After feedback from top advisors, Morgan Stanley (MS) says it will share a new stock-ownership plan with them in 2013.
“What is most different is that we are giving financial advisors the chance to buy Morgan Stanley stock at a discount in 2013,” said a company official on Thursday. “This ownership opportunity was highly requested by our most successful advisors and management, who saw these programs in place at legacy firms and wanted it.”
The plan, which is being referred to as a capital-accumulation program, is available to those advisors and branch managers who have been with Morgan Stanley for at least five years and who have $400,000 or more in fees and commissions in 2012. The firm has close to 17,000 reps and is led by James Gorman.
Advisors able to “meet these hurdles,” can invest up to 25% of pre-tax earnings or $150,000. For every 100 shares purchased, they will receive 20 extra or bonus shares. Those in the firm’s Chairman’s Club need only have been with the wirehouse for three years and can invest up to 25% of pre-tax earnings or $250,000. They will get 25 bonus shares for every 100 purchased. The shares vest immediately and will be distributed on April 15, 2016.
“This is an indication of how much we value advisors,” explained the company official. “While it’s true that lots of firms have deferred compensation, this is at most a three-year vesting program. It’s very aggressive and speedy.”
Experts say the new comp plan may also help Morgan Stanley retain more advisors. In the third-quarter, it had 16,829 advisors, down 1% from 16,934 in the second quarter and 5% from 17,661 a year ago.
“The timing of these award programs couldn’t be better for Morgan Stanley,” said Mark Elzweig, a New York-based executive-search consultant, in an interview with AdvisorOne. “They need to introduce some credible programs to stem broker defections and to prevent their headcount from dropping further.”
The upfront portion of retention awards that advisors received in January 2010 amortize on a nine-year schedule, Elzweig points out, which is considerably longer than the three-year time frame of the new capital-accumulation program..
(While it has been losing some advisors, of course, it’s been actively recruiting as well. Earlier this week, it said it recently recruited eight advisors from Bank of America-Merrill Lynch (BAC) and Barclays with a total of $5.5-plus million in yearly fees and commissions and close to $780 million in client assets under management.)
Morgan Stanley also says it will award bonuses to those FAs with positive growth in net new assets in 2013 and in the top 40%-revenue growth category.
The wirehouse, which adds that this is the “most lucrative ever offered by the firm,” is structuring the bonus as an upfront load to be paid in full in early 2014 and forgiven over five years.