Ex-UBS advisor owes firm $5.6 million in bonus loan dispute

A three-person FINRA arbitration panel this week decided in favor of UBS Financial Services Inc. a dispute regarding a recruiting bonus with a former financial advisor, who is on the hook for $5.6 million in damages and legal fees to his old firm.

The advisor, Terance Takyi, is a fourteen-year veteran of the securities industry who worked at UBS in New York from May 2023 to last June, according to his BrokerCheck report. 

Before that, he worked at First Republic Securities, whose financial advisors became highly valuable targets of competitors after its parent company First Republic Bank became insolvent and was sold to JPMorgan Chase. 

Those First Republic advisors were highly prized and commanded good-sized recruiting bonuses in many cases; in its lawsuit, UBS claimed Takyi breached its promissory note, or the agreement for the recruiting bonus, which is typically paid to the advisor over seven to 10-year periods.

Advisors who sign promissory notes work off the loan amount over the years; if an advisor leaves before the agreed time period, he or she may be liable to pay back the loan, as in this case.

Takyi, who moved to LPL Financial in Paramus, N.J after leaving UBS, did not return a phone call Friday to comment. A spokesperson for UBS declined to comment.

According to the FINRA Dispute Resolution Services panel decision from Wednesday, Takyi is liable for $5.5 million – the amount due on the note plus interest – to UBS. He is also liable to pay $164,000 in UBS attorneys’ fees.

The arbitration panelists did not give any reason for the award to UBS.

Promissory notes used to recruit financial advisors are a fundamental part of the financial advice business but advisors are demanding – and getting – more cash than ever to leave one firm and join another.

Indeed, heads of giant wealth management concerns continue to see their firms between a rock and a hard place when it comes to recruiting financial advisors.

Last month, chief executives of large wealth management companies continued to express concerns over the expense of hiring experienced advisors, which reached a feverish intensity last year in the aftermath of LPL Financial Holdings Inc.’s $2.7 billion all-cash acquisition of rival Commonwealth Financial Network.

That deal set off an industry-wide scrum for Commonwealth advisors, on average the most productive in the industry.

And the rising dollar amount of recruiting bonuses, known as transition assistance in the industry, has remained at levels extremely favorable to financial advisors and potentially costly firms.