UBS tweaked its compensation plan for 2014 to provide additional incentives for advisors who are doing more financial planning work and onboarding wealthier clients.
The changes, which were announced to the firms approximately 7,100 advisors this afternoon and go into effect Jan. 1 2014, provide additional perks for advisors who are helping clients with services such as education planning, long-term care and retirement planning.
GROWTH IN PLANNING
Since the firm implemented a plan this year that pays advisors 50% of all financial plans that cost over $1,000, the number of advisors charging for financial plans has tripled. On average, financial plans cost around $4,000, according to Jason Chandler, who is head of the Wealth Management Advisor Group in UBS Americas division. The firm added 35,000 plans in the last 12 months.
Expense account. In response, advisors will now receive another 25% of the total cost of the financial plan (over $1,000) toward the advisors expense account. This is up from 15% in 2013. For a $1,000 financial plan, for example, the advisor will receive $500 in compensation and $250 in an expense account, regardless of where the advisor falls on the production grid.
Wealth Management Award. UBS is also introducing a financial planning component to its Wealth Management Award. The firms advisors will continue to be eligible to receive a deferred award of up to 1.75% on 50% of fees generated in advisory accounts, but they will now also be eligible to receive an additional financial planning award of as much as 4% on half of all revenue from a household with a financial plan.
The firm has also made changes to asset and production bonuses as it looks to keep them in-line with the growth of average production across the firm, Chandler said. Advisors averaged $974,000 in production and around 25% of the advisors at the firm have more than $1 million in production, he said.
Revenue from households with between $1 million and $10 million in assets has grown 52% in the last three years and 80% for clients over $10 million, Chandler said. "The other big bucket [of changes] is really around focusing on the right segments: high net worth and ultra-high net worth," he added.
Here are three main changes:
Account minimums. As a result of increased production, UBS is raising its small household policy, which is the minimum amount of investable assets a client must have before the advisor can be compensated for the account, from $75,000 to $100,000 so that the firm will no longer pay the advisor for revenue from accounts lower than that. Chandler said it was still relatively low compared to UBS competitors and represented only a fairly modest change.
New asset award. The firm also changed its criteria for its net new asset award. Now advisors with $10 million in net new assets will automatically qualify for a deferred award. Advisors who have $5 million in net new assets and a $1 million new relationship also qualify. That will retroactively apply to advisors in 2013 as well, Chandler said.
Payout grid. The payout grid, which is based on a percent of trailing-12 month production, remains largely the same except for three production bands between $300,000 and $600,000, which are moving up slightly. For example, a 39% payout that would have applied to advisors making between $400,000 to $599,999 will now apply to advisors in the $425,000 and $625,000. Those changes will take effect July, 1, Chandler said.
The so-called penalty box, which assigns a mandatory 20% payout to advisors with eight years or more of experience and less than $325,000 in revenue will apply to advisors with under $350,000 in revenue in 2015, Chandler said.
Its a tweak here and there to really drive financial advisor productivity and focus on the right clients, Chandler said. I would expect that it will be generally well-received.