Adviser count down, profit up at UBS
Employees pass between offices as UBS Group AG logo sits on a walkway at the UBS headquarters in Zurich, Switzerland, on Monday, Jan. 22, 2018. A UBS loan backed by shares of Steinhoff International Holdings NV was to blame for the majority of the Swiss banks 79 million francs ($82 million) in credit losses in the fourth quarter, a person with knowledge of the matter said. Photographer: Stefan Wermuth/Bloomberg
The company has cut back on its recruiting efforts in recent years and instead focused on adviser productivity
UBS had 274 fewer U.S. financial advisers at the end of September than it did a year prior — the result of a years-long strategy the firm has adopted to reduce costs and boost productivity.
And with that lower head count, the company said it saw record profitability in the past quarter.
According to earnings results released Tuesday, UBS had 6,353 full-time financial adviser positions in the U.S., down 4% from the 6,627 at the end of the third quarter of 2019. In the U.S., the company’s pretax profit was $39 million higher in the third quarter compared to the same period in 2019, reaching $371 million, according to the earnings report.
Profitability increased even as operating income fell, dropping by $86 million in the U.S., “mainly driven by lower recurring net fee income as higher invested assets were offset by lower margins, reflecting shifts toward lower-margin funds and advisory mandates, and lower net interest income, mainly due to US dollar rate headwinds,” the company stated in the report.
The company “made it clear in 2016 that [it] planned to gradually reduce advisor headcount,” a spokesperson said in a statement. “We remain focused on quality not quantity, selectively recruiting high-producing advisors with a book of business aligned to our overall [high-net-worth] and [ultra-high-net-worth] strategy.”
The reduction in the number of advisers shows that “overall advisor headcount has no correlation with overall profitability,” with the average income per adviser at the firm being $1.4 million, the spokesperson stated.
By comparison, in 2011, UBS had a total of 9,150 U.S. advisers, but at the time it posted net losses of about $150 million in a year, according to figures provided by the company.
In July, the company signaled plans to shut down its high-end U.S. private bank for wealthy clients. That decision take effect next year and could affect the ability of advisers to build new relationships with a coveted client base, though it isn’t clear how many U.S. advisers are affected.
Even as it keeps its adviser head count low, UBS likely faces pressure to retain experienced financial professionals, as it avoids taking on new ones through recruiting, which can be costly.
The company is also changing the legal structure of its international wealth management unit, which reportedly will allow UBS to bump up its loans business in potentially higher growth markets outside of Switzerland, Bloomberg reported in August.
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