was before UBS got engulfed by the U.S. subprime crisis, which resulted in $52.8 billion of writedowns and losses for the bank, the most of any European competitor, and a drop in client assets.

UBS’s wealth-management business and brand have also suffered from the lawsuit against the bank that sought data on American clients who allegedly evaded U.S. taxes. The Americas unit reported a pretax loss of 221 million francs and clients pulling out a net 5.8 billion francs in the second quarter.

Clients’ Trust

McCann said he isn’t planning to sell the business and doesn’t foresee acquisitions “at this time.” He will review the division with the aim of boosting revenue and cutting costs, and present a strategy by the end of March, he added.

“UBS is still struggling with a heavy cost base, challenging markets with newly invigorated competitors and a very tarnished brand name,” Dirk Hoffmann-Becking, a London- based analyst at Sanford C. Bernstein Ltd., said last month. “They have to work hard to get out of that.”

McCann first joined Merrill in 1982 as an equities salesman. He ran the firm’s institutional sales division and equities business before a 16-month stint as head of research. He left in 2003 to take a job as vice chairman of Axa Financial Inc., only to be hired back by Merrill six months later.

He was named in 2003 to head the brokerage unit that Bank of America Chief Executive Officer Ken Lewis last year called Merrill Lynch’s “crown jewel.” Dan Sontag replaced McCann in January, and Sallie Krawcheck, who previously led Citigroup Inc.’s Smith Barney brokerage, took over from Sontag in August.

To contact the reporters on this story: Matthias Wabl at mwabl@bloomberg.net; Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

Last Updated: October 27, 2009 13:43 EDT