Morgan Stanley is letting its 15,600-plus financial advisors know a bit more about compensation plans set to start nine months from now.
The biggest changes are tied to technology and incentives for advisors to do more financial planning overall, acquire more client assets, boost lending and the use of cash balance funds, and do more goals-based planning for smaller accounts.
In addition, the firm says it is introducing incentives for clients to increase their use of these products and services, too.
“We are intentionally releasing the details of the plan earlier than we ever have in the past because we want to give you enough time to make changes to your practices so you and your clients are able to achieve the maximum benefit,” according to a memo sent Monday by Vince Lumia, head of field management.
In the second quarter of 2018, Morgan Stanley’s advisors each managed an average of $154 million of client assets. Total client assets were $2.4 trillion, while total client loans and other liabilities were $82 billion.
Fee-based client assets stand at $1.1 trillion, or roughly 45% of total assets. But flows of these assets have been declining, totaling about $15 billion in Q2’18 vs. $18 billion in Q1’18 and $20 billion in Q2’17.
“We believe the future of advice is the combination of human advisors plus industry-leading technology. To that end, we are executing on our commitment to deliver industry-leading technology, including innovations like the Goals Planning System, Aladdin and Next Best Action,” Lumia explained. “Our goal now is to drive adoption of this technology and our compensation plan provides incentives to do so.”
Overall, the executive says, the core baseline grid, including credit rates and deferrals, will not be changed, and all grid point incentives are “positive.” In addition, Morgan Stanley is getting rid of some smaller costs and fees related to its Automated Flexible Grid accounts.
Several changes to the 2019 compensation plan and growth award include the following:
- New incentives at the client level for financial planning and net acquired assets that can help advisors increase their credit rate by up to three percentage points;
- Changes to the lending growth award, such as with payouts “nearly doubling across tiers” via an emphasis on more diverse products and services;
- 15 basis points of gross revenue credit on average monthly cash balance funds for clients in the in the Cash Management program vs. 5 bps on cash balances for clients not in the program; and
- A full payout plus one extra point for households with between $100,000 and $250,000 in assets with a goals-based plan and monitoring; for those without the plan, the payout is reduced to 25%.