Firm dangles big carrot to keep advisors from moving clients

Firm dangles big carrot to keep advisors from moving clients

Firm dangles big carrot to keep advisors from moving clients One of the industry’s biggest firms has set a controversial precedent in announcing it will pay retiring advisors more than double their annual compensation if they agree to keep their clients within the firm rather than shop their books for the highest bidder.

UBS’ U.S. wealth management business recently announced it is going on the offensive in an effort to retain the business of soon-to-be retiring advisors. ALFA, which stands for Aspiring Legacy Financial Adviser, is a new program offered by the firm to its nearly 7,000 brokers that provides a serious incentive for them to move their book to another UBS advisor upon retirement keeping it in-house.

It’s simply good business.

The fact that advisors increasingly are choosing to leave their existing firms to establish their own shops or to join independent broker-dealers has the big wealth management machines like UBS doing whatever they can to hang on to assets. In the U.S. it’s not uncommon for firms to pay a signing bonus to advisor defectors that’s as much as three times the annual revenue generated from fees and commissions.

With wealth management such a big driver of revenue and profits at the big banks, advisor retention has become a priority for everyone and not just UBS. Merrill Lynch, for instance, pays 192 per cent of their annual production to retiring advisors; Morgan Stanley has an arrangement that allows a retiring advisor to benefit in the future from revenue generated by the inheriting advisor.

For UBS, not only is ALFA a vast improvement from its previous retention program, which offers advisors up to 230 per cent of annual production after five years working at the firm compared to 180 percent after 10 years, it puts its competition seriously on the defensive.

How is it being received by the rank-and-file at UBS?

“I view this as a pot at the end of the rainbow when I retire,” one longtime UBS advisor told the Wall Street Journal.

Can Canadian advisors expect the same?