The attrition rate for advisors who generate $1 million or more in annual production at UBS Wealth Management Americas fell to 4.7 per cent in the third quarter this year compared to 20.8 per cent last year, Robert McCann, chief executive officer of UBS Wealth Management Americas, said at UBS' annual investor day in London yesterday.

McCann, who has been on the job for just over a year, said that the unit is reversing the negative net new money trend. “In the fourth quarter of 2009 our net new money outflows including interest and dividends were $7 billion.” In the third quarter of this year net new money inflows were $4.6 billion.

The turnaround is related to a change in recruiting strategy, "We're also improving the quality of net new money from recruiting," McCann said. "In 2008 and early 2009 we were recruiting very large numbers of financial advisors with very large compensation packages. It was both inefficient and extremely costly." 

Today UBS is recruiting selectively about 150 advisors annually with strong client relationships in targeted markets.

"The wealth management business in the US is shaped like a barbell. On one side you have three big firms, on the other side you have small boutiques and private banks, “ McCann said. “At UBS we have chosen a strategy that puts us in the middle because we believe that this positioning is where we can win." The big three he refers to are Wells Fargo Advisors, Morgan Stanley Smith barney and Bank of America Merrill lynch.

UBS Wealth Management Americas has 6,783 advisors in 360 branches down from 7,286 in the third quarter of 2009. McCann said he sees the size of the financial advisor force as big enough to be relevant but nimble enough to adapt to the ever-changing market. 

Because of the large amount of money spent on recruiting UBS is focusing on making its new recruits more productive through training and mentoring. "Among the advisors we recruited between the third quarter of 2008 and the first quarter of 2009, productivity is up nearly 70% on an annualized basis year-over-year," he said.

Overall average annual revenue per advisor is up to $782,000, from $683,000 compared to a year ago. 

Cost Cutting

In the last year the wealth management unit cut non-advisor headcount in the US by 8 per cent.  McCann said unnecessary layers of management and personnel were cut reducing staff by 900.

He added that refocusing its recruiting strategy by being more focused and hiring less advisors –the plan was to grow advisor head count to 10,000 in 2009 – the firm was also able to save costs on real estate. It also moved non-client facing personnel out of Manhattan.

The lease at UBS Wealth Management Americas headquarters in Purchase, NY expires in 2013 and McCann said the firm is considering less expensive locations. "In a soft real estate market, this should further drive cost savings," he said.

Cost cutting overall including reducing headcount has resulted in SFr100 million ($100.4 million) in savings annually.

The unit has also turned to outsourcing, including back office functions, to cut costs.