UBS Wealth Management Americas boosted a key award for advisors, but left its core payout grid unchanged in its 2015 compensation plan.
The changes, which UBS announced Thursday to roughly 7,100 advisors, go into effect in January.
Advisors learned the Swiss-owned firm was doubling the maximum payout on its award for growing an overall practice from 3% to 6% of production. Qualifications for the award also expanded to include revenue earned from advisory, insurance lending and planning fees.
"Our advisors have the opportunity to earn more in the 2015 comp plan than they've ever earned before," says Jason Chandler, head of UBS' eastern wealth management advisor group.
The firm's net new asset award lowered the hurdle to qualify from $5 million in net new assets to $1 million. However, advisors have to bring on a new $1 million account to qualify for the lower hurdle. The requirement is waived when an advisor brings in $10 million in net new assets. Credit lines and mortgages could count towards the award.
According to a schedule for the award, an advisor who brings in $1 million in net new assets would earn 0.50% of his or her annual production. An advisor who brings in $10 million would earn 2%. "Our goal is to broaden the number of advisors who can quality for the award," says Chandler.
Adjustments to the strategic awards, which consist of deferred pay, and the overall payout grid are consistent with the firm's strategy for doing business with affluent clients, says Chandler.
"The plan is based on what clients expect of us. If advisors model their business and align with the strategy of what clients desire, they are likely to earn more compensation," he says. "We really design our comp plan to match our own strategy and the input that we receive from clients and advisors. And we aim to pay competitively. But our goal relative to our compensation plan is to build a plan that suits our strategy and clients."
CHANGES COMPARED TO RIVALS
UBS is the second wirehouse to reveal comp changes to advisors.
On Wednesday, Merrill Lynch unveiled details of its compensation for 2015. The firm also left its core payout grid unchanged, but did tweak its small household policy and boosted a growth award bonus. Merrill advisors whose books of business consist of 20% or more of accounts under $250,000 will no longer be paid on those so-called "mass affluent" accounts. Less than that, and advisors will be paid 20% on those accounts.
Morgan Stanley plans to raise deferred advisor compensation. One advisor with knowledge of the matter described the effort as "golden handcuffs," because the delays advisors face in getting their eventual payouts.
"The goal there is to tie people up. I don't see how you can look at it any other way. If I was sitting somewhere else, I'd be thinking, 'I hope the rest of the industry doesn't follow that and we all make less money,'" says recruiter Bill Willis, president of Willis Consulting.
He adds, "We're telling people that the good news is that you have a new retention program, the bad news is that you're funding it."
Bill Carroll, head of UBS wealth management advisor group, said the reaction from advisors at the Pittsburgh-area branches that he was visiting was positive.
"I got a really good sense today about how the roll out resonated with our FAs. They feel there is a good connectivity with the strategy and with what their clients want," says Carroll.
UBS has been posting strong earnings in its wealth management division. The firm reported a 9% year-over-year increase in profits for the third quarter. Income rose to $1.7 billion from $1.5 billion from a year earlier. Client assets were up 10% year-over-year, climbing to $1.067 trillion from $969 billion.
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