UBS Aligns Advisors Bonus Strategy with 2015 Growth Plan
UBS AG (OUBS) is planning to reapply its successful strategy of paying extra to the financial advisors to expand its client base. This extra payment is made in the form of a bonus with the objective to tempt advisors to bring in more assets and customers.
The Swiss banking giant’s current bonus system requires new assets accumulation to exceed $5 million to make an advisor eligible for the additional benefit. However, the bank with 7,114 advisors as of Sep 30, 2014, has the track record of frequently tweaking these minimum prerequisites as part of its growth tactics.
The bank’s U.S. wealth management unit plans to lower the minimum threshold to $1 million for the next year, though this comes with a catch. The advisors aspiring to take advantage of this opportunity will also have to bring a fresh client account of at least $1 million. However, the new account condition will be removed if the advisor manages to draw assets worth $10 million or more.
The bank kept the core payout scheme unchanged and announced a minimum annual bonus of 0.50% on $1 million new assets as well as 3% annual bonus on assets exceeding $20 million. Moreover, the company put a ceiling of $125,000 per adviser.
Besides providing such extensive opportunities to its advisors, the bank also revealed its intention to increase maximum payout, which depends on an adviser’s wealth management production, to 6% from the current level of 3%.
In addition, the advisors bringing in additional advisory, insurance lending and planning fees revenues will be entitled to receive the bonus. This inclusion was made by UBS to persuade advisors to diversify and broaden their client base by focusing on all kinds of clients.
The bank will also increase the compensation deferral rate to 70% in 2015 from the current rate of 50%. However, the 70% cash to be deferred and vested over six years will be offered in the form of notes to provide early withdrawing option to the advisors.
Over the last five years, the bank has been employing similar strategies, which has helped it in strengthening its association with advisors. By undertaking such measures, UBS expects to encourage advisors to become more attentive to the clients’ needs and handle them efficiently, which in turn will boost its expansion goals.
Among U.S. banks, Bank of America Corp’s (BAC) Merrill Lynch announced compensation plans similar to UBS’ strategy, while Morgan Stanley (MS) treaded a different path by raising its pay deferrals. Also, several banks like Wells Fargo & Co. (WFC) and Morgan Stanley are focusing on employees by either increasing cash bonuses or hiking commissions.
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