UBS Removes Count of Recruited Brokers from Annual Report
(Updated to reflect conversion of some Swiss franc numbers to U.S. dollars.)
In its 2017 annual report released on Friday, UBS AG left out a conspicuous number it had regularly published in earlier years—the number of brokers hired in its U.S. brokerage unit during the year.
The missing number likely reflects the Swiss bank’s reluctance to emphasize the dramatic reduction in hiring in its U.S. salesforce, the prime source of customer asset growth in its prominent U.S. wealth management business, recruiters said.
In the “Attracting and Recruiting Talent” section of its report last year, UBS said that hires at its U.S. wealth division in 2016 fell by 54% to 178 advisors from 389 in 2015. The bank had reported the recruiting number for the last seven years but the section makes no mention of U.S. recruiting in 2017.
“They are clear that’s not part of their strategy, and it makes sense they’re not breaking out the number,” said Louis Diamond, a New York City-based recruiter specializing in finding jobs for brokers and financial advisors. “They have experienced a lot of attrition like the other wirehouses, and they have not been replacing that attrition.”
UBS Americas President Tom Naratil 20 months ago laid out a strategy to reduce expensive recruiting and instead retain experienced brokers with new compensation formulas. Although the parent bank has since rejiggered its global wealth strategy, most notably by merging its U.S. brokerage business with its global wealth business in February, it has endorsed Naratil’s recruiting restraint.
Switzerland’s largest bank ended 2017 with 6,822 financial advisors in the U.S., down from 7,025 at the end of 2016 and from 7,140 two years earlier. The brokerage forces at UBS’s largest U.S. competitors, Morgan Stanley, Merrill Lynch and Wells Fargo, range from about 14,500 to 16,000.
Two UBS Wealth Americas spokespeople did not respond to requests for a comment on the reasons for the missing recruiting data.
The pullback strategy has been a double-edged sword for the company. Employee loans tied to signing and retention bonuses in the U.S. dropped 14% in 2017 (to below $3 billion), with related expenses falling another 9%, Kirt Gardner, the bank’s chief financial officer, said in January. New recruiting bonus commitments in 2017 of $754 million were down 7% from $808 million in the previous year, according to the annual report, while financial advisor compensation in the U.S. jumped 13% $3.3 billion on higher revenue and incentives.
Lower net recruiting in 2017 and higher attrition in the fourth quarter from brokers worried about impending handcuffs from UBS’s decision to leave the Protocol for Broker Recruiting also led to an outflow of customer assets. Net new money in customers’ Wealth Management Americas accounts was negative 6.8 billion Swiss francs ($7.2 billion), down 21.3% from additions of $15.4 billion in 2016, according to the annual report.
Naratil’s decision to exit the pact, which allows brokers to bring customer-contact information with them to other signatory firms to help restart their businesses, has been widely viewed as an attempt to staunch such asset outflow by increasing broker retention. The bank’s attempt last month to quietly embed customer non-solicitation language into U.S. brokers’ 2017 bonus-acceptance agreements was also viewed as an attempt to restrain their movement, prompted apologies from Naratil and brokerage force chief Brian Hull.
Separately, UBS said on Friday that Naratil’s shares in the parent company jumped 23% in 2017, giving his holdings a paper value of $27.1 million (based on UBS AG’s closing price on Thursday of $18.41).
He ended the year with 1.5 million shares (less than one-third of which are vested), up 23% from 1.2 million at the end of 2016, according to UBS AG’s annual compensation committee report. It did not break out his 2017 compensation, but said he also owned 282,000 UBS stock options at Dec. 31, more than any other executive.
The options number is down 32% from the year-earlier period, in part because about 182,000 ten-year options that expired at the end of February appear to have been worthless. They had an exercise price of 35.66 Swiss francs ($37.54 at today’s conversion rate), but UBS shares closed on Feb. 28 at $18.97.
Martin Blessing, Naratil’s partner as co-presidents of UBS Global Wealth Management, ended 2017 with just under 66,000 shares and no options.
Unlike Naratil, who has worked at UBS and its PaineWebber predecessor since 1983 and has more options than any other executive, Blessing was recruited in 2016 after spending almost 18 years at Germany’s Commerzbank AG, where he last served as CEO.
While UBS avoided scoring its 2017 U.S. hiring game, the annual report touted the company’s “Career Comeback” program as having “proven successful.” Since the program for people launching second careers or returning from extended time off was launched in Switzerland and the U.S. in 2016, the bank has globally added 67 career changers, the report said.