UBS Wealth Management Americas saw its net new money and advisor productivity rise in the third quarter, according to its parent company’s earnings release.

However, UBS AG reported that its profit dropped 39% percent in the third quarter from the same period a year ago following the rogue-trading scandal that cost the Swiss bank $2.3 billion.

The results of the U.S. wealth management unit marked a turnaround that CEO Bob McCann was brought in to orchestrate. In a memo obtained by On Wall Street, McCann told the staff: “While it was clearly a challenging quarter for the markets and our company, the strong performance of WMA is something of which we should all take great pride—particularly given how far we’ve come in just two short years.”

In the memo, McCann said: “As of the third quarter, our advisors are the most productive in the Americas, with the highest revenue per FA and invested assets per FA.  Additionally, our FA attrition is the lowest it’s been since 2005 at 3.1%, our [net new money] figures are strong and improving and we are solidly profitable. But we are not claiming victory. We have more work to do…”

The firm reported that net new money in UBS Wealth Management Americas was up 55% in the third quarter to $4.8 billion compared to $3.1 billion in the second quarter. Year-to-date, net new money was $11.6 billion versus outflows of $9 billion in the first nine months of last year. Net new money including dividends and interest this quarter was up 20% to $9.5 billion from $7.9 billion in the second quarter.

The unit reported that pre-tax profit was up slightly from the second quarter, rising to $165 million and compared to a loss of $47 million in the third quarter of 2010. Pre-tax profit year-to-date was $444 million versus a loss of $93 million in the first nine month of 2010.

And revenue or operating income was $1.54 billion in the third quarter, a 2% rise from $1.51 billion in the second quarter and increase of 16% from $1.325 billion in the third quarter of last year.

In fact, year-to-date revenue for the unit rose 13% to $4.46 billion from $3.948 billion for the first nine months last year.

However, it was revenue per financial advisor that UBS was particularly proud of since it rose by 1% to $895,000 per FA in the third quarter from $884,000 in the second. It was a 14% improvement from the same quarter a year ago with it was $782,000 per advisor. UBS says those numbers puts it ahead of its rivals such as Bank of America Merrill Lynch, Morgan Stanley Smith Barney and Wells Fargo.

UBS also said it was ahead of its peers when it came to invested assets per advisor with $103 million per FA in the third quarter.

Finally advisor headcount was up 51 from the second quarter reaching a total of 6,913 and it is up 117 year-to-date.

McCann, in his memo, stated: “While it was clearly a challenging quarter for the markets and our company, the strong performance of WMA is something of which we should all take great pride—particularly given how far we’ve come in just two short years. . . We knew it wasn’t going to be easy. In addition to reputational headwinds, our FA attrition was among the highest in the industry, NNM was negative, Advisor productivity lagged our competitors and we weren’t profitable.  Flash forward two years, and what you have is one of the more impressive turnarounds I’ve witnessed in all my 30 years in financial services.”

The earnings announcement came the same day that FINRA announced that it was fining UBS Securities $12 million for Regulation SHO violations and supervisory failures. UBS settled the claims without admitting or denying liability.

The regulator found that UBS “placed millions of short sale orders to the market without locates, including in securities that were known to be hard to borrow.”

The firm also allegedly “mismarked millions of sales orders in its trading systems,” FINRA said. Many of those were short sales that were mismarked as long, which resulted in violation of Reg SHO’s locate requirement.

Finally, FINRA concluded that the firm had “significant deficiencies related to its aggregation units that many have contributed to additional significant order-marking and locate violations.” The agency said in its release “As a result of its supervisory failures, many of UBS' violations were not detected or corrected until after FINRA's investigation caused UBS to conduct a substantive review of its systems and monitoring procedures for Reg SHO compliance. FINRA found that UBS' supervisory framework over its equities trading business was not reasonably designed to achieve compliance with the requirements of Reg SHO and other securities laws, rules and regulations until at least 2009.”






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