It unveiled its Financial Advisor Compensation Plan for the following year, making it the latest major brokerage firm to detail changes to incentive pay for advisors.
The firm is leaving core components unchanged – potentially welcome news for advisors given the turmoil of the pandemic and the changes established in prior years – although it is turning up some of the bonuses.
In a memo sent to consultants on Wednesday, head of field management Vince Lumia said the compensation plan is designed to help consultants develop their practices. “The minimal updates made to the plan align with our modern funding strategy and aims to best position you as your business evolves to meet the unique needs of your customers,” he wrote.
Financial advisors are usually compensated on a grid made up of parentheses; Since they generate more revenue than commissions or fees, they move up the bracket of the grid and get a higher percentage of the money they bring in. Some firms also offer bonus for achieving certain growth criteria.
In recent years, some firms have been shying away from making major changes to their comp plans for fear of letting advisors join rival firms, says Mark Elzwig, a recruiter and president of the New York-based Mark Elzwig Company. “There’s more competition. Wirehouse advisors can go to regional brokerages or open their own RIAs. A lot of top advisors are doing that.”
He continued: “I think it shows that, in this highly competitive environment for advisors, firms are reluctant to do anything to change their grid.”
For example, Morgan Stanley advisors can earn net accrued asset growth rewards, beginning the following year, which will include all client balances; Customers’ e*trade accounts will also now be counted as bonus. Morgan Stanley acquired E*Trade Financials in 2020.
Like other firms, Morgan Stanley also offers compensation for advisors who are on teams. The firm is adding a fourth customer engagement criterion to team compensation, effective in July. Advisory teams can qualify through four metrics; Each team member must have 75% of their customers enrolled in Morgan Stanley Online; or each team member must have completed retirement financial planning for 10% of their clients while monitoring is ongoing; or the team must be positive in net acquired assets and net new liabilities; Or each teammate must have at least 50% of their clients that are flat or dollar positive in trailing-12 net acquired assets and net new liabilities.
The firm is also adjusting the compensation of consultants to facilitate mortgage and other loans for clients. And for the company’s lending growth award, Morgan Stanley is reducing payouts by 50 to 40 basis points and increasing minimum lending balance growth from $1 million to $1.5 million.
Among the major wealth management firms, Wells Fargo has yet to release its 2022 compensation plans. UBS and Merrill Lynch released theirs in November, with UBS offering incentives for advisors who have longer tenures at the company and Merrill Lynch restructuring its grid to align with how competitors pay advisors.
Trade news website AdvisorHub first published details about Morgan Stanley’s 2022 comp plan.