UBS ends fiduciary-era pay policy, drops non-solicit language (2024)

UBS is revising its fiduciary policies and dropping plans to introduce new non-solicitation language into bonus agreements next year, according to a memo executives sent Monday morning to the firm’s roughly 6,900 advisors.

The firm is ending a special compensation policy related to brokerage retirement accounts. UBS had introduced a different way to calculate advisor pay in order to comply with the Department of Labor’s fiduciary rule and still offer clients a commission-based retirement account offering.

Starting in January, the firm will calculate compensation the “normal way,” according to the memo.

The Obama-era fiduciary rule prompted a number of firms to revise compensation policies and review funds available on their platforms. The regulation was vacated earlier this year by a federal appeals court hearing a lawsuit brought by Wall Street and business trade groups.

Brokerages have since been revisiting their compliance policies. For example, Merrill Lynch recently reintroduced commission-based retirement accounts after having ceased offering that option when the fiduciary rule was in effect.

New regulatory changes, however, are on the horizon.

The SEC is developing a new standard of conduct for brokers and advisors. The commission is currently reviewing public comments it received in recent months on its proposed Regulation Best Interest.

Meanwhile, several state regulators and legislatures are considering creating their own fiduciary rules. New Jersey, for instance, held public hearings on its proposed fiduciary rule that would apply to brokers and advisors operating in the state.

In the UBS memo, executives reiterated to advisors that they are monitoring these developments.

“Given this, we must still manage conflicts where we act as a fiduciary to retirement accounts. To address these conflicts, any allocation changes or switches among advisory programs and new retirement advisory relationships will be subject to a level fee structure,” the memo says.

UBS will also notify clients in December year-end statements that the firm doesn't act as a fiduciary in brokerage retirement accounts or when recommending enrollment in an advisory program. The company will also “clearly highlight firm and FA conflicts in brokerage,” the memo says.

And in a move that will likely please advisors, the firm will not not introduce new non-solicitation language into bonus awards next year.

Bryn Colton/Bloomberg

Earlier this year, the firm had surprised brokers when it introduced new language that was highly restrictive, requiring advisors that signed a bonus agreement not to solicit clients should they leave the firm in perpetuity. Within a week, however, UBS leadership changed course, pulling the language and saying they would introduce a new non-solicitation agreement in 2019 that would last for only 12 months.

Now, even those plans are off the table.

“A lot of these firms make a decision and they stand by it no matter what. They don’t want to admit that maybe they made a wrong decision. UBS listened,” says Glenn Taylor, president of Taylor Steele & Associates, a consulting and recruiting firm which has worked with UBS.

Executives say they’ve heard advisor feedback on this issue and no such language will be introduced after all. It’s “what we also expect for future years’ awards,” the memo says.

“As a leadership team, we strive for openness, for always listening to feedback and for taking action to better serve the needs of our clients, our employees and our shareholders — and that includes changing course when necessary. A big part of that is encouraging dialogue and creating a culture of transparency and accountability,” the memo says.