UBS Sees Recovery Signs in US Wealth Business as Inflows Return

(Bloomberg) — UBS Group AG’s wealth-management business in the Americas showed tentative signs of revival after a period of client fund outflows and departures by key staff.

The business led by Robert Karofsky saw client inflows of $5.3 billion for the first three months of the year after three consecutive quarters of outflows. UBS has changed compensation for its financial advisers in the region and shifted strategy.

Chief Financial Officer Todd Tuckner said they’re encouraged by the outcome. “It tells me the strategy is working,” he said in a call with analysts.

UBS has long been vocal about the need to improve performance in its US wealth management unit. The region ranks alongside Switzerland as the biggest generator of revenue but expenses are far higher. The cost-to-income ratio improved to 86.3% last quarter.

Tuckner said the bank’s pre-tax profit margin had improved for six consecutive quarters, driven by the ability to offer clients a broader range of services from the rest of the UBS machine.

Yet UBS has flagged there could be further net new asset headwinds through the first half of the year and expects tax related outflows this quarter.

Financial adviser attrition also continued last quarter, taking the number of advisers down to 5,722 at the end of March, but Tuckner said they had a “healthy recruiting pipeline.” The Swiss bank recently raised the payouts and benefits that they get in an attempt to retain and hire more staff in the region.

In March UBS received a green light for a full-blown US bank license in a boost to its ambitions in the region. Chairman Colm Kelleher has said UBS may eventually look to buy another US wealth management firm, once the Credit Suisse integration is complete.

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