REUTERS SUMMIT-UBS sees opportunities amid rising regulation

(For other news from Reuters Global Wealth Management Summit, click on http://www.reuters.com/summit/Wealth14)

GENEVA, June 16 (Reuters) - New regulation is constantly driving up the cost of business for private banks, a senior executive at Switzerland's UBS AG (Xetra: UB0BL6 - news) has warned, even as fast-changing conditions present opportunities for wealth managers.

"Unfortunately, the regulatory environment is changing by the day all around the globe and the adaptation requirements you have in our firms are huge," Juerg Zeltner, UBS's head of private banking, said at the Reuters Global Wealth Management Summit (LSE: SUMM.L - news) in Geneva.

"Thousands of new legislation (measures) coming in that need to be processed ... only means one thing - that the cost to serve our clients is going up," Zeltner said on Monday at the Summit, also taking place in Reuters offices in New York (Frankfurt: HX6.F - news) and Singapore.

Prospects in the profitable and low-risk private banking industry have been dimmed by an international crackdown on untaxed assets being held in so-called offshore centres such as Switzerland, the world's largest with roughly 2 trillion Swiss francs ($2.2 trillion) in assets.

Private banks are also struggling with a desire by wealthy clients, daunted by political and economic turmoil, to load up on low-risk assets, bad news for private banks which earn little from managing portfolios of cash and cash-related products.

All told, the cost of business for private banks is rising at a time when they must work hard to restore trust in the sector following a string of scandals.

Part of the reason for sizable personal cash piles is that wealthy investors are looking for clearer expert opinion on how the turmoil affects them, which Zeltner believes represents an opportunity for private banks.

"These clients ... need help, they need advice," he said. "So the opportunity for us to build models, where we go out, where we differentiate, where were the go-to person, where we call first has never been greater."

BIG BETS

Zeltner said the wealthy are still hesitant to make big investment bets, with some notable exceptions. While business in China is slowing somewhat, Asian investors were - for the first time - looking to invest outside their region, he said.

And the ultra-rich, generally defined as those with more than $50 million in funds to bank, are becoming active players in long-term investments and private equity investments, he said.

"If (clients) hear valuations are high and they hear China is slowing and they hear (about) inflation fears in the U.S., they're basically not going to be 'risk on'," Zeltner said, referring to their willingness or otherwise to take big risky positions in asset classes such as equities or emerging markets.

Stung by losses during the financial crisis, wealthy investors have kept as much as 30 percent of their assets in cash and cash-like assets, representing a setback for banks such as UBS, which earn almost no income from such holdings.

Last month, Zeltner said he expected wealthy investors to continue to park a large portion of their cash in deposit accounts and low-risk assets, because they want to see tangible signs of a broader economic recovery before stepping outside the comfort zone.

The private banking arm of UBS has become a key component of its business after UBS restructured in the wake of the financial crisis, moving an emphasis away from its investment bank to less risky wealth management.

Bankers and other experts are divided on when - and if - activity will perk up, with some saying clients are likely to keep a significant part of their wealth in cash as a haven.

($1 = 0.9005 Swiss Francs) (Editing by David Holmes; Follow Reuters Summits on Twitter (Berlin: TWR.BE - news) @Reuters_Summits)