There is a lot that is getting better about the U.S. economy but the continued uncertainty on the debt ceiling talks is causing UBS' high-net-worth clients to hold on to more of their cash, Robert McCann, CEO of the Wealth Management Americas business, told CNBC Thursday.
"The challenge is the lack of leadership," he said. "People are frozen." An April survey of UBS clients found 27 percent were pessimistic; an updated report released today has that number at around 60 percent.
"Washington has created that uncertainty and we’re trying to help our clients deal with that uncertainty," he said, adding he is "not optimistic" there will be a significant reduction in the deficit, especially in entitlements.
Currently, UBS' wealth management group is "still seeing good client activity in terms of cash coming in our direction." However, as is the case for many American corporations, UBS' wealth clients are "sitting on that cash far more today than they even did six or eight weeks ago," McCann said.
"So what I see is people unwilling to make commitments to risk-based assets. That had started to alleviate but the current environment is creating that move to stay in cash and cash-like products," he said.
The parent Swiss bank released earnings Tuesday and warned of job cuts although McCann said his unit is continuing to manage costs tightly and hire more financial advisors.
He still likes the U.S. economy. "We think there are a lot of good things going on in the U.S. economy. The earnings story is a very good story. We see some job creation. So overall we have people in a balanced portfolio. We like equities," he said.
He said the main job of UBS' wealth advisors is to "make sure that people don’t overreact to any single piece of news. Because the news is hitting fast and furious, and what what you don’t want a client to do is toally readjust a portfolio based on last thing that they heard."