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UBS Americas WM Sees Effects of Lower Recruiting

October 30, 2017

UBS Wealth Management Americas advisors remain the most productive in the industry, with revenues per advisor reaching a record $1.236 million, according to a press release from the company. And the firm’s recruitment loans to advisors fell a further 3% to $2.7 billion, which is 16% lower year-on-year, according to the press release.

Yet UBS recorded a net outflow of $2.3 billion in client funds in the last quarter and its adjusted pre-tax profits were slightly lower than last year, the Financial Times reports.

The unit had adjusted pre-tax profits of $351 million in the quarter ending September 30, compared to $367 million for the same period last year, according to the Financial Times. The company says the unit had higher costs because of advisor compensation and investments for growth, according to the FT. The client fund outflows, meanwhile, were due to lower recruiting of advisors, according to the firm. UBS said last summer that it would cut advisor recruiting by 40%.

Nonetheless the brokerage had a 7% rise year-on-year in total operating income, to $2.13 billion, according to a press release from the firm. UBS attributes the growth to record net interest income and higher recurring net fee income.

“The market is expecting a lot from wealth management Americas because of the good economy and the rate increases,” said Mirabaud Securities Limited analyst Andreas Brun, who rates UBS’s stock a “buy,” according to Reuters.

UBS’s private banking business overall, meanwhile, beat last year’s results, the FT writes. However, the company’s finance chief told analysts Friday that the company expects an estimated $8 billion in outflows in the fourth quarter as wealthy clients take advantage of tax amnesty programs, Reuters writes.

On Friday, meanwhile, the SEC fined UBS $3.5 million for alleged overcharges on the sales of mutual funds, according to Reuters. From January 2010 to June 2015, the company allegedly failed to offer lower-priced shares available to retirement plans and charitable organizations and didn’t disclose that it would earn more with the shares it did offer them, the newswire writes.

UBS also failed to give the sales charge waivers that such clients were entitled to, according to Reuters. The company has already reimbursed 15,250 accounts a total of $18.5 million and moved eligible clients into the lower-cost shares, the newswire writes. But UBS still has to try to find 970 customers who haven’t cashed their payments or have moved, according to Reuters. A spokesman for the bank, which neither admitted nor denied wrongdoing, tells the newswire that UBS is pleased with the settlement.


Separately, a Finra arbitration panel has ruled that UBS must pay $3 million in compensatory damages on the basis of defamation to a broker it had fired in 2014, InvestmentNews writes. UBS had said that James Springer Jr. was discharged after admitting to filing his personal expenses as business expenses on a corporate credit card in order to get back funds he’d used from his pre-tax earnings for business expenses, according to his BrokerCheck profile cited by the publication. In the dismissal report, UBS acknowledged that Springer’s actions didn’t harm any clients, but said that he had given unsatisfactory answers to queries about “multiple client events and the firm’s non-cash compensation policy,” according to BrokerCheck. The Finra panel denied Springer’s request for attorney’s fees and punitive damages as well as his request that the dismissal reason be expunged from his records, InvestmentNews writes. Springer, who sought $96.5 million in damages, according to the publication, has been with Stifel Financial since 2014. He has 27 disclosures on his record, including multiple customer disputes involving his UBS clients, most of which have been settled, according to BrokerCheck.

By Alex Padalka
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  • To read the Financial Times article cited in this story, click here.
  • To read the Reuters article cited in this story, click here.