LDN - Business

UBS's U.S. wealth business sees profits rise on client activity, lower recruiting

[April 29, 2017] By Elizabeth Dilts

NEW YORK (Reuters) - Swiss bank UBS AG reported Friday that profits for its Wealth Management Americas business rose 8 percent over last year as higher operating income, client activity and cuts to recruiting offset higher employee pay doled out to top brokers.

UBS Wealth Management Americas Chief Executive Tom Naratil's commitment to spend less on recruiting showed as the bank reported recruitment loans to financial advisers fell 9 percent to $2.9 billion, from $3.25 billion last year.

This includes new recruitment loans and existing ones for advisers that continue to be paid out over a period of several years.

UBS AG Chief Financial Officer Kirt Gardner said on a call with analysts that the U.S. wealth business had a higher concentration of recruitment loans from the years following the 2008 financial crisis when "we had a high degree of recruitment."

"We've refocused our (attention to) retention rather than net recruiting...and you'll continue to see those loans come down," a benefit that will show up in lower expenses by the fourth quarter this year, Gardner said.

Compensation for new recruits fell 1 percent to $197 million this quarter from last year. The firm reported it had 6,969 advisers this quarter, down 176 from the first quarter last year and 56 fewer than in the fourth quarter last year.

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Switzerland's national flag flies under the logo of Swiss bank UBS in Zurich, Switzerland April 24, 2017. REUTERS/Arnd Wiegmann

Overall, financial adviser compensation rose 11 percent to $791 million this quarter from $714 million last year.

The results were in line with projections UBS Wealth Management Americas Chief Executive Tom Naratil made last summer when he announced they would back away from the aggressive and costly recruiting practices that had become an industry norm.

UBS's North American wealth business is now aiming to have between 6,500 and 7,000 advisers, and to entice their top advisers to stay with the firm by paying them more.

However, slowing recruiting was a drag on the quarter's net new money inflows. The firm reported $1.9 billion in net new money this quarter, down dramatically from $13.6 billion in net new money in the first quarter of 2016.

During the first quarter last year, inflows were predominantly driven by money brought in by newly recruited advisers, according to the bank's quarterly report.

(Editing by Bernadette Baum)

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