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UBS reviews fiduciary compensation policy with an eye on SEC

The SEC's bid to revise standards of conduct for brokers and advisors has put UBS in something of a holding pattern.

The brokerage firm, citing the SEC's ongoing deliberations, is telling its roughly 6,900 advisors that it will largely refrain from changing policies it put it in place a year ago in response to the Department of Labor's fiduciary rule.

For the time being, UBS advisors will continue to be compensated on clients retirement assets under the company's Retirement ROA policy.

"Given the uncertainty regarding the SEC proposal and general regulatory shift toward a higher standard, we believe it is in the best interests of our clients and advisors to continue with our Retirement ROA solution. By doing so, we can avoid making significant changes until there is greater clarity around the final standard," Brian Hull, head of wealth management USA, and Jason Chandler, co-head of investment platforms and solutions, said in a memo obtained by On Wall Street.

Clashes over the Labor Department's fiduciary rule have carried over into the debate on the SEC's proposed regulation.
August 14

In response to the fiduciary rule, UBS had tweaked how it compensated advisors with regard to advising on clients' retirement assets. The firm pays advisors based on a formula that takes into account the advisor's production based on his or her retirement assets from the previous year. Wirehouse advisors are typically paid based on a production grid, not including bonuses and penalties.

The firm's policy was intended to avoid conflicts of interest and comply with the now vacated Labor Department regulation.

While the firm will maintain that approach for the time being, it will tweak how it calculates compensation. UBS will use more current 12-month trailing production figures for the period ending June 30, and it will also provide two rates: one for advisory accounts and one for non-advisory accounts.

The changes are effective Oct. 1, according to the memo.

UBS NYC Headquarters Bloomberg News photo
A woman exits the UBS building in New York on June 9, 2003. UBS AG, Europe's largest bank by assets, is dropping the PaineWebber and Warburg brands from its brokerage and investment bank today, scrapping two of the best-known names on Wall Street and in the City of London. Photographer: Daniel Acker/Bloomberg News.

UBS is not alone in reevaluating policies and procedures put in place to comply with the fiduciary rule. Merrill Lynch, for example, is currently revisiting restrictions it implemented on commission-based retirement accounts.

The SEC's move to update broker standards, driven by Chairman Jay Clayton, could affect whether firms move forward with yet more changes. The proposal, known as Regulation Best Interest, has come under criticism from fiduciary advocates for not going far enough to protect investors. Some industry trade groups say it imposes too many burdens on firms and advisors.

It's not clear how long it will take the SEC to finalize its rule. The regulator is currently reviewing more than 3,000 comments it received as part of a public comment period that ended earlier this month.

For its part, UBS is telling advisors that it will continue to monitor developments and update advisors accordingly.

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