UBS Cuts Rookie Brokers, Raising Questions About Firm’s Next Move
By Helen Kearney
September 23, 2009
The decision by UBS to cut rookie brokers has raised questions in the industry about their wealth management strategy in the United States.
UBS intends to layoff around 180 junior advisors this week, according to sources close to the firm. The cuts will affect advisors who are new to the field or recently completed advisor training at the firm.
This follows a major recruiting push at the end of last year, when the firm reportedly offered deals of up 260% and attracted 153 new advisors, only to see that turnaround in the second quarter of this year, when a net 821 advisors left the firm, along with $5.5 billion in client assets.
A UBS spokesperson declined to comment on the reports.
Mindy Diamond, a New York-based industry recruiter, says this development is not only bad for the trainee advisors, it also sends a negative message to the more experienced, high-producing teams. “The fact they’re cutting the next generation, the advisors who could represent the succession plan for these (experienced) teams, says they’re in major cost cutting mode and things are getting worse,” she adds.
It also adds to the uncertainty surrounding the firm’s next possible action, Diamond says. There’s been speculation that the firm is waiting for Robert J. McCann, the former head of global wealth management at Merrill Lynch, to come on board to get the division ready to sell to private equity, or another firm, she says. “I had an advisor tell me this morning that UBS is radioactive right now. Even if they offered a 500% (recruiting) deal it would be hard for an advisor to justify a move to UBS to their clients,” Diamond says. [McCann is reportedly trying to settle his lawsuit with Bank of America, which took over Merrill. The dispute centers on a non-compete clause that blocks McCann from working for a rival firm for a 12-month period.]
Alois Pirker, research director at Boston-based consultancy Aite Group, says actions by big firms to cut trainees poses a problem for the future of the industry. “The average age of financial advisors is well into the fifties, and there’s a lack of new folks to fill the gaps,” he says. He also sees the move as a cost-cutting measure. “Firms can spend a lot of money to train advisors only to see them jump to another firm,” he says.
The decision to cut these lower-producing brokers is also in line with comments made by Jamie Price, head of the wealth management advisor group at UBS Americas, in an interview in the upcoming October issue of On Wall Street. He said the Americas division intended to differentiate itself from the new “mega-firms” on the Street and focus on high-net-worth clients. “The $1 million to $10 million range is a large asset opportunity,” he said in the interview. “In every market we operate in, an advisor has a significant opportunity to operate in that range,” he said.
Price also said this shift in focus also spurred the sale of 55 smaller market branches to St. Louis-based Stifel Nicolaus earlier this year, and aligns the Americas division with UBS’ global wealth management strategy.