UBS Woos Cash with Sky-high 3% One-Year CD
(Clarifies in third paragraph that the rate is being offered only to existing customers with more than $10,000 in their household accounts.)
UBS Wealth Management USA has stuck its tongue out at bank and other competitors with a 3% teaser rate on a one-year certificate of deposit, but some of its brokers are upset at the way it marketed the promotion.
The Swiss-owned broker-dealer’s rate on its proprietary CD tops all competitors, according to Bankrate Monitor, and is almost 50 basis points higher than the 7-day yield on top-returning money-market funds and 60 basis points above the 2.42% rate on a 3-year U.S. Treasury note as of Tuesday morning.
UBS is offering the deal only to customers who have more than $10,000 in their household accounts, and the CDs must be funded with new money. Several brokers said the five-week promotional rate, which ends next week and requires a minimum investment of $10,000, is an attempt to increase net new assets, particularly in the first quarter when wealthy people often draw down their accounts to pay tax bills.
The Americas wealth unit lost a net $3.6 billion of customer assets in last year’s fourth quarter, representing almost half of the $8 billion of asset outflows at UBS’s wealth businesses globally.
Brokers said they learned about the promotion only days before notices about the CD were sent out en masse in e-mails to all their customers. Many were miffed because they were not given a chance to opt their clients out of the offering, according to several sources who said the issue came up on a recent national call.
Processing buy and sell CD orders is somewhat labor-intensive for their teams, they said, and the instruments are inappropriate for managed advisory accounts that UBS has been urging brokers to use because they would push up the asset base of the fee accounts in violation of the fiduciary standard. Opening new brokerage accounts to hold the CDs would create more bookkeeping burdens for brokers, in addition to a potential $125 charge to customers (or more busy-work to get the fee waived), they said.
“This is another case where they are acting like they are their clients, not ours,” said a 39-year industry veteran. “I have a very wealthy client who retired last year and wanted to know why I didn’t call him on this. I really believe I do what is best for my clients, but this is a teaser rate, and I’m not a retail banker.”
In response to a broker outcry last year, UBS retracted a provision slipped into bonus-acceptance documents that would have prohibited brokers from contacting their clients for a year if they left the firm.
A UBS spokesman did not return a request for comment on the reason for UBS’s push to attract more cash from brokerage customers or on brokers’ reactions to the way the rate is being promoted.
“Cash is becoming a battlefield among brokerages, because they’ve gone as low as they can with commissions and index funds,” said Peter Crane, president of Crane Data, which tracks money-market and other short-term rates.
He speculated that UBS’s teaser rate may be responding to the high money-market rates that Goldman Sachs has been offering with its new Marcus consumer-banking push. Goldman this week is selling a 2.75% one-year CD, according to Bankrate Monitor.
“Brokerages are looking at Goldman and all those fintech firms attacking their space, and saying, ‘We’ve got to start losing money, too,’” Crane said.
To be sure, broker-dealers have been generating wide profit spreads with revved-up programs that automatically sweep client cash into low-interest bank accounts, using the money to fund mortgages and other loans to their wealthy customers.
-Mason Braswell contributed to this story.