Morgan Stanley is pushing to entice more retiring advisors to pass along their practices to younger advisors with the firm.
In a memo shared with its 15,655 advisors earlier this week, the wirehouse said it is increasing the bonus to a select group of top advisors by 10% to 50% of their trailing 12-month fees and commissions in 2019. For the bump-up, advisors must sign an agreement that they will give a 90-day leave notice.
In terms of total payouts for stellar retiring reps, these rise from an earlier top level of 250% of their latest 12-month production to a maximum of 350%, including the benefits of a new formula for splitting revenue with younger advisors.
The current award program is equal to 50% of the average of the 12-month production for the past three years.
What Your Peers Are Reading
These are the broad strokes, which industry watchers say benefit a fairly exclusive set of advisors.
“Sometimes advisory councils [represent] the ‘largest of the large producers’ and typically the most vocal and needy,” said Andy Tasnady, a compensation consultant based in the greater New York area. “It’s no surprise that a team of high-end advisors came up with these types of awards.”
(Other compensation changes were announced by Morgan Stanley in July.)
More specifically, advisors signing on to the new program would be leaving the current cash payout, which is spread out over two to four years, for a deferred program in which they may receive more money but have to wait 10 years to access it.
The main advantages? They get to manage that money during that decade, and it’s part of a tax-deferred program, which is what some of the firm’s top advisors told Morgan Stanley they wanted.
“So for some advisors, there appears to be a tax and value benefit,” Tasnady said.
More details are as follows:
- Advisors with at least $10 million in gross fees and commissions for three consecutive years are eligible for an award equal to 100% of their average yearly revenue over this period;
- Advisors with $5 million to $10 million in gross fees and commissions for three consecutive years are eligible for an award equal to 75% of their average yearly revenue over this period.
- Advisors with $2 million to $5 million are not in the deferred program but can qualify for awards of 60% to 65% of their trailing-12-month level of their gross production, if they sign the 90-day leave declaration.
Big vs. Small Producers
But while the wirehouse is touting its new offer, industry experts point out that the program is only poised to help about 800, or 5%, of its advisors. “Very few qualify for [the new program],” Tasnady said.