UBS Wealth Management Americas saw further net client asset outflows in the first quarter, but the pace slowed to $6.53 billion from the roughly $10.98 billion of client assets withdrawn in the fourth quarter. Improving market conditions softened the blow as total client assets hit $721.6 billion in the brokerage unit of the Swiss banking giant, a 4 percent increase from the fourth quarter.

Pre-tax profits dipped to $14.1 million from $171.5 million in the fourth quarter. Still, that’s substantially better than 12 months ago when the unit reported a loss of $30.5 million. The unit had revenue of $1.28 billion – a drop of 2 percent from the fourth quarter and of 3 percent versus a year ago. UBS said the latest steep quarterly losses were the result of deferred FA compensation awards and a new compensation loyalty program, dubbed Growth Plus. There were also restructuring charges of nearly $19 million as the unit trimmed layers of management, reduced headcount, and scaled back some operations as part of a turnaround plan under CEO Bob McCann.

“People are making a big deal about the outflow of funds because these haven’t turned around yet,” said industry analyst Dick Bove of Rochdale Securities. “But the outflow of funds aren’t at the same level as previously, so it would appear the programs put in place at UBS are working and, in essence, are turning this company around.”

UBS has been seeking to regain a strong financial footing in the wake of massive losses and to restore the troubled Americas unit at the same time. On Tuesday UBS AG reportedfirst-quarter earnings of $2.02 billion. That compares with a year-ago loss of $1.79 billion. UBS saw worldwide net new money outflows across the company in the first quarter of $16.35 billion compared with $51.04 billion in the last quarter of 2009.

The number of financial advisors at the Americas unit fell by 3 percent to 6,867 from 7,084 in the fourth quarter. But the pace of decline in UBS FA headcount, as well as FA turnover, has slowed dramatically since McCann took the helm six months ago, and following a new program of selective hiring by UBS. The firm recently recruited a slate of FAs from rivals Merrill Lynch and Morgan Stanley Smith Barney, according to people familiar with UBS.

One UBS official said today on an earnings conference call that the Americas brokerage unit has the operational capacity to support some 10,000 FAs, but another executive was at pains to assure Registered Rep. that this does not mean the Americas business is looking to hire 3,000 new FAs. He said, rather, that this extra capacity would give UBS room to “reduce our infrastructure, real estate, to fit what we have.”

McCann recently stressed an improving situation for UBS Wealth Management Americas. In an exclusive interview with Registered Rep., an upbeat McCann said the Americas brokerage unit, was “back on the front foot winning mandates and getting assets in the door.” [See See Is UBS Turning Around?, Registered Rep., May 1, 2010]

Bove said the improvement at UBS “division by division,” including Wealth Management Americas, has been “significant” compared with previous quarters.