UBS surprises advisors with early comp plan reveal
UBS unveiled almost no comp plan changes to advisors on Tuesday, breaking with more typical wirehouse practice of annually tweaking such plans.
The move ― the first by a wirehouse so far this year ― continues the firm's transformation under Tom Naratil, who became president of UBS Wealth Management Americas in January 2016.
That the new comp plan is basically the same as the old comp plan is highly unusual for a wirehouse, says recruiter Michael King.
"They almost always make changes," he says.
President Tom Naratil says the firm will recruit less, spend more on advisers already at the firm and give additional power to branch managers.
The wirehouse had held back on finalizing some aspects of its fiduciary implementation plan until the rule's fate was clearer.
The wirehouse's executives think they've struck on the right formula to boost growth through a simplified comp plan, greater autonomy and an attractive retirement package.
Under Naratil's watch, UBS has been striving to boost advisor productivity and retention. To that end, the company reduced efforts to recruit experienced advisors in order to cut costs and shift resources to brokers currently at the firm.
At the same time, UBS has moved some decision-making powers back to branch managers in the field. And last year the firm simplified its comp plan from more complex previous versions, which some brokers saw as unnecessarily confusing.
The mostly unchanged plan is likely to please wirehouse advisors, who have traditionally had to sort through complex plan changes announced at the end of the year.
"In general, advisors prefer to have no changes," says compensation consultant Andy Tasnady. "It's one less thing [for them] to worry about."
Among the firm's minor tweaks this year are a few related to regulatory changes wrought by the fiduciary rule. UBS told brokers that production credits will be eliminated on financial advisors' personal IRAs. Requirements to earn the firm's strategic objective awards ― based on net new business and length of service ― remain the same. But UBS will cease offering loans as part of the program.
Earlier this year, the firm changed how it was paying advisors for advice on clients' retirement accounts. Those changes remain in place.
Although the Department of Labor partially halted the fiduciary rule's, it isn't yet clear if the agency will ultimately repeal or only amend the regulation. That regulatory uncertainty may deter UBS and other firms from making changes to broker pay on retirement accounts, Tasnady says.
"There are so many unknowns. It's a more difficult environment to introduce anything major," Tasnady says.
But the main takeaway for the firm's roughly 6,900 advisors is that the core components of the comp plan remain the same; the pay grid still has a top rate of 50% and the combined team grid introduced last year is still in place.
The company's retirement program, nicknamed ALFA, also remains unchanged. UBS sees it as a key component to retaining top brokers and enticing new ones over.
UBS unveiled its 2018 comp plan earlier than is typical for the wirehouses, which traditionally have unveiled the coming year's plan after Thanksgiving. However, UBS's move is unlikely to spur other firms to change course.
All firms have been working on their changes since the start of the year, Tasnady says. "The big firms start on it in the first quarter."
But UBS is no stranger to being ahead of the curve; the Swiss firm revealed its comp plan for 2017 nearly six months ahead of its rivals. At the time, UBS drastically simplified its compensation plan. For example, the brochure explaining compensation shrank from 34 pages to eight.
King says the firm may benefit from the lack of pay changes, which would otherwise alienate some brokers, as well as recruiting cutbacks at key competitors Morgan Stanley and Merrill Lynch.
"Without many wirehouse [recruiting] offers, it may keep people in place," he says.