Making Field Managers Great Again: UBS Takes a Stab
UBS unfurled a provocative plan on Wednesday to buy broker loyalty and productivity through higher payouts, but the most radical change at the Swiss banking giant’s U.S. brokerage may be the sales reorganization aimed at returning power to branch managers, according to current and former employees and consultants.
The new operating model, which eliminates all regional sales managers and dozens of branch complex managers, is “designed to move decision-making and resources closer to clients,” UBS Americas President Tom Naratil said in unveiling the plan that insiders had been buzzing about.
That wording is code for saying that the bank-owned brokerage model that UBS, Merrill Lynch, Morgan Stanley and Wells Fargo Advisors have adopted since the financial crisis has alienated managers and brokers while doing little to enhance bottom lines or help clients, Wall Street veterans said.
“It looks like the first step in changing the culture of the wirehouses that had disenfranchised the field generals,” said Pat Mendenhall, who spent almost 20 of his 33 years in retail brokerage at UBS and its PaineWebber predecessor before founding U.S. Capital Advisors in Texas. “It’s one of the smartest things I’ve seen coming out of those organizations in a decade.”
Delegating decisions about things as simple as adjustments on client fees and requests for support personnel to remote corporate offices has been alienating brokers and disenfranchising branch managers, industry veterans said.
“This whole thing boils down to field management,” said Rick Peterson, a veteran retail broker recruiter in Houston. “Brokers want to know whether their managers have the power and will to support their business, whether he or she is likable and what happens inside the office. It’s not pay packages that keep them in their seats.”
Whether UBS has the operational expertise to execute the sweeping change orchestrated by Naratil is another question. Many managers who were skilled at working with brokers and watching branch bottom lines have left UBS and other wirehouses since the financial crisis, current and former brokers said. The Houston office complex once run by Mendenhall has had five changes of management since he left in August 2009, he said.
If UBS’s restructuring works, Naratil, a former chief financial officer of UBS Group AG, could take credit for revolutionizing the retail model across Wall Street.
“It will be interesting to see if this gives the other firms air cover to make the draconian changes that are needed,” said John Straus, a former head of private wealth management at UBS and at Morgan Stanley. Straus is now chief executive of FallLine Securities, a boutique firm in Darien, Conn.
But culture doesn’t change overnight, Peterson cautioned, and Naratil’s plan is complicated by vast personnel and pay changes that will distract brokers and management alike.
Several branch managers whose compensation has long been tied to hiring new advisors will likely have to modify behavior as their payout moves more directly to an office profit-and-loss model, some said. Meanwhile, hiring offers that some branch and complex managers have made in recent weeks have been frozen in midstream, they said.
The new sales structure, to be sure, decentralizes decision-making, at least on paper. UBS Wealth Management Americas is expanding its branches to 208 from 189. On the flip side, complexes—now called “markets”—are being reduced to 43 from 63.
“It’s a flattening of the pyramid to a more evenly distributed structure,” said Bill Butterfield, a senior analyst with Aite Group’s wealth management system. “With these firms that have a lot of advisors you can get these large complexes with 100 advisors in each one. It makes personal relationships tougher.”
In another move aimed at making UBS a happier place to work, Naratil has eliminated some of the so-called nuisance costs that brokers say have been enduring as a result of centralized policies.
The $12-per-trade transactional charge imposed on brokers in an attempt to prod them to convert clients to fee-based accounts is being eliminated. On the flip side, small-account charges, credit card fees and some other administrative charges paid by UBS customers will count as production credits for brokers, something not totally consistent with the firm’s earlier efforts to have brokers shed small accounts.
Mason Braswell contributed reporting to this story.