UBS Financial’s decision to pull back on recruiting has hurt asset flows, with the U.S. wealth management unit seeing a net drain of $7.2 billion in assets last year compared with a gain of $15.4 billion in 2016.
Financial advisor numbers ended the year at 6,822, down 3 percent from 7,025 at the end of 2016, the company said in an earnings release Monday. Recruitment loans were off 14 percent from a year ago, to $2.6 billion.
“Strong [asset] inflows from same-store advisors were more than offset by lower net recruiting, consistent with changes in the operating model, resulting in net new money outflows” for the year, UBS said.
That new operating model revolves around the retention of existing advisors, instead of recruiting new ones.
UBS pulled back on is recruiting deals midway through 2016, after new head of wealth management Tom Naratil took over for Robert McCann in late 2015. Then last November, the firm pulled out of the recruiting protocol effective Dec. 1, 2017.
Outflows did slow in the fourth quarter of last year, to $500 million, an improvement over the $1.3 billion lost in the last quarter of 2016.
Despite the improvement, effective Feb. 1, 2018, UBS corporate is combining its U.S. retail business with its global operations to create a combined entity called Global Wealth Management.
Naratil and Martin Blessing, currently president of UBS’s non-U.S. wealth management business, will become co-presidents of the new Global Wealth Management unit.
UBS said the combined division will leverage its purchasing power and realize greater synergies. “Regional variations in the client service model will be maintained, while middle- and back-office functions will be more closely aligned and integrated,” the bank said.
UBS CEO Sergio Ermotti said the merger will result in streamlining. The combined wealth management unit is targeting net-new money growth of 2 to 4 percent per year.