UBS (UBS) is rolling out a new field structure and compensation plan for its Wealth Management Americas. In order to help raise pay for top advisors and support retention, the group says, it will reduce advisor recruiting by 40%.
“As we have thought about where we are going, we decided that … we are going to cut [recruitment] by 40% and take that funding and give it to the most compelling compensation program in the industry, which will reward our advisors for growth and loyalty,” said Brian Hull, head of the unit’s Client Advisor Group, in an interview with ThinkAdvisor.
As of March 31, UBS Wealth Management Americas has average assets per advisor of $147 million. The level of average yearly fees and commissions per rep is now $1,064,000, which tops the average 12-month production levels reported by Merrill Lynch (BAC) of $983,000 and Morgan Stanley (MS) of $923,000.
“We really like our advisors, who are the most productive in the industry in terms of assets under advisement and production,” Hull explained. “Nothing in what we have done changes the strategy of wanting to be the firm of choice for high net worth and ultra high net worth families and the advisors who serve them. [But] we want to have about 6,500-7,000 advisors. We are now at about 7,100.”
That should be music to the ears of Morgan Stanley, Merrill Lynch and Wells Fargo — and their respective recruiting teams.
“UBS paid the biggest upfront deals last year, and that’s not a sustainable business model,” said Mark Elzweig, head of a New York-based executive search firm. “If UBS becomes less aggressive, other firms will view that as a recruiting opportunity.”
As for compensation at UBS, a plan that has been about 35 pages is being whittled down to four pages of highlights and four pages of disclosures, executives say.
As part of the 2017 comp plan, the highest performing reps will be able to receive as much as 50% of their revenue vs. 45% in the past. “Nuisance fees” such as ticket charges will be a thing of the past.
“The heart of the new compensation plan is that anything an advisor’s clients do that generates revenue for UBS the advisor should get credit for,” Hull explained. “So we are eliminating small nuisances and erring on the side of simplicity …”
UBS’ wealth management business in the Americas is being reorganized into four divisions, 43 markets and 208 branches. In the past, this structure had two divisions, eight regions, 63 complexes and 189 branches.
“In terms of the branches, we did not close any offices and did shift some people around. Some individuals, a handful, decided to leave firm,” said Hull.
He adds that the firm isn’t planning to close small offices or “get rid of any small producers. “We want as high a retention level as possible, and we will selectively recruit as best fits our business model and ultra high net worth culture.”
According to Chip Roame, head of the consultancy Tiburon Strategic Advisors, “Delayering the field and streamlining the head office both can save a lot of money and seems smart.”
As for the compensation plan, these changes “seem smartly defensive,” Roame explains. “Pay more to biggest guys to keep them, encourage teams [to] make asset retention better and improve their broker book transition program that keeps assets. Sounds like defense, smart defense.”
The firm, which is about half the size of its three rivals – Wells Fargo, Merrill Lynch and Morgan Stanley – in terms of its advisor headcount “seems progressive to me vis-à-vis other wirehouses,” the consultant states.
(UBS recently formed a partnership with high-tech firm SigFig and announced that it was investing in the start-up company.)
Plus, the plans could be “a morale booster at UBS,” says Elzweig, thanks to higher payouts and the expected improvement in advisor satisfaction, which should ultimately support retention.