UBS to Close U.S. Private Bank; Advisor Attrition, Client Exits Predicted

By Miriam Rozen July 27, 2020

UBS has unveiled to employees plans to shutter its U.S. private bank unit at the beginning of next year and recruiters are predicting advisor attrition and client defections.

Jason Chandler, head of wealth management USA, and Sylvia Coutinho, head of wealth management Latin America and country head of UBS Group Brazil, issued in June a company-wide memo detailing the plans.

The move is part of a reorganization in which UBS will offer comprehensive wealth management services in the U.S. through UBS Financial Services and UBS Bank USA, according to a company statement sent to FA-IQ. The plans were first reported by Citywire, then by Financial Planning and ThinkAdvisor.

“[W]e can provide all of our clients with a superior experience on a single platform, while also simplifying how we operate,” UBS says, according to the statement. Earlier this year, UBS streamlined operations and cut expenses, slashing about 500 wealth management unit jobs and paring its management layers.

The changes represent an effort “to continually simplify how we operate and connect more of our clients to the best of what UBS can deliver to them,” according to the memo sent to employees.

U.S. private bank clients “who move their relationships” to the UBS America wealth management unit “will have direct access to the broad capabilities and expertise of the world’s largest wealth manager, while still enjoying the high level of service to which they’re accustomed,” the memo continues.

Private bank advisors and their teams who make the transition “will gain direct access to products and subject matter experts that will support them in growing their business to new levels,” the memo notes.

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It is understood that U.S. private bank advisors who move to UBS Americas will be paid in accordance to the same compensation grid as FAs in that unit. 

Unanswered, however, is how many AUM credits UBS will assign the private bank advisors for the portfolios and balances of their existing clients who move with them to the wealth management unit. A UBS spokesperson declined to answer that and other compensation-related questions.

The spokesperson also would not provide the number of impacted private bank advisors. UBS Americas had 6,410 financial advisors at the end of the second quarter.

The U.S. private bank unit likely has no more than 200 advisors on its roster, estimates Louis Diamond, executive vice president and senior consultant at Morristown, N.J.-based Diamond Consultants, based on his conversations with advisors who have considered joining or leaving it.

Tough choices ahead 

The private bank advisors must make tough choices because of the reorganization, according to three recruiters.

They might choose to move to UBS’ wealth management unit and get paid under the traditional wirehouse compensation model rather than their current salaries and bonuses, the recruiters say. Or they might move to a rival private bank with hopes of taking some UBS clients with them, the recruiters say.  

“You’ll have attrition,” Diamond says. “Something like this is an event. It’s a catalyst, and it forces advisors to either recommit to the firm or gives them a really good reason to leave.”

Either way, the private bank advisors will face compensation risks, particularly since “their business is typically not very portable,” says Mark Elzweig, president of New York-based recruiting firm Mark Elzweig Company.  

Other firms that may consider hiring them typically expect private bank advisor recruits to bring with them only 20% of their client assets and scale their salary offers accordingly, Elzweig notes.

Bill Willis, president and CEO of recruiting firm Willis Consulting in Palos Verdes Estates, Calif., says private bank advisors who move to the wealth management unit are “going to be paid on exactly the revenue they bring in.” From UBS’ perspective, that means an end to “overpaying” an advisor, he notes.

Meanwhile, Elzweig says UBS’ “cost-containment” action allows the bank to reduce overhead by housing the private bank and wealth management advisors in the same facilities.

The reorganization also widens UBS’ potential to lend money to clients, a possible “boost” to the bank’s profitability and an outcome that fits “nicely into today’s holistic wealth management ethos,” Elzweig says.

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