From the October 2011 issue of Research Magazine • Subscribe!

September 29, 2011

UBS Cutting Staff, But Recruiting FAs

UBS said it planned to cut staff by 3,500, or more than 5 percent of its global workforce, as part of its overall plan to trim about $2.5 billion from its yearly expenses by the end of 2013 “to improve operating efficiency,” the company explained in late August. About 10 percent of the job eliminations, or 350 positions, will take place within the wealth-management operations in the Americas and will affect corporate staff, not advisors, UBS says.

“These plans include savings associated with headcount reductions of approximately 3,500, which will be achieved through redundancies as well as natural attrition, and further real estate rationalization,” according to a UBS press release.

UBS says that it will trim some $570 million in costs from its operations worldwide in the second half of 2011 with roughly $507 million related to personnel expenses and the remainder in real estate. The majority of the cuts affect investment banking, though about $170 million will be trimmed for the global wealth-management and Swiss banking operations and close to $30 million from Wealth Management Americas.

When it released its second-quarter earnings results in late July, UBS said it planned to “eliminate costs of 1.5 billion to 2 billion Swiss francs [$1.9 billion to $2.5 billion], while remaining committed to investing in growth areas” over the next two years. According to data compiled by Bloomberg, more than 100,000 jobs are set to be lost this year in the global banking sector.

UBS’ wealth-management operations in the United States and Latin America include some 6,860 financial advisors as of June 1, up from 6,760 advisors a year ago. The unit is led by Bob McCann, formerly of Merrill Lynch.

The staff headcount at the Americas unit — excluding financial advisors — totals 16,240 vs. 16,341 in June 2010. Thus, after eliminating 350, the total number of staff would be 15,890.

Costs for staff at the New York-based unit were nearly $1.2 billion in the second quarter, which advisors accounting from about $600 million of these expenses. Compensation commitments and advances for recruited advisors in the period were $410 million.

Worldwide, UBS has some 65,700 employees of whom roughly 19,670 are employed at its corporate headquarters. Its non-U.S. wealth-management operations include about 16,100 staff members and 4,200 financial advisors.

In mid-September, UBS hired Jonathan Mitchell and Nick Abdy from Wells Fargo Advisor to join its office in Tucson, Ariz., where they will report to branch manager Charlie Cajero. The pair has about $1.8 million in trailing-12-month fees and commissions and about $308 million in assets under management.

In the prior month, UBS announced that it added eight financial advisors, including three from Bank of America-Merrill Lynch. The Swiss-based wirehouse firm says the FAs have roughly $7 million in yearly production and $994 million in assets.

The eight advisors joining UBS will be located in Farmington Hills, Mich., Denver, New York, Bloomington, Ind., and Fort Worth, Texas. Three advisors coming to UBS from Merrill Lynch will join the Farmington Hills complex, where they will report to complex director John Bush. The advisors are Makram Talia, Robert Loupee and Michael Graziani, who have a combined production of $2.85 million and $450 million in assets under management.

UBS is the smallest of the four wirehouse firms, excluding bank advisors, with an FA force in the Americas of 6,862. Morgan Stanley has 17,638 FAs, Merrill Lynch has 16,241 and Wells Fargo includes 15,194. Annualized revenues (or fees and commissions) per advisor are now roughly $912,000 at Merrill, $867,000 at UBS, $776,000 at Morgan Stanley and $648,000 at Wells Fargo.

In terms of total assets under management, Morgan leads the charts with $1.7 trillion, followed by Merrill with $1.5 trillion, Wells with $1.4 trillion and UBS with nearly $775 billion. UBS has the highest AUM per advisor, though, at $113 million, followed by $98 million at Merrill, $97 million at Morgan Stanley and $74 million at Wells Fargo.

The cutbacks were announced before the revelation in mid-September that UBS had suffered a $2.3 billion loss from what the firm described as unauthorized trading. The loss, which raised the possibility that UBS may be unprofitable in the third quarter, generated speculation that further job cuts may be in the offing. However, such initial expectations were focused on the firm’s investment banking staff rather than its financial advisor workforce.

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