UBS expects a short-term increase in U.S. financial advisor attrition this year as it adjusts compensation incentives, creating an extra headwind for net new assets in coming months, Chief Financial Officer Todd Tuckner said this week.
UBS, which also expects flows to soften in other global regions this year, recently announced changes to its U.S. financial advisor compensation model, he noted on the bank’s fourth-quarter earnings conference call Tuesday.
“We aim to better align FA incentives with the strategic goals of the firm by rewarding net new money, new client acquisition and the broadening of existing client relationships, with a specific incentive for NII (net interest income) growth,” Tuckner told Wall Street analysts, per a call transcript.
“While we designed these changes to incentivize greater production and ultimately higher compensation levels for advisors in full sync with our strategy, we may see a short-term rise in FA attrition, which is reflected in our pre-tax margin expectation for 2025,” he said.
The highlighted changes “also are more aligned to what we believe or observe are the comp models at our competitors as well. We had certain features we think that were perhaps off market and we are looking more to align with what our peers do,” Tuckner said.
“It's clear that those who are very aligned with our strategy of bringing value to their clients and growing their books of business and … bringing more solutions to their clients from essentially across what we can offer, those FAs will benefit in this model, and they'll get paid more. And I think that's the key point,” he added.
UBS in December said it was making advisor compensation changes to support U.S. growth and profitability goals. Among the changes, production levels below $750,000 will see payout rates drop 2% to 4%.
Advisors will be eligible for a maximum $1 million cash incentive award based on three criteria: net new money growth, the number of qualified new relationships with more than $1 million in assets, and return on asset growth. The changes also include enhanced rewards for connecting clients to the firm’s banking services.
“It’s important to keep in mind that the changes we're making are really not intended to reduce compensation, but to increase it as long as it's being done in ways that are very aligned with our strategy," Tuckner said on the call. "And I think that's the most important point.”
UBS Global Wealth Management ended 2024 with 9,803 financial advisors, down from 10,469 a year earlier.
Image: Shutterstock
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.