UBS SMAs’ Popularity Ranks as Earnings Bright Spot

By Miriam Rozen October 21, 2020

UBS' decision late last year to eliminate fees on certain separately managed accounts created a bright spot in its 2020 third quarter earnings, the bank’s financial results show.

The SMA fee-elimination initiative netted $8 billion in asset inflows for UBS Americas in the third quarter, the bank reports.

That trend countered the wirehouse’s $9.2 billion in outflows of net new money during the third quarter, which included tax-related outflows of $5.5 billion due to the Covid-19-related tax deadline extension to July, as reported.

The wirehouse has hauled in $35 billion in SMA inflows since the fourth quarter of 2019, when it announced plans to eliminate the fees, UBS chief financial officer Kirt Gardner told stock analysts yesterday during a conference call after the bank released its earnings results.

The SMA inflows are “well ahead of our plans,” Gardner said. The no-fee SMA strategy has “exceeded our expectations,” he added.

UBS announced the strategy in an internal memo dated Oct. 22, 2019, declaring it was eliminating SMA fees on products manufactured in-house and from some third-party providers. UBS expected the fee-elimination to simplify the pricing process and lower costs for end clients. For more premium services such as tax management and sustainable investing, the firm said it would continue to possibly charge an incremental fee.

The wirehouse opened the model to third-party asset managers, where it negotiates institutional pricing for their services and the advisory fee paid by end clients to UBS would cover that cost instead of the separate SMA fees.

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