UBS to Cut Proprietary Managed Account Fees Ahead of Reg BI
UBS Wealth Management USA is eliminating fees on advisory accounts managed by its own asset management unit as it looks to eliminate potential conflicts of interest, according to internal memos.
“This is a win for our clients and Advisors,” they wrote in a “Key Message” talking points addendum to a memo highlighting the fee waiver as part of a new effort to align asset and portfolio management execution efforts.
“We’re introducing a new client-friendly pricing model, expanding choice and transparency and further aligning with the SEC’s Regulation Best Interest, while also investing in our Advisors’ success…giving Financial Advisors increased flexibility to determine the pricing that’s appropriate for each of their clients.”
The Securities and Exchange Commission’s new best Interest rule takes effect in June 2020, and requires firms to have policies and procedures to identify and either disclose or eliminate conflicts of interest that can put firm and brokers’ interests ahead of clients.
Naratil and Harford positioned the fee removal as “further differentiating UBS in the Americas from our peers by harnessing the full strength of our global firm and by creating unique capabilities and thought leadership that help FAs successfully compete for business, grow their practices and deliver for clients”
Greg O’Gara, a senior research analyst at consulting firm Aite Group, said several other firms have been adjusting fees on proprietary asset management products, including Edward Jones. (Jones charges an additional management fee of 9 basis points for investments in its proprietary Bridge Builder models, according to its website.)
“Firms like UBS are clearly delineating the difference between the underlying product fees and advice fees,” O’Gara said.
Morgan Stanley eliminated management fees on in-house strategies from its investment management division at least a year ago, according to an advisor at the firm. A spokeswoman at Morgan Stanley declined to comment.
A spokeswoman for Wells Fargo declined to comment and a spokesman for Merrill Lynch said he could not immediately comment. Merrill last month told compliance officials to double-down on reviews of differing platform fees being charged for the same managed-money product.
The change will initially apply only to single-asset strategies but UBS will “invite” third-party managers to participate in the new pricing structure and add multi-asset strategies later in 2020, according to one of the memos, which were reported earlier in “The Wall Street Journal.”
UBS offers more than 500 accounts managed by outside portfolio managers. By next year’s second quarter, the firm anticipates offering all strategies without the fee if they occur on ACCESS, where the firm controls the client-outside manager relationship.
Some separately managed accounts, however, including those with sustainable investing strategies and others with tax management features, will continue to charge a management fee, the executives wrote.
Management fees for accounts using UBS ACCESS and SWP separately managed account platforms range from 20 basis points of assets to 75 basis points, and supplement the underlying account advisory fee. That can be as high as 2.50%, according to ADV filings on the platforms, although few advisors at big firms charge maximums.
Broker compensation will not be affected by the change because advisors did not collect the SMA fee, a UBS spokesman said.
UBS Wealth Management USA in July eliminated the separate manager fee on model equity portfolios created by its chief investment office.