(Adds that eliminated products would be noncompliant, contracts
must be changed by January)
By Elizabeth Dilts
NEW YORK, June 1 UBS Group AG is
changing the way it pays U.S. financial advisers on retirement
accounts before a U.S. Labor Department rule goes into effect
next week, and halting the sale of a small number of
noncompliant products, a senior UBS wealth executive said in an
Advisers in the Swiss bank's Americas wealth management
business now will be paid based solely on the amount of assets
and not the volume of transactions or the products they
recommend for retirement accounts, said Tom Naratil, who runs
the operation. UBS was in the process of informing its nearly
7,000 advisers in the Americas on Thursday.
"If nothing changed year over year (the adviser would) be
paid exactly the same in terms of dollars and cents," Naratil
said. "Whatever decision he and the client make, it doesn't
impact his rate of pay."
UBS also will stop selling a "small list" of products that
do not comply with the so-called fiduciary rule, such as
exchange-traded notes it issues itself.
Even with the changes, UBS is allowing customers to maintain
most options they previously had.
For instance, customers can still opt for accounts that
require them to pay commissions on each transaction, rather than
a flat fee based on assets. UBS will still receive the
commissions, but because they no longer factor into pay,
advisers will not have an incentive to repeatedly trade in
retirement accounts for the sake of higher bonuses.
In taking this approach, UBS will have to insert new
language into contracts before the fiduciary rule goes into full
effect in January. The rule is intended to force advisers to put
customers' best interests ahead of profits. By signing documents
that include a "best interest contract exemption," customers are
acknowledging that the products and accounts they choose may not
be favored by the Labor Department.
UBS is the last of the big four U.S. brokerages to detail
plans for compliance with the controversial rule, whose fate has
been in question.
Earlier this year, President Donald Trump ordered the Labor
Department to review the rule, which could affect the final
outcome. As it stands, implementation begins on June 9.
UBS chose its approach to keep client disruption to a
minimum and to make sure the it can adapt if the rule is
delayed, changed or repealed, Naratil said.
UBS has chosen a path similar to Morgan Stanley and
Wells Fargo & Co, which are also keeping
commission-based retirement accounts. Bank of America Corp
is taking the most conservative approach by moving
nearly all retirement accounts to a fee-based model.
(Reporting by Elizabeth Dilts in New York; Writing by Lauren
Tara LaCapra; Editing by Cynthia Osterman and Jonathan Oatis)