UBS Is Making Big Changes To SMAs And The Manhattan Trading Floor

By Amit Chowdhry ● October 24, 2019
  • UBS announced it is dropping the fees on more SMAs for wealth management clients and the company is making some changes to its trading floor

UBS is planning to drop the fees on more separately managed accounts (SMAs) for wealth management clients. And the company is also adding third-party money managers in the Americas, according to ThinkAdvisor.

Two executives at the company told its advisors in the region that strategies that tied to just one asset class will be available without SMA management fees on its ACCESS and Strategic Wealth Portfolio platforms — which is going into effect on January 13. 

“This approach aligns with the current availability of UBS AM SMAs based on CIO Equity Models offered with no additional SMA management fee, which launched this past July,” said a memo by UBS president of asset management Suni Harford and president of UBS Americas Tom Naratil.

Plus UBS is opening its asset management platform to outside fund vendors. And the company is expanding the no-fee program by midyear.

“By the middle of next year, select UBS AM multi-asset class strategies, as well as select strategies from any participating third-party managers, will also be offered with no SMA management fee,” explained the executives. “Our financial advisors will now be in an even better position to successfully compete for business, grow their practices and deliver for clients.”

In an interview with The Wall Street Journal, Naratil said that UBS is likely the first wealth firm to drop the cost that clients typically pay asset managers for oversight of SMAs. These fees are generally about 1% of assets today, of which one-third is paid to the asset manager and two-thirds are paid to the advisor. Asset managers will still be paid by financial advisors going forward.

Wealth clients that are using premium services associated with sustainable investing and tax management are going to continue paying asset managers a fee next year.

UBS is also making some big changes to its trading floors in Manhattan. As part of an initiative called Project Lexington, UBS is moving 125 sales members and traders from the Weehawken, New Jersey office to its trading floor at the 1285 Avenue of the Americas Manhattan headquarters.

Plus UBS is planning to hire 65 new employees by the end of the year in order to build a plan to merge the wealth management trading operations into the investment bank. Naratil and investment bank co-head Rob Karofsky told Business Insider that this decision was made in order to generate more business for the bank by sharing more resources for clients.

And UBS recently announced its third-quarter earnings. In the earnings report, UBS revealed that its Advisors in the Americas had average annual fees and commissions of $1.4 million and client assets of $201 million.

UBS’ key wealth management unit added $15.7 billion in new money for the three months through September. And the worldwide wealth business has about $2.5 trillion in client assets. The company also saw a total operating income of $4.14 billion, up 1% from a year ago.

Even though UBS’ profit beat estimates, the company said it will book about a $100 million charge in the Q4 to restructure the securities unit along. And the company also warned that lower interest rates will have a negative impact on income.

“Market conditions in the last few quarters have been very challenging,” said UBS Group Chief Executive Officer Sergio P. Ermotti in an interview with Bloomberg TV. The new money in the last quarter was largely credit to affluent Asian clients.