From the February 2010 issue of Research Magazine • Subscribe!

UBS Adjusts FA-Recruiting Packages: Pushes Total Bonuses Up to 260-280%

The firm's latest recruiting offer includes an upfront cash payment of 130 percent of trailing 12-months' sales, but it still lags offers at Morgan Stanley and Merrill Lynch.

Under the leadership of former Merrill Lynch executive Bob McCann, UBS Wealth Management Americas has introduced a new recruiting package.

Though UBS' latest recruiting package isn't quite as high as those being offered by Morgan Stanley and Bank of America/Merrill Lynch, experts say, it has grown and now represents as much as 260 to 280 percent of yearly advisor revenue, or production, up from 220 percent.

"McCann has said that he didn't want UBS to be offering the biggest deal on the street, which it isn't," says Mindy Diamond, president of Diamond Consultants in Chester, N.J.

UBS now includes some 7,300 FAs in the Americas.

The firm's latest recruiting offer includes an upfront cash payment of 130 percent of trailing 12-months' sales. It is being extended to advisors in the top two tiers, or 40 percent of advisors, according to UBS, which says the top tier production level is roughly $500,000. There are also four asset-based bonuses offered for the first four quarters of the first year.

Overall, the wirehouse's latest recruiting efforts feature asset targets and backend bonuses based on future growth, as opposed to trailing 12-months' production.

"These [wirehouse recruiting packages] are really deals that are structured for the growth-oriented advisor," explains Diamond. "Though 140 percent in cash upfront is a lot, it's not necessarily enough to make [every] advisor move."

Morgan Stanley and Bank of America/Merrill Lynch, in particular, are paying about 330 percent in total over five years, 120-140 percent in cash upfront and up to five bonuses, nearly all cash, according to the recruiter. "Morgan Stanley's is all cash; Merrill's includes some stock," she says.

"Unless the advisor is in growth mode and has a really good shot of hitting the backend bogies, which means you have to be at certain levels of assets and production at the end of years one, two, three, four and five, these are not deals that make sense," explains Diamond.

As for Wells Fargo Advisors, the firm "has never wanted to be the biggest deal on the street," according to Diamond. It is offering about 200 to 225 percent as its maximum recruiting deal. "The sweet spot for Wells is the $500,000 to $1 million producer," she adds.

With the new UBS recruiting package, advisors can earn four asset-based bonuses for their performance in the first four quarters of the first year after they join the Swiss-based firm.

The first backend bonus is 55 basis points of what an advisor has at the end of the first quarter in terms of assets; the second is 50 basis points of what you have at the end of the second quarter; 45 basis points for the end of the third quarter; and 40 basis points for the fourth quarter, experts say.

"At the end of month 24, if you are at 85 percent of your recruited trailing-12- months' production, you get an extra 50 percent of actual UBS production. Plus, at the end of month 36, if you are at 100 percent of your recruited trailing-12- months' production, you get 50 percent of your actual UBS production," Diamond explains.

Thus, UBS total recruitment package offers FAs up to 280 percent of their existing yearly sales.
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