UBS U.S. wealth management: more advisers, less earnings

Headcount is up, but unit's earnings are down as a result of strong increase in litigation costs

Feb 2, 2016 @ 2:11 pm

By Christine Idzelis

UBS Group AG's wealth management group for the Americas increased financial-adviser headcount last year, attracting $16.8 billion of net new money in the fourth-quarter even as the unit's earnings fell.

The U.S. unit had “strong growth” in net new money even as the global wealth management business saw outflows driven by emerging markets and Europe, according to a Keefe, Bruyette & Woods research note on the Swiss bank's earnings report on Tuesday.

The unit's $1.03 trillion of invested assets at the end of December was little changed from a year ago, propped up in part by the fourth-quarter inflows, according to an email from Gregg Rosenberg, a spokesman for UBS in New York.

The number of financial advisers at the U.S. wealth management unit, which focuses on high-net-worth individuals with at least $1 million to invest, rose 2% last year to 7,140, according to the spokesman. The unit's revenue was hurt in the fourth quarter by lower managed account fees while higher litigation provisions led to a steep drop in pre-tax profit.


Damages surrounding Puerto Rico's distressed debt was among the litigation matters outlined in the Swiss bank's financial supplement for its fourth-quarter earnings results, with the commonwealth's governor saying last year that it was unable to meet its obligations.

Since August 2013, declines in the price of Puerto Rico municipal bonds and related funds managed and distributed by UBS have led to regulatory inquiries, customer complaints and arbitrations, with claimed damages totaling $1.5 billion, according to the financial supplement. About $284 million of claims have been resolved through settlements or arbitration, the supplement shows.

The Americas wealth-management unit's adjusted pretax profit in the fourth quarter dropped 73% to about $63 million from the same period a year ago, mainly due to higher litigation provisions, according to the UBS spokesman. The $1.87 billion of fourth-quarter revenue declined 3%, primarily due to lower managed account fees, he said.

Headcount for financial advisers is up slightly even as retention deals at U.S. brokerage firms on Wall Street are expiring. The attrition rate for advisers who contribute more than $250,000 of revenue annually at UBS's wealth management group for the Americas has fallen to “near historic lows,” according to the spokesman.


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