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Comp Plan Strategies: Wells Takes Aim at Small Households, UBS Stays the Course

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UBS is making almost no changes to its 2016 comp plan, while Wells Fargo is incentivizing its brokers to either grow their small household accounts or give them up, according to people familiar with the firms' plans.

Both firms unveiled the plans on Thursday to their more than 22,000 advisors in total.

Neither wirehouse changed its core pay grid. That move stands in contrast to Merrill Lynch which earlier this month told its nearly 15,000 advisors that grid ranges below $1 million would rise by $50,000 in 2016. In other words, some Merrill advisors would be required to generate additional revenue in order to earn the same payout next year.

UBS' sole change was to enhance a teaming award. The steady-as-she-goes approach will likely be welcome by many advisors, particularly lower producing advisors, industry insiders say.
"Advisors love no change," says Andrew Tasnady, head of an eponymously-named compensation consulting firm.

"Advisors believe any time there is a change, even when there are pluses and minuses – they fear that it's a net negative," he adds. "It's probably a relief."

Jason Chandler, head of wealth management for the Eastern United States at UBS, says it is among the fewest changes that the wirehouse has made in the last five years.

"What that indicates is our confidence that our FA compensation plan is competitive and most importantly fits our strategy of becoming the firm of choice of high-net-worth and ultrahigh-net-worth clients," Chandler tells On Wall Street.


Wells Fargo, meanwhile, made two changes to its comp plan. First, the wirehouse tweaked its small household policy to encourage advisors to grow those accounts or drop them.

In 2016, advisors at Wells Fargo can choose to be compensated for offloading their households with less than $65,000 in assets to a junior financial advisor in the branch – what the firm calls financial relationship advisors.

Advisors who take the firm up on the offer will have two choices. They can either accept their 2015 12-month trailing production on the household or 40 basis points. The payment is in the form of deferred comp.

Wells Fargo is not mandating its more senior advisors take this course. The firm says the option is meant to allow smaller households to receive more attention and that it frees advisors to focus on more lucrative clients.

"The reality is that the people that do transition the bulk of their [small] accounts are better off and they're glad they did," says Tasnady, who notes that those advisors tend to have more time to spend on serving larger clients.

Advisors, however, are sometimes reluctant to give up small accounts because they are either related to their larger clients (e.g., father and son) or may develop into larger clients one day.

Michael King, a recruiter in New York, says advisors need to be careful about which clients they offload.

"If you have a younger person starting out that you think is going to become wealthy – well if you give it to a call center, then how are you going to get it back?  So a broker has to be smart about what accounts he is going to give up and which you are going to keep," King says.

A UBS advisor, who asked not to be named, agreed.

"If I want to serve $8 million or $10 million clients, then I can't take on [even] a $1 million client," the advisor says, noting that there are only so many hours in the week to devote to clients' needs.


Wells Fargo raised the bar on several hurdles for bonuses. Advisors wanting to earn an award for advisory flows will need to net $10 million under the 2016 plan, up from $5 million under the 2015 plan.

"If someone has a $100 million book of business, getting another $10 million in advisory fees is a big hurdle," Tasnady, the compensation consultant, says.

The firm is also awarding advisors for doing $8,000 in lending credits, up from $6,000 last year. And the firm is awarding advisors for having 75% or more of their household accounts above $250,000 in size per household.

Payment is made in the form of deferred comp for these awards, and advisors can earn extra for hitting all three hurdles.


UBS enhanced an award aimed at promoting teaming among its advisors. Under the new plan, if a team has a combined production of $2.5 million or more and the average production per FA is $750,000 or more, then all the advisors can earn at the grid level of the highest producer on the team, Chandler says.

"Assume that you have a $4.5 million team, the senior producer does $4 million, the junior FA does $500K. They would qualify for this highest producer grid because they do more than $2.5 M and their average is above $750,000," he says. "So the junior FA would qualify for the higher grid level."

The effect, Chandler says, is to encourage more teaming efforts among advisors.

"Teaming is a critical element of our strategy and we know from listening to our clients and that our teams are best positioned to deliver holistic wealth management," he says. "We also know from our own research that teams experience the highest level of client satisfaction and asset growth."

King, the recruiter, says it is in line with other firms.

"They are all trying to encourage that because it keeps brokers from leaving. It's harder for teams to move. And it helps with succession planning," King says.

The UBS advisor says he has been happy with UBS' comp plan.

"The UBS tagline is advice beyond investing. That's so much of what I do. And I think it's set up to reward you for doing that," he says.

The advisor adds that the most pleasant surprise was that the wirehouses did not follow Morgan Stanley's lead, which last year made some small cuts to deferred compensation for some advisors.

"I think there was such a negative reaction to that from brokers," the wirehouse veteran says.

He adds:  "It's kind of follow-the-leader, and the leaders are Morgan Stanley and Merrill Lynch; Morgan in terms of the FA stuff and Merrill in terms of a bank. So when you saw they did not make a lot of changes [this year], I didn't expect UBS to make a lot either."

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