UBS Puts New Caps on Managed Account Fees
As big brokerage firms continue their attempts to funnel client assets into fee-based advisory accounts without violating new “reasonable” compensation and level-fee standards, UBS Wealth Management Americas has put a 2.5% maximum fee across all its advisory account programs.
As of July 1, the 2.5% maximum replaced fee caps that ranged from 1.25% to 2.8%, depending on asset classes and types of management programs, according to a June 30 regulatory filing for the firm’s five wrap-fee programs that hold billions of dollars of client assets.
Brokers who have discretion over customers’ managed account investments through UBS’s hallmark Portfolio Management Program (PMP) and who focus on equities could take a hit if they actually charged the maximum 2.8% previously allowed for equity and balanced-account assets. By the same token, they could glean higher payouts while customers pay more if they predominantly invested in fixed-income assets that had carried a maximum 1.25% PMP fee.
In the regulatory “brochure” on the wrap-fee programs filed with the Securities and Exchange Commission on June 30, UBS focused on the upside of the changes for PMP account investors.
“Fees for existing Advisory Accounts will not be automatically increased as a result of these changes,” it says.“PMP accounts currently priced over 2.5% will see a fee reduction.”
The uniform maximum fee also applies to the firm’s Managed Portfolio Program (MPP), Consolidated Advisory Program (CAP), Access and Managed Accounts Consulting programs, with varying effects on customers and brokers.
PMP, which is advised by outside money manager Richard Bernstein, had charged a maximum 2.8%, inclusive of his management fee, which will now be added to the wrap program charge. Similar changes have been made for the separately managed account Access program, in which UBS sub-contracted with outside advisors and charging up to 2.8% on equity accounts but only 1.25% on fixed-income accounts. In essence, UBS has “unwrapped” the portfolio advisor’s fee from all its managed account programs. The manager fees generally range from 0.25% to 0.75% on equity accounts and 0.10% to 0.60% for fixed income, according to the filing.
A spokeswoman for UBS did not return a request for comment on the effects of the changes on customers, advisors and the firm. The fee schedule alterations were reported earlier by “FundFire.”
The fee changes appear to be driven by the new DOL fiduciary rule retirement account conflict-of-interest avoiding requirement that fees on similar asset types be “level” so that brokers are not incentivized to sell more lucrative products.
Merrill Lynch in February lowered the ceiling on its advisory accounts to 2.2% from 2.7%. Morgan Stanley Wealth Management caps fees for its Consulting Group Advisory program at 2.5%, according to a filed on June 30 along with its ADV.
UBS has generally trailed its larger rivals in announcing other policies to conform with the DOL rule, with executives saying they did not want to stir waters for brokers and customers given the potential for changes being considered by the Trump administration’s new Labor Secretary.
The brochure also provided additional details about slimmed-down recruiting packages that UBS and its rivals have offered since the said last October that the fiduciary rule would prohibit back-end bonuses tied to hitting retirement account asset transfer and revenue growth targets.
Bonus offers made since November 1, 2016 “do not include recruitment incentives triggered by production, asset levels or other targets at UBS regardless of account type,” the UBS filing says.