EXCLUSIVE: UBS Slips Non-solicit Language Into Bonus Documents
(Updates last two paragraphs with details of the bonus payments.)
UBS Financial Services is requiring brokers waiting for their 2017 bonuses to sign agreements that open them to lawsuits and arbitration complaints if they try to contact former clients within 12 months of leaving the U.S. broker-dealer unit of the Swiss bank.
The restriction puts teeth behind UBS’s recent decision to pull out of the Protocol for Broker Recruiting in order to keep its almost 7,000 advisors in place, said several advisors.
Brokers eager to collect bonuses, which can be as high as 10% of the total fees and commissions they generated last year, are likely to sign without being aware of the new restrictions. That’s because neither managers nor the emailed documents call attention to the new restrictions, said the internal sources, who spoke on condition of anonymity.
In past years, non-solicitation clauses in UBS’s bonus agreements were effective only until exiting brokers paid off any balances they may have had on “forgivable” loans that the firm gave them as signing, retention or performance bonuses. The new document creates the client-information bar regardless of whether a broker has such loans.
The new restrictions, reviewed in part by AdvisorHub and included in documents now being sent to brokers who achieved new-asset and other “strategic objective” targets in 2017, also prohibit brokers from soliciting UBS colleagues to join them at their new firms for a year.
Violations of the solicitation prohibitions give UBS the right to seek damages and court-ordered restraining orders and/or injunctions against brokers signing the bonus documents.
UBS’s existing employment and retention agreements are not as tightly or as uniformly written as those of Morgan Stanley, which has been aggressively seeking court orders restraining brokers from possessing and using allegedly confidential client-contact information. Both firms left the Broker Protocol late last year in an attempt to retain brokers at a time when they have contracted their expensive recruiting of veteran brokers.
A UBS spokesman did not respond to a request for comment about the new language in the bonus-qualification documents.
The changed agreement is likely to be an effective deterrent to departures because of the deleterious effect that restraining orders can have on attempts to jump-start practices. What’s more, people who do not take the 2017 bonus currently due are essentially signaling their dissatisfaction and eagerness to leave, said people familiar with the new language.
Two sources independently said brokers who do not sign the agreements would have “targets on their backs.”
Without much conviction in their voices, the sources said they are hoping to stir an internal outcry against the new language that could persuade management to modify the clauses. They cited the firm’s decision in late 2016 to backpedal on a plan to eliminate a bonus tied to selling certain products after protests from some of the firm’s almost 7,000 brokers.
In an attempt to improve morale and retain advisors at a time when it has cut recruiting, UBS did not make significant payout changes to its 2018 compensation plan and even added “production” credits for small accounts referred to the firm’s call centers. That contrasted with the broad changes put into effect the previous year by UBS Wealth cohead Tom Naratil.
UBS is paying its “strategic award” bonuses for hitting 2017 targets later than usual, several brokers said. Brokers can choose to receive the bonuses in equal parts over seven years, in a cliff-payment at the end of seven years or elect to take some of the money in the form of an upfront forgivable loan that must be repaid if they leave. (UBS going forward is lowering the upfront percentage allowed to 50% from 70% as it tries to work down some $3 billion of loans to brokers on its balance sheet.)
The acceptance agreements for the 2017 bonuses are due in April.