UBS Polishes Offers for Private Bankers with Upfront Cash
UBS Wealth Management USA has recast its offers for private bank recruits as it looks to make its recruiting deals more attractive to the non-traditional hiring pool, according to two recruiters with knowledge of the firm’s deals.
UBS has had an established track record for hiring advisors from private banks, nabbing the vast majority of around a dozen large teams that have exited from J.P. Morgan Private Bank over the past year, for example, but the wirehouse was finding it increasingly difficult to compete as rivals, including Morgan Stanley, stepped in with their own offers that often included upfront notes.
UBS hiring managers “are trying to be as creative as possible and the creativity leads to enhancement in the deals,” said Richard Kronman, a Malibu, California-based recruiter at Kronman, Matthew & Associates who recruits for UBS but who has not negotiated any of the private banker deals specifically.
A UBS spokesperson declined to confirm the change or comment on its recruiting offers.
Previously, UBS’s private bank deals may have included a small portion of upfront signing money. But the cash portion was well below 60% as they were back-weighted to account for the risks associated with hiring salaried bankers whose customers can be more closely tied to the parent bank and often come with garden leaves and stricter non-solicitation clauses, recruiters said.
A UBS team in Fort Worth, Texas earlier this month agreed to a temporary restraining order blocking them from soliciting their former clients from J.P. Morgan.
The new deals, however, more closely resemble offers UBS or other wirehouses would make to a traditional broker. Those deals, which can reach 300%, include upfront forgivable loans of around 150% of trailing-12 that are forgiven over a period of around 10 years.
UBS’s willingness to put more money on the table upfront likely signals that its bank recruits have been paying off, said Louis Diamond, an industry recruiter in New Jersey. Private bankers have clients with significant assets who are interested in borrowing, including commercial lending, and might use the wirehouse’s investment banking unit’s services, he said.
“Honestly, they are great businesses to go after, as long as you price them right. And UBS kind of cracked the code,” said Diamond, who noted he was not familiar with the modified UBS offers.
To further hedge their bet on hiring bankers, wirehouses, including UBS, often discount the total production when they calculate deal offers based on an estimate of how much of the banker’s book will likely transfer, recruiters say. A large Dallas team that UBS had hired, for example, had $75 million in revenue but UBS based its offers on the expectation that only around half of that amount would transfer, a source close to the team said at the time.
And for a private banker, the risk of losing some clients may be worth the reward. In addition to the recruiting deal, they may stand to earn more as commission-based brokers, who can take home as much as 50% of their revenue, rather than under the traditional salaried private banking model.
“These private bank advisors might be generating $15 to $20 million in annual revenue, but they might only be getting paid $400,000 in salary,” Diamond said.