UBS Wealth Management Americas more than doubled its pretax operating profit, despite the net loss of 136 financial advisors from a year earlier.
The wirehouse reached a record $505 million in pretax income after its thinned-out force of 6,274 advisors reeled in net new advisory assets of $13.5 billion, UBS said in disclosing its second-quarter
July 20, 2021 11:17 AM
- Annual revenue per advisor soared by 29% to $1.7 million. Within the significant influx in new advisory assets, the unit generated $8.3 billion in flows to the firm’s separately managed accounts under an expansion since
last year of the fund families offered to UBS clients without management fees. The unit’s total invested assets surged 26% year-over-year to $1.7 trillion. - The unit lent $5.3 billion in new loans and topped $83 billion in loans, compared to $1.3 billion in new lending out of $64 billion in total loans at the same time last year. Most of the new loans in the second quarter were asset-backed Lombard loans, in which clients pledge securities or insurance policies as collateral. The wirehouse didn’t disclose its advisory assets in the second quarter of 2020, but fee-generating assets went up 7% from the first quarter to $845 billion. Equity value accumulation of $38 billion drove much of the increase in assets under management.
- In keeping with a multiyear trend since the firm
changed its recruiting strategy in 2016 , the ranks of advisors slipped by 2% year-over-year in the second quarter. Recruitment loans to financial advisors in the Americas fell by 6% to $1.8 billion. Advisors going independent from wirehouses like UBS have pushed down the sector’s advisor headcounts in recent years. - UBS Wealth Management Americas’ profit climbed by 122% from the year-ago period on the strength of the advisory inflows, the new loans and advisor productivity. Higher revenue from advisory accounts and transactions drove up revenue by 30% versus the same time in 2020 to $2.6 billion, which more than offset $320 million in higher operating expenses from compensation paid to the firm’s advisors, among other areas.
- In a conference call with analysts after UBS reported its earnings, CEO Ralph Hamers identified net new advisory assets and loans as the “critical overall performance indicators” that the firm has made clear to its advisors,
according to a transcript by Seeking Alpha. “We're actually happy to see FA comp go up, because that means revenue’s going up,” Hamers said. “But what's most important, if you look at the U.S. business, our overall cost-to-income ratio came down almost six percentage points year-on-year. So what you're seeing is, yes, there's more compensable revenue, but we're generating leverage off of that. Also, very importantly, we're seeing higher levels of lending in net interest income, which actually pays very little off the grid. And so that has a much higher margin overall.”
