UBS PW Pushing Fee-Based Business, Transactional Reps Upset

Mirroring an industry wide trend, UBS PaineWebber is encouraging its brokerage force to go fee-based by increasing the payout on fee-based business by an average of two to four percent net, according to brokers from the firm. At the same time, UBS PaineWebber management is penalizing transaction-oriented brokers by instituting a $12 fee for every stock/option ticket brokers write. The plan goes into

Mirroring an industry wide trend, UBS PaineWebber is encouraging its brokerage force to go fee-based by increasing the payout on fee-based business by an average of two to four percent net, according to brokers from the firm. At the same time, UBS PaineWebber management is penalizing transaction-oriented brokers by instituting a $12 fee for every stock/option ticket brokers write. The plan goes into effect on Dec. 1.

Perhaps Mark Sutton, the firm's private client group president, put it best in a video released to the brokerage staff: “If you do fee-based business, you just got a raise,” according to a Bethesda, MD, broker who saw the video. “I like it," the rep says. "I do a good fee-based business and, yes, I just got a raise."

The new compensation policy will hurt traditional, transaction-oriented brokers who still don't do a meaningful fee-based business.

"It's a terrible policy," says a UBS PaineWebber West Coast rep. “The average broker writes about 5,000 tickets per year. That's $60,000. This policy will personally cost me $20,000."

Just about every brokerage is pushing the fee-based, individually managed money concept. Most recently, Merrill Lynch raised the percentage it pays out on fee-based accounts. But Merrill also raised the payout for commission trades—but only for large accounts. The behemoth cut payouts for orders of less than $100. Obviously, brokerage brass believe that the only way to break the old, well-entrenched transaction business is to punish the traditional “stock jockey” while rewarding the new paradigm.

A Louisiana-based UBS PaineWebber fee-based financial adviser sees a revolution taking place in the trenches. "I've been transitioning to fee-based for a few years now and the new payout is great for me,” he says. “I can see how [transactional] brokers are complaining, but hey, you've got to change with the times and get up to speed. Fee-based is the way to go. It's the future and the future is now."

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