Morgan Stanley (MS) is emphasizing growth in its private bank operations, and its 2016 compensation plan for the firm’s 15,800-plus advisors reflects this strategy.
“We continue to make private banking services our top strategic priority in support of [our] holistic advice,” Greg Fleming, president of wealth management, said in a memo to advisors last week. “Highly competitive lending solutions have proven popular with clients, and for 2016 we will focus on extending our suite of services to bring clients new convenience and value in their day-to-day cash management.”
In the third quarter, client loans made through Morgan Stanley advisors totaled $61 billion, up 5% from the prior quarter and up 27% from last year. (In the same period, fee-based asset flows declined to $7.7 billion vs. $13.9 billion sequentially but rose from $6.5 billion a year earlier.)
To further boost loans and other banking business, the wealth unit is rolling out a new incentive award. Advisors can receive $5,000 to $50,000 a year for growth in clients who are “cash management engaged.”
To be eligible for this new bonus, advisors must have five new clients with an average daily cash balance of $50,000 or with $5,000 a month in direct deposits. In addition, they need to show aggregate growth in their total cash-deposit balances of $125,000 for 2016.
In addition, these clients must use two out of five bank payment mechanisms (which include debit cards, online bill payment, Morgan Stanley American Express Cards, check writing and ACH transfers).
Clients must meet these standards for three consecutive months in 2016, and advisors must demonstrate that they are broadening their client relationships on the banking side.
Advisors’ support staffers and associates can receive between $1,200 to $12,500 for their efforts to grow bank programs.
As for Morgan Stanley’s lending award, it remains unchanged from last year at the advisor level: A maximum of $202,500 will be received for those showing growth in securities-based lending, tailored lending and home mortgages.
Support staffers, though, can earn as much as $10,000 for their support of lending activities, up from $2,000 in 2015.
No Grid Changes
The wirehouse says it has made no changes to its payout grid, which ranges from 28% to 55.5% of compensable revenue. Deferred compensation remains the same in 2016 at 8.5% for the average producer.
The period of vesting of deferred cash has been shortened by two years, according to Fleming’s memo.
In 2016, 75% of deferred compensation will be paid in cash; the vesting period, though, is reduced to six years from eight. The remainder, 25% of deferred compensation, is set to be paid in stock, which – as in 2015 – will vest in four years.
As of the third quarter, yearly fees and commissions per FA at Morgan Stanley are $922 million, a drop of 6% sequentially and 1% from the prior year. Average assets per FA are $122 million, down 5% from the earlier quarter and 2% from a year ago.
In October, Fleming’s role as head of both the wealth management and investment management units was trimmed down, with the firm asking him to focus on wealth operations. The advisor-led business brings in about 40% of Morgan Stanley sales; advisors have some $1.9 trillion in client assets.
“Our compensation of advisors is an integral part of how we support and position them to best serve clients,” Flemming said. “The 2016 plan incorporates a lot of advisor input and feedback and meets a number of critical objectives that were conveyed to us.”
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