UBS Lost 109 U.S. Brokers to Competitors in Past Six Months–Report
UBS Wealth Management USA lost 109 brokers who had been managing $13.9 billion to the competition over the past 180 days, according to an internal report viewed by AdvisorHub.
The attrition report categorizes brokers by name, days since departure, reason for leaving, total assets under management, number of households and assets retained by UBS as of the chart date. It excludes advisors who left because of retirement or termination (ten were terminated in the past six months, according to another list), and does not account for new brokers hired.
But outside headhunters said the leave rate appeared high, with one estimating that the firm has been losing control of almost $20 million in revenue a month based on assets that advisors typically bring with them to new firms within months of departure.
“It’s a lot,” said Frank LaRosa, a New Jersey-based recruiter and a former Morgan Stanley complex manager. “Nobody wants to see that kind of attrition.”
The departures strike some insiders and recruiters as particularly challenging for the firm’s sales managers. They have been asked to fill empty seats and improve retention, a metric that one insider said was recently added as a performance factor affecting 10% of managers’ bonuses, at a time when hiring budgets have been cut.
The U.S. arm of the Swiss banking giant also in March imposed a hiring freeze on support staff for its advisors, according to multiple sources at the firm who spoke on condition of anonymity. UBS Wealth Management USA also closed a practice-management coaching unit last month and pared a training program for young associates who handle financial planning chores for veteran brokers.
UBS Wealth Management USA currently employs 6,275 brokers, according to insiders who see their internal rankings. The total is less than half the count at wirehouse competitors Merrill Lynch Wealth Management, Morgan Stanley Wealth Management and Wells Fargo Advisors.
In the last 15 months, UBS logged a net decline of 331 advisors, according to several brokers who based the estimate on their internal rankings. Year to date, the net decline is 45 advisors, they said.
Recent departures included high-ranking advisors Justin Ryan and Thomas Epperson, who managed $819 million and $676 million respectively, and left in December for Rockefeller Capital Management in Atlanta. Last week Boston broker Brian Mulvey, who had $4 million in production and $672 million in assets, left to set up an independent advisory firm.
UBS Americas President Tom Naratil also has not significantly changed his goal stated two years ago of reducing hiring by 40%, insiders said, and but may not be meeting even that reduced bogey. But the pullback conforms to companywide constraints. UBS Group Chief Executive Sergio Ermotti said in March that the Swiss banking giant plans to add another $300 million to a previously announced cost-cutting plan for 2019 following a “challenging” first quarter.
UBS AG, which reports its first-quarter earnings on Thursday, reported that at the end of 2018 it employed 6,850 American advisors, including those in Latin America, Canada and the U.S. The company, which melded its U.S. results into its broader global wealth management reporting early year, does not break out its U.S. totals to the public.
The U.S. wealth unit, to be sure, has been making selective hires. It recruited large teams in Dallas from U.S. Trust and Goldman Sachs in March, and also picked up a $3.5 million Morgan Stanley team in Boston in February.
But in October, Naratil told investors that the Swiss bank was dropping its target of maintaining between 6,500 and 7,000 brokers in the U.S. The broader Americas business was the bank’s most profitable wealth region in 2018, despite a net decline of $4.1 billion in customer assets. Its strategy of only selectively recruiting has reduced expenses, and the $3 billion of broker loans oppressing UBS’s balance sheet at the end of 2016 had been whittled to $2.3 billion at the end of last year.
UBS AG officials have also said that U.S. brokers were on average producing an industry-leading $1.3 million of fees and commissions based on fourth-quarter 2018 annualized results.
Overhanging the broker attrition is a broad question that analysts and shareholders have periodically raised: Will UBS AG follow the lead of its archrival Credit Suisse and simply exit the U.S. wealth market? UBS became a major force in U.S. brokerage with its 2000 purchase of PaineWebber.
Several analysts and former executives have said that the parent company is unlikely to shed the unit while it retains net operating loss carryforwards from the financial crisis that are beneficial for tax purposes. However, those are expected to run out within a few years.
Spokespeople at UBS Wealth Management USA did not return requests for comment on the attrition reports.
—Jed Horowitz contributed to this story.