UBS Wealth Management continued to bleed assets from its emerging markets client base last year due to tax amnesties, even as the overall business recorded a 90% increase in net year-on-year inflows.
The bank saw outflows of 12 billion Swiss francs ($12.6 billion) from its cross-border business in 2017, driven by withdrawals from its emerging markets clients booked through Switzerland, according to the UBS annual report released March 9.
UBS Wealth Management encompasses all wealth operations booked outside North America.
In 2016, outflows from that segment reached 14 billion francs ($14.7 billion) and in 2015, 8 billion francs ($8.4 billion).
Inflows from Europe and emerging regions such as Asia Pacific offset the overall withdrawals, leading the business to garner 51.1 billion francs ($53.7 billion) in new money.
That’s up from 26.8 billion francs ($28.2 billion) in 2016 and 22.8 billion francs ($23.9 billion) in 2015.
Citywire Americas understands the better part of the cross-border outflows from emerging markets in 2017 occurred in Latin America, most likely because of tax amnesties.
Transparency programs in Argentina, Peru, Colombia and Venezuela in the past three years have hit Swiss private banks, including EFG International and Credit Suisse. Argentina’s scheme alone led taxpayers to declare roughly $117 billion in assets held offshore and encouraged some investors to repatriate part of their assets.
Further, by the end of 2018, Swiss banks will be brought in line with international standards in taxation, reversing a 1934 law that forbade banks from sharing client information.
‘We have experienced cross-border outflows over a number of years as a result of heightened focus by fiscal authorities on cross-border investment and fiscal amnesty programs, in anticipation of the implementation in Switzerland of the global automatic exchange of tax information, and as a result of the measures we have implemented in response to these changes,’ UBS said in its annual report.
‘There is no assurance that we will be successful in our efforts to offset the adverse effect of these or similar trends and developments,’ the firm added.
Still, UBS's international wealth unit managed to post a pre-tax profit of 2.3 billion francs ($2.4 billion) in 2017, up 18% from the previous year.
UBS Wealth Management Americas, which includes US domestic and international business booked in the US, had net outflows of $7.2 billion in 2017 due to advisor exits, according to the report.
In the past two years, UBS Wealth Management Americas has slowed down recruitment efforts to focus on improving efficiency and the performance of its top advisors.
Last year, the Wealth Management Americas advisor roster decreased by 203 from 6,822 as staff left and weren’t replaced, according to the report. The unit posted pre-tax profits of $1.2 billion, a 10% increase from 2016.
The split between UBS Wealth Management and UBS Wealth Management Americas will soon become less relevant following UBS’s announcement in January that it would merge the units into one division, UBS Global Wealth Management.
The group appointed Martin Blessing, president of UBS Wealth Management, and Tom Naratil, president of UBS Wealth Management Americas, as co-presidents of the new division. In addition, UBS named Sylvia Coutinho as head of Latin American wealth management.