Wirehouses' cost cuts target support staff

UBS' plans to cut 75 sales assistants comes as firms including Morgan Stanley target new profit margin goals for next year.
AUG 25, 2014
UBS Wealth Management Americas is the latest firm to begin cutting operations staff in effort to reduce expenses. The firm said it was eliminating 75 of those positions as part of an “ongoing review of costs and resources,” according to spokeswoman Karina Byrne. The eliminations were first reported late Tuesday by Reuters. The firm overall has around 3,800 sales associates, who work to process orders and address client issues for the firm's roughly 7,100 advisers. One UBS adviser who spoke on condition of anonymity said that it was not likely to have a major impact at this point as the firm was not “understaffed” in terms of client associates. The move does, however, speak to the broader efforts by large brokerage firms to levy more sales and operational costs on the brokers, he said. “We're in a battle where firms are trying to unload more liability and costs onto the brokers,” he said of the industry. UBS' move mirrors similar efforts at Morgan Stanley, where the firm has been looking to centralize its back office operations. Next year, a portion of Morgan Stanley's roughly 16,300 advisers are set to pay additional costs, including a $1,000 monthly fee, for extra support staff beyond what the branch provides. Previously, those fees, which go toward items such as technology costs, insurance and retirement contributions, were paid by the firm. Executives at both Morgan Stanley and UBS have set expectations for improved profit margins by next year. Bob McCann, CEO of UBS Wealth Management Americas, said that the firm was aiming for a 75% to 85% cost-to-income ratio in 2015. That metric hovered close to 85% for several quarters, but has not broken that threshold as expenses related to recruiting and compensation for both advisers and support staff continue to tick up. UBS' U.S. wealth unit reported last quarter that its cost-to-income ratio, a measure of the firm's profitability, rose to 87.4% in the second quarter, up from 86.2% in the same quarter last year. Morgan Stanley, which focuses more on the profit margin metric, said it is hoping to achieve 22% to 25% margins, up from 21% last quarter, by year's end.

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