UBS Wealth Management Americas reported net asset outflows of $11.2 billion in the fourth quarter as the division struggles to regain its footing in the competitive U.S. market.
UBS [UBS] blamed the outflows on advisors leaving the firm and taking clients with them, as well as limited recruiting of experienced advisors.
The U.S. wealth management division had 7,084 advisors at the end of last year, down 3% from the previous quarter and 8% from a year earlier.The firm recently unveiled a new recruitment package in an attempt to attract more high-producing advisors.
But it wasn’t all bad news. The division reported a 62% increase in pre-tax profits to $167 million from the previous quarter. The firm said the improvement was partially due to lower personnel expenses, but was also helped by some one-off items.
And UBS was not the only one to lose client assets in the last quarter of 2009. Its rival Morgan Stanley Smith Barney [MS] also saw $4.7 billion in net asset outflows in the fourth quarter, which the firm blamed mostly on Smith Barney advisors who left the firm following the merger and took clients with them.
However, MSSB’s outflows actually fell 47% from the third quarter when they lost $8.8 billion in client assets. UBS, meanwhile, saw a 21% increase in outflows in the fourth quarter from $9.3 billion the previous quarter. The third quarter outflows were also up from the second quarter.
“While other firms have seen a better situation going into this year and really started to gain traction, UBS has gotten worse,” said Alois Pirker, research director at Aite Group. Pirker says the division’s cost cutting efforts have been effective in terms of boosting profits “but unless they can stop the outflow they’re going to lose huge market share.”
And the situation was even worse for the firm’s global wealth management and Swiss bank division, which saw net asset outflows of $31.1 billion.
In a statement announcing the results, the firm said that addressing the cause of net new money outflows remains a priority and management is confident that the firm’s reputation will be restored “with tangible results.”
Pirker said the real test for the U.S. wealth management division will come with this quarter's results after the new management team has had time to make an impact. “That’s when we’ll see if the ‘McCann factor’ has worked,” he said. “At the moment it’s too early to say if advisors are buying into it.”