UBS restructures US private banker bonuses

European wealth managers may be interested to learn of the generous terms being offered to some of their colleagues in the U.S.

UBS has reportedly adjusted its US bonus structure in an effort to lure senior high net wealth advisors from rivals. According to The Wall Street Letter , advisors who join the bank are now offered a first-year package equivalent to 120% of the revenues they earned for their former employers during the previous 12 months.

On top of this, they are then paid commission equivalent to 80% of previous client assets within the next 24 months.

Headhunters say the deal is considerably more generous than anything on offer this side of the Atlantic, where banks are increasingly moving away from the commission-based model, or are only paying commission on new funds brought in, not on repeat business.

"It's great news for US wealth managers," says Harry Pilkington, a private banking specialist at search firm Armstrong International. "If you're hiring top teams over there you're now going to have to give them an upfront payment of more than 100% of the previous 12 months' production."

James Younger, a consultant at search firm Culliford Edmunds, says pay in Europe is more commonly based on higher base salary plus a bonus. A typical client advisor in Europe is paid a base of salary of 80,000 to 90,000, plus a discretionary bonus of up to 100%, he says.

With banks like Citigroup building their UK wealth management presence, and experienced asset gatherers in short supply, recruiters say the US system of upfront payments could be one way of luring new staff. "Given the shortage of talent available on the UK market, it would make sense for some organisations to develop this strategy for senior lateral hires," says Mark Somers of search firm The Somers Partnership.

The silver lining comes with an inevitable cloud, however: bankers who join UBS under the new payment programme are obliged to stick with the bank for nine years.

If they leave before the time is up, they have to pay the upfront payment back to the bank. Under the previous pay schedule, bankers were locked in to six years at 100% of revenues earned at their former employers.