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UBS Taps Top FAs in Texas, Shores Up U.S. Wealth Management

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While fierce speculation continues about the future of UBS’ U.S. wealth-management operations, the Swiss-based firm added 274 advisors in the fourth quarter of 2008 and close to $4 billion in net new money. Still, it ended the year down 37 advisors.

UBS scored big in the Lone Star State in the last few months of ’08 — picking up stellar teams from Morgan Stanley in Houston and Goldman Sachs in Dallas — as it moved to attract advisors nationwide. One industry expert gives credit to recruiting branch managers like John McCauley, a UBS and Texas veteran now based in Houston.

“It is a major coup for the recruiting firms, as is the case for UBS, to attract a Goldman Sachs team,” says Rick Peterson of Rick Peterson & Associates in Houston, a recruiting firm. “In this case, John McCauley, who runs UBS recruiting and the ultra-high-net-worth practice in Texas out of Houston, can be credited with now opening an ultra-high-net-worth Dallas office for UBS.”

“The Goldman Sachs brokers know how to be fabulous,” Peterson explains, “and these advisors are no exception. They have a huge business. And it’s very rare you see Goldman Sachs brokers leave and go to a competitor.

The other team joining UBS from Morgan Stanley is also “a fabulous group of brokers, and the largest producing [sales] team in Houston — period,” Peterson adds. “Once again, John McCauley did a tremendous job of recruiting. The asset base of the team is exceptionally large and is remaining in place.”

UBS announced record full-year losses of about $18 billion and further job cuts at its securities division on February 10. However, UBS executives also are saying that the organization “had an encouraging start to the year, and net new money was positive in January in both our wealth management and asset management businesses.” The bank is creating two new business divisions: wealth management and Swiss banking, and wealth management Americas, led by Marten Hoekstra.

“I think the announcement of separating the Americas business is a precursor to selling it,” says Chip Roame, head of Tiburon Strategic Advisors, a Northern California-based consultancy. “UBS is likely to either sell the business outright or sell it off to a larger player, taking back a minority stake, akin to how Prudential exited its Pru Securities business with Wachovia Securities.”

Recently, UBS revealed that it had held talks late last year with Morgan Stanley and other firms, over the possible sale of its U.S. brokerage unit. These talks came about eight years after UBS acquired the brokerage operations in a nearly $12 billion purchase of the business from PaineWebber. Morgan Stanley agreed to pay nearly $3 billion for a majority stake in a joint venture with Smith Barney on January 13.

“UBS would like to get economies of scale that Morgan Stanley [now teamed up with Smith Barney] and Merrill Lynch [merged with Bank of America] have accomplished with their deals,” Peterson explains. “The company could get this by working with JPMorgan or on their own. But, UBS is a Swiss entity, so I would stress that I can’t possibly presume to second guess what it might do.”

As of the fourth quarter 2008, UBS reported that it has about 8,182 financial advisors in the United States.

While sources at the bank have said UBS is not now in talks with buyers, some Wall Street observers dispute this. “The rumors about UBS are everywhere, which can cause a lot of concern and potentially slow down their recruiting pipeline,” said one source.

But, rumors aside, no one is debating the brokerage unit’s recent ability to attract big producers.

“UBS has been very successful as a wirehouse recruiter, especially in the past few months — when it’s had tremendous success at recruiting high-end advisor teams,” shares Mark Elzweig, president of Mark Elzweig Company, executive search consultants.

UBS grabbed a team in Dallas from Goldman Sachs Group Inc. with about $4 billion under management, and a group of the same number from Morgan Stanley in Houston with $2 billion in assets.

How has the Swiss-based firm done it, given its recent write-downs and its role in facilitating offshore banking activities?

“Some advisors will join another wirehouse despite the fact that it has issues,” explains Elzweig.

“They feel that all the wirehouses have issues right now, so they can now transfer their business and capture a nice signing bonus.”

UBS’ recent recruiting efforts have reportedly entailed signing bonuses of as much as 260 percent of trailing-12-month revenues, though some news sources say that the packages were actually closer to 200 percent to 220 percent. And the company itself insists that bonuses range from 160 percent to 200 percent, the “market rate” or below.

“A financial inducement is always an important part of the package,” says Peterson. “But no amount of money can get an advisor to go to a broker-dealer that might in some way be ‘below’ that advisor’s or the clients’ expectations.”

Though all firms tend to “sharpen their pencils when they [work out] enhanced recruiting packages,” the recruiter explains, “the real winners are the managers themselves. They say and do the right things and can then help the [recruited] advisors maintain and grow their businesses.”

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