Even as UBS' CEO acknowledges that recent compensation changes have been unpopular with some advisors, the firm lost two members of a long-affiliated team to its rival Morgan Stanley.
John Cunningham and his daughter, Lee Ann Cunningham, both recently decamped from UBS for Morgan Stanley in Louisville, Kentucky. The two had been part of UBS' Cunningham King Wealth Management Group and had roughly $700 million in assets under management and $3 million in annual revenue production, according to a source familiar with the move. Their former partner, Tracy King, remains at UBS.
John Cunningham has had a lengthy career in wealth management, having started at Merrill in 1983 and been at UBS for the past 25 years. Lee Ann Cunningham started at BlackRock in 2021 and joined her father at UBS three years later.
Ron Edde, an industry recruiter and the founder of Millennium Career Advisors, said John Cunningham has earned respect as an "advisor, community member and colleague."
"Companies suffer more than just the loss of an advisor when someone like John moves to another firm," said Edde, who did not help recruit the Cunninghams to Morgan Stanley.
The Cunninghams and UBS did not respond to requests for comment. Morgan Stanley declined to comment.
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UBS acknowledges unpopular comp changes
UBS has suffered heavy advisor losses since announcing
In an earnings
Speaking on Monday at the UBS Financial Services Conference in Key Biscayne, Florida, CEO Sergio Ermotti acknowledged that some of the firm's recent compensation changes were "not very popular" with certain advisors. Specifically, he referenced UBS' decision to abandon its Combined Team Grid, which had allowed wealth managers on advisory teams to be paid out a percentage of the group's total production. Its replacement, the Highest Producer Grid, allows advisors on a team to receive payouts only as a percentage of the revenue generated by the highest-producing member.
Ermotti said he and his colleagues decided to reconsider "the compensation grid for part of this population that were de facto benefiting from being part of a team of people, getting all the advantages of a large team in terms of how the grid works, but de facto never growing their business and not really contributing to the bottom line."
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A balance between 'what shareholders make and what financial advisors make'
UBS has
Many of the recent compensation changes have been driven by a desire to improve UBS' profit margins in its U.S. wealth management business. The division's profit margin — or the percentage of revenue left over after the subtraction of expenses — rose above 13% toward the end of last year.
Ermotti has set a goal of pushing that closer to 15%, which he has acknowledged would still lag behind the margins posted by many of its competitors in the U.S. On Monday, he suggested the firm is still weighing its profit goals against its desire to keep advisors happy.
"Of course, we want our financial advisors to be able to serve their clients at best and grow their businesses," Ermotti said. "But in order to do that, we need also to make sure that there is a good balance between what shareholders make and what financial advisors make."
Recruiting continues at UBS amid losses
Throughout all this, UBS has continued to recruit advisors. Last week, the firm announced it had brought in a pair of financial advisors who had previously managed $1 billion at Merrill.
Mark Lilley, who had been at UBS before joining Merrill in 2020, and Gabriel Trigo, who moved to Merrill from Morgan Stanley in 2020, are joining UBS' Puerto Rico market in San Juan.
