UBS's wealth goal: $5T under management in 5 years

Like its wealth management rival Morgan Stanley, UBS Group is setting itself a hard target for the amount of assets it wants to be overseeing in coming years.

The Zurich-based bank said during a fourth-quarter earnings call on Tuesday that it plans to have $5 trillion in invested assets in the next five years, up from $3.85 trillion now. To reach that goal, it plans to bring in roughly $100 billion in net new assets a year through 2025 and then increase the pace to $200 billion annually through 2028.

CEO Sergio Ermotti said during the call that it's all part of his ambition to make UBS "the world's leading global wealth manager." UBS is already the top management firm in Europe and many other parts of the world and is seeking to gain ground in the U.S.

"We are the only truly global wealth manager with nearly $4 trillion in invested assets across a client franchise that would be nearly impossible to replicate," Ermotti said.

UBS's ambition to eventually have $5 trillion in assets under its belt invites comparison with a similar benchmark that Morgan Stanley has set itself. Before stepping down this year, former Morgan Stanley CEO James Gorman had set his firm a goal of having $10 trillion under management by adding roughly $1 trillion every three years. In its latest earnings call — in which new CEO Ted Pick recommitted to the $10 trillion goal — Morgan Stanley reported having roughly $6.6 trillion under management by the end of 2023.

UBS, for its part, is already surpassing its goal of bringing in more than $100 billion in net new assets annually. Its asset inflows for 2023 came to $131.7 billion, up nearly 48% year over year from $89.2 billion.

Ermotti said UBS has begun to recover from the departure of some former Credit Suisse clients following its acquisition of its onetime Swiss banking rival for $3.2 billion last March. Discussing the firm's third-quarter earnings in November, Ermotti reported a loss of 500 client advisors and roughly $20 billion in assets since the purchase.

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Ermotti said Tuesday that UBS is stemming those losses in part by transferring high net worth clients out of the former Credit Suisse into its Global Wealth Management unit.

"These clients represent an estimated $60 billion in invested assets and $550 million in annual revenues," he said.

For more on UBS's fourth-quarter and annual results, scroll down. To read about its third quarter, click here. For its second-quarter results, look here.

Advisor headcount

UBS reported a slight decline in its advisor headcount in the U.S., Canada and Latin America in 2023. Its tally for advisors in its Americas region, the bulk of whom work in the U.S., came in at 6,117. That was down just barely from 6,245 at the end of 2022.

For all of its regions — including much of Europe, Africa, the Middle East and Asia-Pacific countries — it had a headcount of 10,027. That figure, buoyed by holdovers from Credit Suisse, was up nearly 9% year over year from 9,215.

Advisor pay

UBS reported spending nearly $1.2 billion on compensation to advisors in the fourth quarter, a figure up 2% year over year. UBS's pay figures take into account cash and deferred compensation, as well as recruiting deals. The firm reported having roughly $1.75 billion in outstanding recruitment loans at the end of the year.

For all of 2023, UBS spent roughly $4.5 billion on compensation for its advisors in the Americas. That figure was essentially unchanged year over year.

Financials

UBS's Americas wealth unit reported $102 million in profit on nearly $2.6 billion in revenue. The profit figure was down 72% year over year from $375 million. 

The results were dragged down in part by a $60 million charge from the Federal Deposit Insurance Corp. The FDIC, which provides a backstop to the U.S. banking system, has been hitting firms with higher special assessments following the collapse of First Republic Bank, Silicon Valley Bank and Signature Bank last year.

The firm acknowledged a need to increase its profit margins in its U.S. wealth management business. UBS's margin figure now hovers around 5%, well below its rivals in the same market. Ermotti said one strategy is to provide international customers to American advisors and products.

"We expect … margins in the U.S. to remain in the low double digits in the near term, but we are confident that the actions we take will help produce mid-teens profit margins by the end of 2026," he said. "This will put us in a position to explore opportunities to further narrow the gap to our peers."

All told, UBS's Global Wealth Management unit reported a $381 million profit on $5.4 billion in revenue for the fourth quarter. The profit figure, dragged down in part by temporary costs related to the Credit Suisse deal, showed a 64% decline year over year.

Assets

UBS's $131.7 billion in net new assets in 2023 were buoyed by $21.8 billion in inflows in the fourth quarter alone, a figure that now includes dividends and interest. That quarterly figure was down slightly from $24.6 billion year over year. 

The firm's $3.8 trillion in invested assets at the end of 2023 was up 37% year over year from $2.8 trillion. Besides inflows, the results were driven up by strong market returns and favorable currency exchanges.

Remark

In an interview with Bloomberg on Tuesday, Ermotti emphasized his perception that UBS can play a distinctive role in opening U.S. wealth management markets to people living all over the world.

"A lot of our global clients want to be also booked in the U.S., and this is the real opportunity," he said. "So we believe that by doing that we will be able to narrow the gap with our competitors and setting the base for the next phase of growth."