UBS Rushes Out 2017 Comp Plan with 50% Payout Potential
The mid-year compensation plan rolled out at UBS Wealth Management Americas on Wednesday is aimed at stemming attrition of top producers by sweetening the compensation grid and length-of-service awards, and offering better payout for those who team up.
UBS 2017 Comp
The changes, which take effect January 2017, come as Tom Naratil, the recently installed president of UBS Americas said that the firm is retrenching from recruiting and restructuring field management.
To be sure, brokers are still doing the math to determine where they stand. The tradeoff is whether new production incentives—ranging from higher grid-based payouts for million-dollar producers (see accompanying graphic) to length-of-service bonuses—are outweighed by the elimination of some strategic objective awards, such as one that encouraged producers to defer bonus compensation.
The numbers for big producers are compelling, reflecting Naratil’s need to curtail the sky-high recruiting bonuses that has left UBS Wealth Americas with $3.25 billion of recruiting debt on its balance sheet at a time when its Zurich-based parent has become hawkish on expenses. At least for the short-term, Naratil said this week, UBS will be reducing advisor recruiting by 40% and “realigning resources” to existing employees and platforms.
UBS has become the first big brokerage firm in years to raise payouts for its top brokers rather than production quotas, a move clearly designed to keep top veterans from accepting deals being offered by rivals. The top cash payout percentage jumps to 50% from 45% of revenue collected by brokers bringing in $10 million or more, scaling down to a 100- basis point lift to 44% for brokers producing between $1 million and $1.749 million.
The top payout rate for 2016 is 45%, and applies to brokers generating $3 million or more.
“I think guys are pretty happy with it,” said a 20-plus year UBS veteran on the West Coast who produces over $1 million. He calculated that his annual pay will jump by a few hundred-thousand dollars a year.
To keep the big producers and their clients from jumping, UBS has enhanced its length-of-service award plan. It will pay as much as 10% of total production to brokers with 25 years’ experience who produce at least $5 million. The “stay” bonus gears down in stages to 1.5% stay for those with five to eight years at UBS producing $750,000 to $999,000, according to the six-page 2017 FA compensation plan sent this week to the firm’s 7,100 brokers.
“We are…putting a stake in the ground that relentless and costly advisor recruiting is not sustainable as a growth strategy in this industry,” President Tom Naratil said in a prepared statement.
In another move to keep high-producing vets in place, UBS is implementing a new five-year retirement program that offers payouts of 50% to 200% depending on length of service and production. Infelicitously titled the Aspiring Legacy FA (ALFA) program, it includes the potential for million-dollar producers and above to receive forgivable loans ranging from $250,000 to $5 million, an incentive with recruitment-like appeal.
The 2017 comp plan also sweetens incentives for advisors to work on teams, a trend that large brokerage firms have been encouraging in recent years because it makes it harder for individuals to bolt and because, they say, it provides better service to clients.
Each member of a team with combined production of more than $5 million will be paid at the combined-production rate of 48% to 50%, provided each team member produces at least $1 million. Each broker on a team producing $2.5 million up to $5 million will receive the same payout rate earned by the team’s highest producer if average production is $750,000 or more per broker.
“Overall, they were really trying to solve the retirement problem,” the West Coast advisor said. “Literally half our brokers are [over 50] so if you stop recruiting and those guys leave…we’re in trouble.”
A spokesman for UBS, Gregg Rosenberg, did not respond to a request for comment on the new plan.
Although advisors, recruiters and competitors said comp plan details are crucial to advisor happiness, even more important to to top producers are their sense of empowerment and support from management. UBS’s Naratil said that part of the program will be accomplished through the organizational restructuring, which AdvisorHub outlined on Monday.
This plan raises pay at the grid level for those only over 1mm in production, that accounts for roughly 1700 of UBS’s advisors. The other 5,300 all received harsh paycuts as the firm nearly eliminated all of the year end strategic objective awards. Gone is the “wealth management award” which was as high as 6% of business that qualified as such (wrap business, lending, etc), the financial planning award and the productivity award were also eliminated. The LOS awards were increased, but not to the level that would compensate for the loss of the other year end awards (which were “deferred” with the option of taking 79% of it in the form of a loan- nearly all advisors took this option. Net net, folks at the 1mm level will also take a comp cut with this new plan. Most are down between 3-5% in total. The top 100-200 teams and advisors will see a modest uptick, some will breakeven, the majority goes backwards. The press would have you think this is a major win- make no mistake 75% of the advisor force will see a paycut.
this is another comp plan that decreases pay for most advisors. This will not stop advisors from leaving. Not sure who in management thought this was a good idea.
FYI, at least 90% of the advisors will see a total comp paycut. Certainly way more than 75%.
To UBS broker- you are probably right on 90% seeing a cut, under 2mm producers with under 15yrs LOS take a hit. Always interesting how the brass tries to sell it as a win. Do they not realize we crunch numbers for a living?
This was basically a big pile of $&@! wrapped in a beautiful package. As one of the previous comments said, we crunch numbers for a living. It strongly encourages teams. Teams can be good, but the underlying motive is that teams make the assets stickier therefore benefitting the firm. Comp plans always benefit the firm and is presented to benefit the advisor.