NEW YORK (Reuters) – UBS Wealth Management Americas unveiled its 2014 compensation plan on Tuesday, offering new expense accounts to brokers who produce annual revenue of at least $550,000 and eliminating broker pay for client households with less than $100,000 in their accounts.
Other changes include incentives to encourage the selling of financial planning products to households that have $1 million or more to entrust to the firm.
U.S. brokerage firms typically tweak pay plans each year to promote sales of particular products and services – and occasionally make major changes. But firms tend to move cautiously so as not to drive their best salespeople to rivals.
“We adjust to make sure our compensation plan aligns with our strategies,” Jason Chandler, head of the firm’s approximately 7,100 brokers, said in an interview. “These are minor adjustments rather than major changes.”
The firm, an outgrowth of the old PaineWebber brokerage and a subsidiary of Swiss banking giant UBS AG, will not pay advisers for working with any household with less than $100,000 at UBS, up from $75,000 this year.
UBS, like rivals such as Bank of America’s Merrill Lynch, already shuttles clients with less than $250,000 from branch-based advisers to its phone-based Wealth Advice centers. In 2013 to date, 52,000 households have made the move, Chandler said.
The firm also is tweaking its “net new money” bonus to push brokers them to work with wealthier households.
The bonus still applies to brokers who attract $5 million or more of new money over the year, but will apply only if the money comes from households with at least $1 million to entrust – unless the broker brings in $10 million or more. In 2013, brokers could qualify even if they got assets from two households with less than $250,000.
“We had too many advisers focused on households with lower levels than we wanted,” Chandler said.
The 2014 compensation plan also contains changes aimed at stoking brokers’ productivity.
The biggest carrot is expense accounts for “thousands” of brokers who previously did not have them and were dependent on branch managers for travel and entertainment outlays.
Any adviser who brings in $550,000 or more in commissions and fees annually will have a $500 account. Those who produce more than $1 million – and already have expense accounts – will enjoy increases of $1,000 to $2,000 for a total of as much as $7,000. Expense accounts for the top tier of multi-million-dollar producers remain at $10,000.
“It sounds petty, but expense account raises are big carrots because branch managers are getting stingier,” said one broker who spoke on condition of anonymity.
Other productivity changes are punitive.
HIGHER MINIMUMS
Advisers with eight or more years of experience must produce at least $350,000 in 2014 – up from $325,000 – to earn the minimum payout of 28 percent of the revenue they produce. If they bring in new assets of $5 million from clients, however, they are exempt from the penalty. Advisers with less than eight years’ experience have no production quota.
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UBS also is tightening its payout grid for brokers who produce between $300,000 and $600,000, the first such change in more than four years, according to Chandler. As of July 1, advisers will have to earn $425,000 to qualify for a 39 percent payout and $625,000 for a 41 percent payout. The 39 percent payout currently starts at $400,000 while the 41 percent payout began at $600,000.
Such changes are easier for brokers to accept when the stock market is roaring as it is today, said Andy Tasnady, who runs a broker compensation consulting firm.
UBS’s bottom and top payout rates – 28 percent on revenue of $200,000 and 45 percent on revenue of $3 million or more remains the same. But brokers can earn up to three percentage points more for hitting fee-based wealth management targets.
Chandler said about 25 percent of UBS Wealth Americas brokers now produce $1 million or more, up from about 10 percent in 2009.
On the flip side, UBS changed the penalty for advisers who offer discounts from the firm’s standard commission table. It now deducts $12 from advisers’ revenue totals for any discounted stock or option trade. Next year it will deduct $24 for any trades discounted by more than 50 percent, with the penalty ratcheting down to $6 for discounts of 1 to 15 percent or on any discounted trade with a commission of $500 or more.
WEALTH MANAGEMENT FOCUS
UBS last year began promoting financial plans to help wealthy clients meet long-term goals by allowing brokers to keep half of any fee between $1,000 and $50,0000 charged for the planning service and putting another 15 percent of the fee toward expense accounts. Chandler said as many as ten brokers have charged the $50,000 maximum per quarter this year.
Planning revenue soared by 100 percent over 2012 and about 60 percent of advisers now do plans at an average fee of $4,000, as a result, Chandler said.
To keep momentum going, UBS is bumping the expense account contribution to 25 percent of the fee charged for the financial plan on the theory that clients on plans have higher satisfaction levels than others and give the firm more assets to manage, Chandler said.
UBS also is giving brokers a deferred cash and stock bonus for wealth management-related revenue that surpasses previous-year levels.
(Reporting By Jed Horowitz; Editing by Tim Dobbyn)