EXCLUSIVE: UBS Forming Business to Service Independent Advisors
UBS is setting up a business to sell products and services through independent advisors in the U.S., the second big traditional brokerage firm to see opportunity—or at least expedience—in servicing the burgeoning independent channel.
Joseph P. Connellan, a managing director who joined the Swiss banking giant’s wealth arm last month after 31 years at Citigroup, is listed as head of Wealth Management USA Independent Advisor Channel in a firm directory, according to UBS sources. Jean Smart, who worked with Connellan at Citi, also has joined UBS as a managing director and is in charge of business strategy for the new registered investment advisory custody unit, they said.
Neither Smart nor Connellan, who was in charge of selling Citi’s fixed-income and equities services to registered investment advisors, small brokerage firms and electronic trading platforms, responded to requests for comment. A UBS spokesman said he could not immediately comment on their roles.
The decision of a conventional retail brokerage firm to expand from its core business of selling investment products through a captive brokerage force signifies the attractiveness of the independent advisory model to many advisers with large practices and, perhaps, practicality.
“What they are really doing is addressing a threat to their core channel of brokerage and product distribution by recognizing that there’s this whole growing segment,” said Mark Tibergien, chief executive of advisor solutions at BNY Mellon/Pershing, who said he was not familiar with UBS’s plans.
Wells Fargo Advisors last month introduced an RIA “channel” in what many observers believe is largely an attempt to retain brokers who have been abandoning the bank-owned broker for other firms but might prefer the convenience of using familiar platforms. More than 1,000 brokers have left Wells since its fake account scandals were disclosed two years ago.
The flight out of UBS has not been as extreme, although the Swiss banking giant’s U.S. retail brokerage force declined by about 285 last year amid a years-long exodus that has brought its advisor count to about 6,300 today. UBS also has retreated from expensive recruiting of advisors, making retention a key priority.
Michael P. Crawford, a San Diego broker who left UBS in November to become an RIA, said he would have considered using UBS as custodian for his clients’ assets had the option been available. “It would have made it a lot easier,” he said of his team’s efforts to transfer customer accounts to Fidelity Investments’ RIA channel.
Although the RIA channel is less lucrative than the traditional broker-deal model—and risks antagonizing firm brokers who compete with independent advisors—setting up an RIA channel is not necessarily capitulation, some consultants said.
Independent advisors typically work with wealthy customers and family offices that pay asset-based fees, a more reliable revenue source than trading commissions that rise and fall with customers’ market engagement.
“Scale on the advisory platform is the biggest thing right now,” said Alois Pirker, research director at Aite Group’s wealth management practice. “Where it comes from doesn’t matter as long as it ends up on the same backbone.”
Merrill Lynch Wealth head Andy Sieg has said that Merrill has no plans to open an RIA or independent brokerage channel. Morgan Stanley executives have similarly said they have no immediate plans for an independent business.
Connellan joined UBS Wealth Management USA at its Weehawken, NJ, headquarters in January after a 90-day garden leave. He reports to Michael McGovern, head of “corporate and institutional advisory solutions” for UBS Wealth USA, the sources said.
In addition to working with Smart, who was global head of marketing at Citi for the “private client solutions” unit led by Connellan, he oversees at least two other managers who had been with UBS, the sources said. Lisa Lenza is head of relationship management for the independent advisor channel and Melanie Warner is a regional sales manager, they said.
—Jed Horowitz contributed to this story.