UBS’s Naratil and Hull Apologize for Non-Solicit Document Snafu
The co-head of UBS AG’s wealth management business and the head of its U.S. brokerage force offered mea culpas on Wednesday for embedding non-solicitation clauses into brokers’ bonus-acceptance agreements without calling attention to the clauses.
In a conference call to most of the bank’s 6,800 U.S. brokers, Global Wealth Management Co-president Tom Naratil and Wealth Management Americas client advisory group head Brian Hull acknowledged that the firm was ham-handed in the way it delivered “important” information affecting compensation and the work environment, according to several people who listened to the call.
However, the executives affirmed the broker-dealer’s decision to restrict advisors who leave from soliciting clients or UBS employees to their new firms for a year. Though Switzerland’s biggest bank will not retract the non-solicit language that gives legal force to its recent decision to leave the Protocol for Broker Recruiting, they said that any broker who already signed and returned the bonus agreement will be able to retract it.
The new policy, embedded in agreements allowing most brokers to receive thousands of dollars of bonuses for reaching sales and business objectives in 2017, is aimed at creating uniformity among the various non-solicit clauses contained in employment, trainee, account inheritance and other contracts signed by brokers across the country, the executives reportedly said.
UBS spokespersons did not respond to requests for confirmation of the unusual apology call.
Several sources said that they were dismayed by one of the executive’s conclusions that the decision to create a uniform non-solicitation policy will be good for the firm, for UBS shareholders, for clients and for advisors. The call, which lasted about three minutes, did not include a Q&A period for the advisors, they said.
The sources, who spoke on condition of anonymity, were divided on whether most of their colleagues will forego their 2017 bonuses rather than allow the firm to constrict their freedom to move. The inability to call former clients within days of moving is a death threat to starting a new business, one of the sources said, calling the non-solicit clause a trigger for “indentured servitude.”
Another said advisors are outraged over the Hobson’s Choice they have been presented. “Most people aren’t going to sign it,” he said of his high-producing colleagues who would be giving up bonuses they earned the previous year that generally range from $50,000 to $100,000.
Two sources said that UBS was under-handed in the way it orchestrated the non-competes and that morale has been widely damaged. They also questioned whether the apology call will achieve its purpose, noting that Naratil devoted much of his discussion to explaining the alternative agreement changes that UBS officials had weighed to create non-solicitation uniformity.
In previous years, UBS’s bonus agreement gave the firm the right to enforce non-solicitation agreements until advisors paid off balances on “forgivable loan” promissory notes they may have signed. The new agreement will affect any advisor accepting the bonus, whether or not he or she has a loan balance.
Brokers, who have an April deadline to return their acceptances, have the option of receiving the bonus money in equal parts over seven years, in a cliff-payment at the end of seven years or in a combination that would include an upfront forgivable loan.