UBS And Morgan Stanley Get Aggressive; Five Reasons Why The Private Banking Model Continues To Unravel

UBS continues to have enormous success recruiting private bankers away from J.P. Morgan, Goldman Sachs, and Bank of America. And now, Morgan Stanley has thrown its hat in the ring, but this isn’t that story or article.

The focus today is the reason why private bankers have become such easy targets in today’s recruiting landscape.

There are five principal reasons that billions of client assets have migrated away from private banks in the last year, some of which you may have not even considered. Let’s deconstruct a movement that doesn’t show any signs of slowing down.

1. Depressed comp grids, or no comp grids at all! Wealth management firms are making clear and concise claims that private bankers are GROSSLY underpaid. J.P. Morgan has no comp grid whatsoever. Goldman Sachs had a grid that tops out at 30% and an annual draw (yikes). The Bernstein grid tops out at 23%. Given the difference in a 50% grid at UBS or Morgan Stanley, private bankers are being shorted in a massive way on their career and lifetime earnings.

2. Subjective compensation? Didn’t we all believe that Wall Street is the ultimate capitalistic endeavor? The term ‘eat what you kill’ originated on Wall Street. Not so much at J. P. Morgan, BofA, and Citi. Their private bankers depend on annual reviews by management focused on their own P&L handing out annual bonuses. Subjective compensation is a cultural cabal. Walk away from it.

3. Recruiting Deals have skyrocketed for Private Bankers. UBS has put together a deal that no longer considers W-2 compensation for private bankers. Show me your scorecard, or gross credits, or whatever system is used at each of these private banks and put together a monster deal. No longer are private bankers seen as secondary recruiting options, they are being heavily pursued. Private bank recruits are cashing ‘walk in the door’ checks of $5M-$40M bucks. **UBS has added guaranteed salaries for a decade on top of those checks.

4. Massive disparity in retirement compensation. Morgan Stanley, UBS, and Wells Fargo all have large bonus structures attached to advisors choosing to retire from their current firm. 200-260% of current annualized revenue. Meanwhile, Goldman Sachs will give you a multiplier on your final year W-2 compensation (seriously lol!). Private bankers are missing out on an extra $10-$15M in cash compensation as they exit the business if they remain in the private banking world. Read that again.

5. Freedom and Legacy. In the private banking world, you are forced to move and distribute relationships and accounts whenever you are told to do so. You don’t own any relationships no matter how hard you’ve worked on it. At J. P. Morgan you can bring in a $500M account, get a year-end bonus based on that ‘win’, and never get paid on it again no matter how many times the account owner calls you for advice over the next decade. At UBS, First Republic, or Morgan Stanley you get paid every month, every year, and on every transaction for as long as the account remains with your team. It’s the difference between a one-time payout of $200k and $4M over 10 years. To further explain ‘freedom and legacy – you set up the team you want, work with who you want when you want and how you want. And should you want to add your children into your business as you get closer to retirement YOU get to make that decision.

Might as well add a 6th reason why private bankers are flocking to traditional wealth management firms. It’s culture. Everything you’ve read above is a significant shift in culture. Politics are nearly fully stripped out of these organizations, and assets and revenue are king. If you do your job, bring in assets (that you get paid on in perpetuity) and take care of your clients you are hailed as a king/queen.

Have you ever felt that way at your current private bank? We doubt it. It can’t be stressed enough, now is the time to do your due diligence and consider changing the arc of your career – and we aren’t joking when we say this: it is a $100M dollar decision.