A new incentive package at UBS AG's Wealth Management Americas may be not be lucrative enough to retain the U.S. brokerage unit's most productive financial advisers.
The program, Growth Plus, is designed to reward brokers who have been with the firm for more than five years and generate at least $500,000 in annual production starting next year, according to recruiters.
The recruiters said advisers will be paid on a sliding scale, up to 65% of their production next year. Robert McCann, the former president of global wealth management of Merrill Lynch & Co. who is now chief executive of UBS' wealth management business, announced the plan at a meeting with the firm's top 300 advisers.
Roughly 20% of UBS' advisers would qualify for the payout, said Mindy Diamond, a recruiter based in Chester, N.J.. "These UBS advisers have been through the war, and they expected to be rewarded for their loyalty," Diamond said. "They stuck with a firm that has been radioactive for a couple of years. They needed to be rewarded for that loyalty, and frankly, they may be offended by this."
Diamond added, "McCann is boldly saying that retention is the most important thing, and retention means bonuses, but it may be too little, too late."
A UBS spokesman said Growth Plus enhances the bank's existing compensation plan for advisers, which is designed to allow them to "participate and share in the future of our firm in two ways. Participation is based on prospective 12-month — not trailing 12-month — production, and secondly, Growth Plus recognizes long-term dedication to the firm. This new paradigm for compensation is aligned with our renewal efforts and our vision of becoming the best wealth management firm in the Americas." The UBS spokesman declined further comment.
Paul Werlin, the president of Human Capital Resources, an executive search firm in St. Petersburg, Fla.,, said he expects 2010 will be "the toughest recruiting year in the past 20," as many wire houses and brokerage firms "chase fewer and fewer top producers."
"There are three to four major players who have an unlimited appetite for strong producers, and they are emptying the bank to pay for them," Werlin said. "At least six firms are looking for more than triple digits in new brokers and attracting them will require really large incentive packages."
The Morgan Stanley Smith Barney, Bank of America Merrill Lynch and Wells Fargo incentive packages are all superior to what UBS is offering, Werlin said. Merrill offers up to 330% of trailing 12-month production as a bonus for its top producers.
"So many major players are throwing major numbers around," Werlin said. "Merrill and Morgan Stanley have the capital to reach their targets, but everyone else will be scrambling. No one is sure about the economics, but everyone is certain that the talent pool is shrinking. Brokers can write their own ticket right now. UBS is playing with fire."
Steve Rosen, a New York recruiter, said if these numbers are correct it would leave fewer companies — namely Merrill and Morgan Stanley Smith Barney — to vie for the biggest and best advisers. "Merrill, Wells and Morgan Stanley have had retention packages, and UBS did not," Rosen said. "This is something that they are calling a 'growth package,' because if it was a retention package, brokers would be insulted by it. … This is not going to keep brokers in their seat, because it just isn't competitive with the marketplace with the deals that are out there."
Rosen said that this may just be "the first trick that is up McCann's sleeve."
"They clearly had to do something," he said. "UBS couldn't do nothing while the other three major wire houses were offering their brokers 125% retention packages. This is an attempt to keep their advisers, but I just hope there is more to it."
Diamond said the package may be enough to keep some advisers "who are fearful of making a move," but "the large majority will feel offended by this."
Rick Peterson, an executive search consultant with Rick Peterson & Associates in Houston, said that details surrounding UBS' plan "are very, very sketchy." Peterson said he expects the bonus to be higher than 65%.
"The program certainly rewards guys that have been there forever, but it hasn't been completely disclosed yet," he said.