How They Handled My $15 Million

UBS offered broadly diversified packages, tailored to the client's tax needs

"We are going to make you work a little bit," said René Marty, a UBS (UBS ) executive director. To experience how UBS handles its private bank clients firsthand, I agreed to travel to Zurich for a session with a group of UBS financial advisers. Marty was joined by Martin Liechti, head of private banking for North American clients, and Jonathan Guest, an investment specialist.

The hour I spent with them in the plain, modern central Zurich building devoted to private banking was surprisingly intense. For purposes of the session and with their knowledge, I pretended to be a new UBS client with $15 million to invest. (The minimum is $625,000 in liquid assets.) First, in keeping with Swiss banks' newfound emphasis on screening their clients, the team peppered me with probing questions about where I had gotten that $15 million. "How did you accumulate so much money? When? And where?" they asked.

Satisfied that I hadn't looted some small nation's treasury, they went on to map out my profile as an investor. What were my family's ongoing and future financial needs? How much of a dip in the value of my portfolio was I prepared to accept? And how much discretion was I willing to give UBS in managing my money? When I told them my wife takes responsibility for much of our finances, they regretted that she had not come along. "It is very important for us to meet your wife and hear her philosophy," Liechti said. "Remember, we are here for you. If we don't do what you want, we fail."

Much of the session seemed more like visiting a psychiatrist than a broker. Following the spot financial check, Guest offered a couple of solutions UBS thought might work for me and later sent brochures full of additional information. From what I saw, UBS tries to offer clients broadly diversified packages of stocks, bonds, and alternative products such as hedge funds. Their aim is to limit damage from bear markets while allowing big gains when stocks are rising. UBS also tailors its offerings to suit the client's tax jurisdiction. The fees: 1% to 1.3% per year.

UBS recommended two packages for me as an investor with a 10-year time horizon who is willing to accept moderate risk. The first package proposed placing 70% of my money in a portfolio put together by UBS called Absolute Return Defensive, which is designed to generate returns of 2% above money-market rates with low risk. The Absolute Return portfolio that I saw consisted of some 27 funds, most of them in-house, with a heavy weighting toward hedge funds (23%), bonds (22%), and money-market (10%). Guest suggested that I spice up this conservative choice with 30% of MFP Classic Equity, a blend of about 25 geographically diversified stock funds. Most of these were managed by outside providers, including Stockholm-based Nordea and London-based Schroders. The largest position was Goldman Sachs (GS ) U.S. Core Equity U.

UBS isn't offering get-rich-quick schemes. The average annual return of the first solution they recommended for me would have been only 2.9% over the last 5 years, when equity markets were rocky, 9.7% over the last 10. But they figured at age 55 with over $15 million, my first priority was to keep most of my nest egg intact. Guest's second option was not radically different: He would have placed 50% of my kitty in a portfolio called PM Enhanced Return, which uses hedge funds, real estate, convertible bonds, and emerging-market bonds to earn returns about 1% over a traditional fixed income portfolio. The other 50% would have gone into MFP Classic Equity. This would have earned me 3.2% on average over the last 5 years and 9.3% over the last 10.

Of course, UBS is prepared to let risk be damned if that is what the client has in mind. The bank will even link a high-net-worth individual who wants to be his own hedge fund directly to a UBS special-purpose trading floor in Zurich. UBS manages personal art collections, and it has made specialties of buying and selling vineyards for clients and giving advice on collecting rare coins. As Liechti says, what the client wants, the client gets.

By Stanley Reed in Zurich

    Before it's here, it's on the Bloomberg Terminal.