UBS to Expand Lineup of No-Fee SMAs

UBS plans to drop fees on more separately managed accounts for its wealth management clients and add third-party money managers in the Americas.

On Tuesday, two executives told the firm's roughly 6,600 advisors in the region that strategies tied to just one asset class will be available without SMA management fees on its ACCESS and Strategic Wealth Portfolio platforms starting Jan. 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," according to a memo sent Tuesday by Suni Harford, president of asset management, and Tom Naratil, president of UBS Americas.

In addition, UBS will open its asset management platform to outside fund vendors and expand 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," the executives explained.

"Our financial advisors will now be in an even better position to successfully compete for business, grow their practices and deliver for clients," they added in the memo.

Naratil told The Wall Street Journal that UBS is likely the first wealth firm to drop the charge clients typically pay asset managers for oversight of SMAs.

These fees are about 1% of assets today, with about one-third of the fees being paid to the asset manager and two-thirds going to the advisor, the Journal said. Overall, asset managers will still be paid by financial advisors going forward.

"This makes it clear: The premium is still on financial advisors," Naratil said in an interview with the Journal. "Asset management really provides the tools."

Also, wealth clients using premium services, tied to some sustainable investing and tax management, will continue to pay asset managers a fee next year, the executive memo said.

The current regulatory climate seems to have played a role in these moves. "We're simplifying SMA client pricing, expanding choice and transparency and aligning our offering with the SEC's Regulation Best Interest (Reg BI)," according to Harford and Naratil. "At the same time, we're … giving advisors increased flexibility to determine the pricing that's appropriate for each of their clients."

Q3 Results

In the latest quarter, UBS said it had 6,627 advisors in the Americas, which is down 283 from a year ago and 62 from the prior quarter. Globally, it had 10,207 advisors as of Sept. 30, down 677 from a year ago and 460 from the prior quarter.

Advisors in the Americas had average yearly fees and commissions of $1.4 million and client assets of $201 million, putting UBS reps in the region ahead of their counterparts at Merrill Lynch and Morgan Stanley.

The worldwide wealth business has some $2.5 trillion in client assets and total operating income of $4.14 billion, up 1% from a year ago. Net new asset flows in the Americas in Q3 were reported as zero, but about $16 billion globally.

The Americas business had pretax income of $332 million, up 3% from last year; its operating income also rose 3% to $2.3 billion.

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