Advisor drop doesn't hinder asset flows in UBS' first quarter

Though some UBS advisors walked out the door, net new assets year over year streamed into the wirehouse's Americas wealth division.

UBS reported in an earnings call Wednesday that net new assets coming into its wealth business in the U.S., Canada and Latin America rose by 47% year over year to $20.2 billion in the first quarter of this year. That helped boost the unit's invested assets total by 5% to $2.08 trillion.

The increase came despite an advisor headcount that, at 5,884, was down 3% from the same period a year ago and down about 1% from the fourth quarter of 2024.

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UBS executives acknowledged in an earnings call in February that recent changes to the firm's compensation policies could drive some advisors toward the exits. Among other things, UBS lowered its payout rates for wealth managers on the lower levels of revenue production. It also eliminated a system that had paid advisors on teams a proportion of the entire group's production, replacing it with one merely paying a percentage of the single highest-producer's revenue generation.

Improving the operating margin

UBS has said one of its main goals for its Americas wealth business is to improve its pretax operating margin — or the percentage of its revenue left over after costs other than taxes. The firm showed improvement on that front as well, seeing that figure rise to nearly 12% from just under 10% a year before. But it still lags behind the comparable figure for UBS' wirehouse rival Morgan Stanley, which had a pretax margin of 27% in the first quarter.

UBS Chief Financial Officer Todd Tuckner told analysts Wednesday that the Americas wealth unit is on a "two- to three-year journey" toward better margins.

Tuckner said there is "broad support for our strategy," which "is intended to better align advisor incentives with the strategic goals of the firm."

"In terms of the headcount, I would just say that our recruiting pipeline is robust," Tuckner added. "There is some attrition that one can expect."

Like other industry executives in recent earnings calls, Tuckner also hinted that market turmoil could also lead to "some movement across the industry in terms of advisor repositioning."

Higher transaction income amid economic turmoil

Revamping the Americas wealth unit is a key part of UBS' plans for its Global Wealth Management business. Along with the improvement in its operating margin, Wednesday's earnings call included other signs of progress toward the firm's goals.

The Americas unit saw its total revenue rise by 10%year over year to just over $3 billion and its operating profit by 42% to $357 million. Of its $20.2 billion in net new assets, $10.2 billion went into fee-generating accounts, which are particularly prized for their ability to generate steady revenue. That brought the Americas unit's total for fee-based assets to just over $1 trillion, up from $990 billion the year before.

The Americas unit meanwhile saw its transaction income — derived from commissions and other revenue from trading in client accounts — surge by 16% to $460 million in the first quarter. 

UBS CEO Sergio Ermotti said Wednesday that the firm saw a huge increase in client activity amid economic turmoil in the first few days of April, after the first quarter ended. He characterized it as "a 30% increase compared to the peak of COVID times, which is quite exceptional."

But now, Ermotti said, fatigue seems to have set in.

"Markets are stabilizing around current levels across many asset classes, and it's much more of a wait-and-see attitude," he said. "And so, in that sense, it's a more normalized environment."

Global results

UBS had strong results not just in its Americas unit but also its wealth business as a whole. The firm's Global Wealth Management division rose by nearly 5% to $6.4 billion and its operating profit by 23% to $1.4 billion. 

Its invested asset tally increased by nearly 5% to $4.2 trillion. But its advisor headcount was down 6% to 9,693.