NEW YORK (Reuters) – UBS Wealth Americas earned record pretax profit of $293 million in the first quarter, but its brokers fell short of their Swiss parent’s target of adding new money from clients at an annualized growth rate of 2 to 4 percent.
Brokers employed for more than one year in the United States and Canada collected $4.8 billion from clients in the first three months of 2015, a growth rate of 1.9 percent, UBS AG said on Tuesday.
Large U.S. brokerage firms are incentivizing advisers to convert wealthy clients from trade-based commission accounts to fee accounts based on their total assets, but resistance to investing everything with one company and competition make it difficult for veteran brokers to progressively increase client assets.
Last month Morgan Stanley, the world’s biggest brokerage by number of advisers, said new money its clients put into fee-based accounts fell 36 percent in the first quarter from 12 months earlier.
UBS’s revenue in its American wealth division fell slightly from the fourth quarter of 2014 when there were three more calendar days in which clients generated commission trades, a UBS spokesman wrote in an email. Pretax profit adjusted for one-time costs nevertheless rose 3 percent from a year ago, and 26 percent from last year’s fourth quarter, as the New York-based brokerage axed expenses.
Foreign banks have long pressured their U.S. brokerage subsidiaries to rein in compensation that is much higher than in Europe. In the first quarter, UBS Wealth Americas paid lower compensation to its advisers than in the previous three quarters. The brokers also sold more loans and bank products that pay them less than traditional investment sales, the bank told investors on Tuesday.
Lower litigation and regulatory expenses company-wide also helped trim costs.
Since joining UBS to run the U.S. wealth business in 2009, Robert McCann has cut costs from more than 90 percent of revenue to 85.9 percent in the just-ended quarter. That just misses the target expense ratio range of 75-85 percent set by the parent company.
The U.S. wealth business, formed when UBS bought broker-dealer PaineWebber in 2000, ended the first quarter with 6,982 brokers, about 43 percent of its workforce. It lost a net 15 brokers during the quarter, and 131 in the past year. The spokesman said those who left were generally not top producers. The unit also trimmed its executive ranks last quarter.
Switzerland’s biggest bank as a whole reported its best quarter in nearly five years on Tuesday.
(Reporting By Jed Horowitz; Additional reporting by Elizabeth Dilts; Editing by Ted Botha)