UBS saw a small uptick in the number of new U.S. advisors for the first time in years and blockbuster profits, even as it took a massive hit from the Archegos drama and plans job cuts.
The Swiss bank’s Wealth Management Americas unit, which focuses on the U.S., said Tuesday that it had 6,335 financial advisors in the first quarter of 2021, up a net 30 advisors from the prior quarter. The tiny uptick at the bank, which had been slashing its advisor headcount for nearly five years, still falls 2.5% below the tally of 6,496 a year ago. Globally, the bank has 9,582 advisors, flat on the prior quarter but up 4% from a year ago.
UBS, the world’s largest wealth manager but the smallest of the Wall Street wirehouses, reported record first-quarter quarterly profits for its U.S. wealth management business, even as it revealed that it had absorbed a surprise $861 million hit from Archegos Capital Management, the hedge fund that imploded several weeks ago. It booked $774 million of that bodyslam in the first quarter, and will take the remaining $87 million loss in the next quarter. The overall size of the hit initially stunned investors and sent the bank’s shares down early Tuesday, though they quickly recovered.
Bloomberg News
The Archegos disaster suggests that UBS’s global advisors, and not its investment bankers or traders, reaped the bulk of a $300 million increase in overall “variable and financial advisor compensation” in the first three months of 2021. Still, the bank’s $123 million in compensation commitments to recruited global advisors was flat on the prior quarter and down 6% from a year ago.
The bank’s Global Wealth Management Americas unit, which includes advisors, saw a record quarterly pre-tax profit of $467 million, up 23%, or $87 million, from a year ago. Revenue per advisor grew to $1.6 million, up 9% over the prior year. Its pre-tax margin of 18.3% was the highest ever, and bests that of other banks with many more advisors.
The bank reported $8 billion in net new money through its separately managed accounts (SMA) initiative in the U.S., a no-fee program for wealthy investors that it launched at the start of 2020 and now has $70 billion in assets.
After years of cutting back on overall recruiting, UBS made a series of high-profile hires over the past year, including from JPMorgan Chase, Merrill Lynch and Goldman Sachs. Still, its recruitment loans to global financial advisors were flat on the previous quarter’s nearly $1.87 billion, and down 7% from a year ago. The loans are upfront payment to advisors and are conditioned upon them staying at the firm and meeting performance targets.
UBS doesn’t break out each quarter’s net new money for its Americas unit, arguing instead that new fee-based assets are a better indicator of profitability. The bank traditionally focuses heavily on Asia, particularly China.
In a call with investors, Ralph Hamers, the new UBS Group Chief Executive, laid out general plans for a “new strategy” that includes focusing on digital services and cutting costs by $1 billion by 2023 across the global firm. He said the bank could start with job cuts, though he didn’t say how many would come in the Americas. Last year, a top bank executive said that one-third of the firm’s global workforce of more than 71,000, including advisors, could perhaps work remotely on a permanent basis.
UBS’s current advisor headcount in Wealth Management Americas is a shadow of the more than 8,700 advisors it had in early 2009, when it aggressively recruited talent. The bank has said that it prefers to focus on productivity, not body numbers, and that the industry trend of wide-scale recruiting is overrated. UBS closed its U.S. private bank last year and transferred its advisors to the company’s wirehouse operations.