UBS latest to shift broker compensation ahead of DOL fiduciary rule

UBS Wealth Management Americas told its 7,000 financial advisers Thursday that their compensation from clients' retirement assets will change. The shift will be to asset-based compensation for UBS advisers and will apply only to retirement accounts. For the rest of the year, advisers will be paid a flat rate based on clients' retirement assets and not transactions, according to a UBS source. If the rule is eventually scrapped, which many in the brokerage industry continue to hope for, UBS will simply return to its current payment schedule, known as a grid in the industry. UBS will base its calculation of compensation from retirement assets on advisers' production in 2016, the source said. For example, if an adviser last year received 50% of gross production, or revenue, from retirement account assets, that adviser would receive the same percentage this year, the source said. The goal of the UBS compensation plan was to cause as little disruption as possible for the firm's clients and advisers, said the source, who added that a small number of products, such as IPO shares underwritten by UBS and exchange-traded notes, would no longer be sold in retirement accounts. The changes in compensation comes at a time when broker-dealers are scrambling to put policies in place to make sure they are in compliance with the Department of Labor's fiduciary rule for retirement accounts, which is scheduled to go into effect on June 9. UBS' plan is unusual because it does not limit the type of compensation or mutual fund share class advisers can sell to investors with retirement accounts. Last month, Wells Fargo Advisors told brokers of new limits on mutual fund share classes and types of securities advisers can sell or recommend in a client's retirement account. And Morgan Stanley in April announced a series of pricing, policy and product changes designed to further raise the standard of care for the firm's clients. The fallout included eliminating new sales of Vanguard Group mutual funds from the platform. Merrill Lynch last year said it was eliminating commissions in advised brokerage IRAs but has since softened that stance, announcing in March that it may offer commissions in retail retirement accounts in limited circumstances.