UBS to launch new digital wealth service among workplace clients

Americas unit earned 37% of $1.52 billion in quarterly pretax profit for UBS Global Wealth Management

After its fourth straight quarter of record profit before taxes, the Global Wealth Management Americas unit of UBS plans to reach for more U.S. clients with a new digital service.

In keeping with recent trends at UBS, the wirehouse saw a net loss to its headcount of financial advisors but a step up in their level of production from the year-ago period. The firm also aims to attract clients at a lower level of investable assets than its traditional high net worth and ultrahigh net worth base with a new hybrid robo advisor alongside an existing digital arm it launched in 2018 after UBS made an equity investment in technology developer SigFig. UBS will unveil a “strategic update” across its entire business on Feb. 1, Group CEO Ralph Hamers said.

“The market and economic backdrop were broadly positive in the third quarter; although there has been some uncertainty recently,” Hamers said in a statement. “Today, we are seeing the benefits of delivering our full ecosystem to clients in a seamless way as One UBS. And there is so much more we can and must do.”

Note: The parent of the wirehouse doesn’t break out specific U.S. wealth management results from those of its units in Canada and Latin America. All figures refer to the Global Wealth Management Americas division unless otherwise noted.

New robo advisor: In an interview with Bloomberg TV, Hamers described the service as a digital wealth manager that would give clients the ability to speak with a human advisor, too. Starting out with pitches to 2 million U.S. workers that UBS works with on their employer retirement plans and stock options as “workplace wealth” clients, the firm has set its sights on investors with between $250,000 and $2 million in assets. UBS will launch the digital service next year. Hamers didn’t rule out potential acquisitions. “Organic growth is basically the default,” Hamers told Bloomberg. But “if there is an inorganic option that could accelerate us into that direction, we would certainly consider it.” The existing hybrid robo advisor powered by SigFig's tech, the UBS Wealth Advice Center, has a different target client base among non-workplace investors.

Advisor headcount: For several years in a row, the ranks of advisors with the wirehouse have fallen as the firm cut its recruiting loans and pursued a strategy UBS executives have characterized as “quality, not quantity.” The number of financial advisors slipped by 87 year-over-year, or by 1%, to 6,266 in the third quarter. Recruitment loans to financial advisors ticked up by 1% from the year-ago period to $1.88 billion. By comparison to the third quarter of 2016, though, the wirehouse had issued $3.18 billion in recruiting loans to a base of 7,087 advisors at the time.

Advisor productivity: On the other hand, UBS executives point out that the lower number of advisors are driving the highest rates of production per advisor in the industry. Invested assets surged by 21% year-over-year to $1.74 billion in the third quarter, client loan volume reached a record $87.5 billion and the advisors reeled in $11.8 billion in net new fee-generating assets. In addition, the UBS advisors drove inflows of $5 billion for the quarter to the parent firm’s proprietary separately managed accounts, part of a haul of $22 billion this year. Annualized revenue per advisor jumped by 26% from the year-ago period to $1.7 million. At the same time, the increased business boosted financial advisor variable compensation by 30% year-over-year to $1.12 billion. The higher advisor productivity and client loans, especially in securities-backed lending and residential mortgages, helped push the unit’s pretax profits to another record in the quarter.

Bottom line: The wirehouse earned $559 million in pretax operating profit on $2.74 billion in revenue for the third quarter. Compared to the year-ago period, profit soared by 51% and revenue grew by 23%. On the whole, the Global Wealth Management unit’s pretax profit of $1.51 billion surpassed the Wall Street consensus projection by roughly $300 million and its fees reached their highest level in nearly three years at $2.87 billion, Bloomberg News reported.

Correction
An earlier version of this story mistakenly said that UBS acquired SigFig. UBS made an equity investment in SigFig and uses the firm's technology as part of a strategic partnership.
October 27, 2021 9:41 AM EDT
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