UBS executives acknowledged Tuesday that recent changes in pay policies for U.S. advisors will most likely result in increased attrition in 2025 and result in declining inflows of net new assets.
But the firm is still confident it can hit its goal of having $5 trillion in what it calls invested assets by 2028. This figure includes not only assets under management in advisory and brokerage accounts but also deposits and institutional assets.
UBS Chief Financial Officer Todd Tuckner told analysts in an earnings call Tuesday that "our efforts to align financial advisor incentives with our strategic priorities may result in a short-term increase in [financial advisor] attrition, creating an additional headwind for net new assets in the coming months."
Tuckner's statement referred to changes UBS made in November
Some industry recruiters predicted the changes would lead some wealth managers to look toward the exit. UBS' Americas division did see a declining headcount in 2024; it ended the year with 5,968 advisors, down from 6,117 at the close of 2023.
READ MORE:
Tuckner said Tuesday that the prospect of further advisor attrition was leading the firm to "maintain our net new asset ambition of around $100 billion for 2025." Yet by 2026, he said, he and other executives expect "net new assets to begin to accelerate towards our ambition of $200 billion per annum and over $5 trillion in invested assets by 2028."
Tuckner also noted that UBS is providing U.S. advisors with incentives meant to encourage them to help it meet its asset goals. The bank, for instance, is offering a cash award of up to $1 million for advisors who hit certain targets for bringing in net new money, striking up new relationships with clients with $1 million or more in assets or achieving higher returns on assets under management.
Tuckner said, "It's important to keep in mind that the changes we're making are really not intended to reduce compensation but to increase it, as long as it's being done in ways that are very aligned with our strategy."
Net new assets and Credit Suisse
UBS came up just shy of hitting $100 billion in net new assets goal in 2024, instead bringing in $96.7 billion. That figure was down nearly 33% from 2023, when UBS reported $128.3 billion in new assets. In the fourth quarter alone, the Zurich-based bank's net asset haul fell by nearly 14% year over year to $17.7 billion.
Tuckner told analysts Tuesday that the "net new asset achievement this year reflects several challenges that we successfully navigated over the course of 2024." Those include the firm's work to retain — "despite significant levels of relationship manager attrition" — "the vast majority" of assets it inherited from its acquisition of its Swiss banking rival Credit Suisse in 2023.
"Collectively, while these factors weighed down flows by around $30 billion, importantly, they've contributed to enhanced profitability and returns," Tuckner said.
Onward to $5T in invested assets
Despite falling short with net new assets in 2024, UBS did show progress toward its $5 trillion goal. Its invested assets total increased by 7% to $4.18 trillion by the end of the year.
The bulk of its net new assets ($13.7 billion) came in through its Americas unit, which has struggled to control costs. Tucker said the Americas division manages about half of the global wealth management business's assets and produces roughly the same proportion of its revenues.
The Americas unit ended 2024 with $2.1 trillion in invested assets, which was up nearly 12% year over year. Its assets in fee-generating accounts rose by nearly 14% to top $1 trillion.
That helped drive the Americas unit's revenue also up by 14% year over year to $2.9 billion in the fourth quarter. UBS saw the division's cost-to-income ratio fall to 92.4% from 96.7% and its profits rise by $129 million year over year to $214 million. UBS has said it wants that division's cost-to-income ratio reduced to around 85% by the end of 2026.
Reorganization of the U.S. wealth business
Besides revamping its pay policies for U.S. advisors, UBS
"In the Americas, we are making targeted investments to deepen relationships with our ultrahigh net worth clients, accelerate growth in the high net worth and core affluent segments and expand our loan and deposit offering," CEO Sergio Ermotti told analysts. "These growth initiatives will be supported by actions we have already taken to enhance our technology offering, simplify our organizational structure and improve execution."
Tuckner called the Americas unit "our foothold into the world's largest wealth pool." He told analysts the division's expenses have grown rapidly as recent bull markets have forced the firm to pay out higher performance-based compensation. UBS has also been spending heavily on technology for both clients and advisors.
UBS has also begun to move slightly away from its emphasis on serving the ultrawealthy. Tuckner said the firm will never lose sight of that client base but also wants to work more with a broader swath of investors.
UBS also wants to juice its revenues from working with ultra wealthy and family office clients by offering them banking and other services. It reckons its revenues from serving clients with $100 million or more in assets triple for each it can provide with three additional services, the presentation shows.
Because of fee discounts usually given to clients who entrust wealth managers with large amounts of money, Tuckner noted that the return on assets can be lower with the ultrawealthy than with so-called mass affluent clients.
"And so the profitability as you move down segments is higher," he said.
Tuckner said UBS
"In addition, the Wealth Advice Center becomes an effective pipeline for future [financial advisors] and a more cost-efficient way to scale our business," Tuckner said.
Results for all of UBS global wealth
All of UBS' global wealth units ended the fourth quarter with $6.1 billion in revenue, up 10% year over year. That was "largely driven by higher recurring net fee income, a decrease in negative other income and higher transaction-based income," according to the firm's earnings report.
Those higher revenues helped boost the firm's wealth management pre-tax profits by 80% to $1.1 billion in the fourth quarter, excluding expenses related to UBS'
