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UBS Red Tape Cuts: Real or Lip Service?

By Murray Coleman September 1, 2017

Wirehouse advisors like to talk about donating their time to help overcome America’s financial literacy epidemic. But Jennifer Povlitz figures she’s actually doing something about it.

In fact, the head of a half-dozen branches for UBS Financial Services in Orange County, Calif., says she’s taking advantage of a more streamlined chain of command to work on a local university’s project aimed at educating high school students about financial issues.

“This isn’t a corporate decision – it’s an effort by our local advisors to take part in supporting a program that we think can do a lot of good for our community,” Povlitz says.

Last summer UBS announced plans to cut bureaucracy and put more decision-making authority in the hands of some 6,900 advisors throughout the country. Now UBS officials tell FA-IQ the results of such reforms are starting to spread across its 300-plus wealth management branches and seven private wealth offices.

“Our goal is to get to a point where 90% of all wealth management decisions can be made at the local branches,” says Brian Hull, head of the client advisor group at UBS Wealth Management Americas.

Giving local managers more voice should “only make UBS look more attractive to experienced and highly productive advisors at other firms,” suggests Frank LaRosa, a former Morgan Stanley complex director who now works as an independent recruiter in Moorestown, N.J.

“Our goal is to get to a point where 90% of all wealth management decisions can be made at the local branches.”
Brian Hull
UBS Wealth Management Americas

Along those lines, Hull notes recruitment activities so far in 2017 are in line with earlier expectations of anywhere from 30% to 40% less activity than in past years. Savings are being plowed back into several different areas, he says. Those include supporting marketing and research programs along with pumping more resources into training programs developed at the local level.

“As we continue to decentralize we’ve decided to reduce our recruiting efforts and take that money to reward advisors who are already here,” Hull says.

The firm’s compensation grids used to consist of 34 pages, excluding footnotes. That’s now down by almost a third. Guidelines are now “more inclusive” where “most everything goes into the gross number” used to calculate advisor payouts, Hull adds. That includes ticket charges and other revenue streams from smaller households that in the past might’ve been excluded from counting towards gross production.

Jennifer Povlitz

UBS is also upping incentives for advisors to work together.

“We’ve tried to take away all of the details and individual caveats to our compensation grids which could be considered as disincentives to team building,” Hull says. “In effect we’re paying according to a team’s total production as long as advisors reach certain basic production levels.”

UBS is putting more emphasis on length of service in offering deferred compensation to advisors, he insists. “We used to base deferred awards on five different sets of criteria in the past,” Hull says. “We’ve taken those away and just basically went with longevity and productivity growth.”

Retirement deals are also getting a boost, he notes, both in terms of amounts as well as when advisors can get such payouts. “We see this as a way to build succession planning into the fabric of how our advisors think about building their business over time,” Hull says.

In the second quarter, UBS reported sequential revenue per advisor increased by $55,000 to a record $1.23 million. Meanwhile, invested assets for an average advisor jumped on a quarterly basis by $4 million to $169 million.

But such broad metrics can be deceiving since headcount numbers at UBS are “considerably” fewer than those at rival wirehouses, suggests industry recruiter Howard Diamond.

In the second quarter the wealth management Americas unit of UBS reported 6,915 financial advisors. That compares to 14,527 listed by Wells Fargo and 15,777 at Morgan Stanley. Meanwhile Merrill Lynch – not counting 2,000-plus consumer banking advisors – had a reported headcount of 14,811.

“By its very nature, looking at numbers like average productivity or average compensation makes UBS look better than any of its larger competitors,” Diamond says.

In highly competitive times he sees other major banks and wealth management firms seeking to cut costs by trimming layers of management. “One of the biggest complaints by advisors is bureaucracy and complex compensation grids,” Diamond says. “So these aren’t issues that UBS stands alone in trying to address.”

For UBS, its ability to execute on any pronounced march to decentralize operations is likely key to future growth prospects, adds the independent wealth management consultant.

“If they cut key thought leaders and lose too many experienced managers, advisors will be adversely impacted,” Diamond says. “Like other big brokerages, UBS still needs captains who can steer the boat through good times and bad.”

Putting more resources into training and support for current advisors, he agrees, might be a way to balance less recruiting activity. “But it still leaves UBS vulnerable to more attrition in the future of talented and experienced advisors,” Diamond says. “After all, recruiting isn’t done overnight – it’s a highly competitive and time-consuming process.”