UBS sees $9B in advisors’ assets leave in Q3

While it appears to have addressed the flow of financial advisors leaving, UBS Group in its Americas wealth management unit reported negative assets flow – or net new assets – of close to $9 billion for the three months ending in September. This trend is not a favorable sign in the ultra-competitive fight for clients and advisors taking place right now in the wealth management industry.

Meanwhile, the New York Post two days later on Friday reported that UBS executives is slowly moving along in its efforts to move its headquarters to the United States in an effort to escape the regulatory oversight of the Swiss government.

UBS CEO Sergio Ermotti over the past two months has publicly said the bank’s intention was to operate from Switzerland as a global bank.

A UBS spokesperson Monday morning declined to comment.

Toward the end of last year, UBS said it was redrawing its pay plan for advisors and in 2025 would cut a bonus for teams - unique in the industry. It also cut rates on its pay grid that squeezed advisors who are the lower producers of revenue, a long-running tactic by large firms to boost margins in wealth management franchises.

It's been an up and down 12 months for the firm’s compensation plan.

The bank reported improving pretax margins in wealth management for the Americas, with $416 million its highest quarterly pretax income three years on revenues of $3.1 billion.

UBS reported in February it was expecting financial advisors to leave the firm after changes to the firm’s compensation plan were met unfavorably by some advisors. The firm appeared to back away from that change. In September, UBS wealth management in the United States announced internally it would add to some advisors’ pay next year - if they met certain targets. 

Big firms taking the foot on and off compensation levers for financial advisors is a large driver for some advisors’ behavior.

At the end of September, UBS in its Americas region reported 5,779 financial advisors, a decline of 207 advisors over the past 12 months, or close to 3.5%. But UBS actually gained six financial advisors in the quarter compared to its last report at the end of June.

Senior management at the bank welcomed that development in the face losing assets. 

“Net new assets in the Americas were negative $9 billion, primarily reflecting advisor movement following the structural changes we introduced last year, including to the compensation grid as part of the franchise's broader realignment,” said Todd Tuckner, Group CFO, during last Wednesday's conference call with analysts. “Looking ahead, we expect turnover to moderate, supported by a healthy recruiting pipeline and a record number of advisors choosing to stay and ultimately retire at UBS.”

“We're working quite hard to ensure that the outflows taper, as I've said, we'll see some lag effect is likely just given the movement that we've seen and given the time that it takes before advisers are off our platform,” he said.

A move out of Switzerland could better position UBS in the US wealth management market, according to the Post.

“The latest sign that Switzerland’s biggest bank is on the way out of its home of 162 years came Monday, when it applied for a US national bank charter,” according to the article. “UBS has a strong wealth management unit here and could offer many more services through its brokerage arm. That, in turn, could expand UBS’ US footprint well beyond the nearly 6,000 advisers already here.”