UBS shrinks recruiting costs in 2017, boosts adviser pay

Both trends reflect the firm's shift away from recruiting in favor of increasing the compensation of existing brokers.
MAR 09, 2018

In line with a shift in recruiting strategy, UBS Wealth Management Americas last year reduced the amount of money it spent on signing bonuses for new brokers, while at the same time increasing compensation for existing advisers. The firm reduced the signing bonuses, usually in the form of forgivable loans, by $54 million, or 7%, in 2017, according to the annual report of its parent company, UBS AG. In 2017, UBS Wealth Management Americas listed an expense of $754 million for "compensation commitments with recruited financial advisers," compared with $808 million a year earlier, according to the report, which was released Friday. Meanwhile, compensation to UBS Wealth Management advisers increased 13.8% in 2017, reaching $3.3 billion compared with $2.9 billion in 2016, according to the report Almost two years ago, UBS Wealth Management Americas said it would shift strategies and focus efforts on retention of top-producing advisers and cut back on recruitment. That was announced in June 2016, when the company said it would focus on a new operating model meant to drive organic growth "through an increased focus on adviser retention," according to Tom Naratil, the firm's president at the time and now co-president. At the time, the firm launched a new adviser compensation plan that would boost payouts for advisers with the largest books of business and incentives for advisers to form teams. UBS said it intended to reduce adviser recruiting by 40%. The adviser compensation plan took effect January 1, 2017. UBS noted in its annual report that the higher comp for advisers, coupled with lower expenses for recruits, was part of the change in strategy two years ago. "The higher financial adviser compensation reflects higher compensable revenues as well as changes we announced in 2016 to our financial adviser compensation model," the report said. "The increase in salaries and other personnel costs is due to an increase in support staff. These increases were partly offset by lower expenses for compensation commitments with recruited financial advisers." UBS Wealth Management Americas continued to back away from recruiting brokers and advisers when it said in November it would exit the protocol for broker recruiting; the agreement makes it easier for brokers and advisers to move to new firms with clients when switching employers. Morgan Stanley said a month earlier it was dumping the protocol. For years, large wirehouses like UBS and Morgan Stanley have been dealing with the decline in the number of experienced advisers, either from retirement or leaving to start an RIA or work at an independent broker-dealer. And while the four wirehouses — Morgan Stanley, Merrill Lynch, Wells Fargo Advisors and UBS Wealth Management Americas — still get their fair share of recruits from each other, IBDs have been making considerable inroads in recruiting wirehouse brokers, often the most experienced and productive in the industry.

Latest News

Prediction markets get a new twist: betting on what's already happened
Prediction markets get a new twist: betting on what's already happened

A new platform turns disputed facts into tradable markets, flipping the prediction market model on its head.

Merrill to pay $39 million in cash sweep settlement
Merrill to pay $39 million in cash sweep settlement

The financial advice industry has been facing inquiries into its cash sweep programs for years now.

SEC accuses fund advisor of defrauding SpaceX, OpenAI investors
SEC accuses fund advisor of defrauding SpaceX, OpenAI investors

Investor money allegedly went to strip clubs, exotic cars, and landscaping

RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey
RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey

Procyon adds $415 million in assets under management in New Jersey while Savant picks up a $213 million Southern California planning firm

Beyond sell or inherit: A third exit for appreciated property
Beyond sell or inherit: A third exit for appreciated property

With a growing number of real estate-rich Baby Boomers aging into retirement, some advisors may be failing to consider all the options available for those clients' assets.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains