Morgan Stanley is keeping its core advisor compensation plan the same for 2021 while tweaking some associated policies.
For instance, the wirehouse is adding new team compensation hurdles and boosting the minimum for new Private Wealth Management clients from $2 million to $5 million next year, the company disclosed to reporters Tuesday.
Overall, “these are minor changes, and they will be well received” by Morgan Stanley’s 15,469 advisors, according to executive recruiter Mark Elzweig.
“On the other hand, the firm has made some draconian cuts in years past — so they don’t have much room to maneuver this year,” he told ThinkAdvisor.
“They raised the goalposts on their grid by 10% last year, and prior to that they took some current cash compensation and journaled it over into a deferred payout format,” Elzweig explained.
Details of Morgan Stanley’s 2021 comp plan were made available to the wirehouse’s advisors in a Dec. 8 memo written by Vince Lumia, head of Field Management.
“As you will see, there are very few changes for next year,” Field said. “Importantly, the plan remains consistent with our Modern Wealth strategy and demonstrates our continued commitment to support the growth of your business as you deliver the highest standard of care to your clients, even in the most challenging of times.”
In 2019, Morgan Stanley changed its grid by implementing a 10% increase in the revenue hurdles advisors must achieve across its payout grid. That change was scheduled to go into effect in April but was delayed until October due to the COVID-19 pandemic.
Despite leaving the core comp plan intact for the firm’s advisors next year 2021, Morgan Stanley is rolling out a new Client Engage qualification for team compensation. It requires advisor team members to achieve at least one of three hurdles in order to qualify for compensation at the payout level of the team’s largest revenue producer, Lumia said.
The hurdles that must be achieved at least once in 2021 are as follows: The team must post positive net new assets (i.e., net asset growth) for a trailing 12-month period; or 10% of an individual team member’s clients must sign up for financial planning services, or 75% of a team member’s clients must use Morgan Stanley’s online platform and tools.
“The team bonus payout rate qualification change really would affect the junior members the most, as they are the ones that can really get a big pay rate percentage boost from going [up] to the payout rate of the top team member,” said Andy Tasnady, managing partner of Tasnady Associates.
However, “I would hope most teams have at least 10% of their accounts with a financial plan if they were operating as a top quality service team, but you never know,” Tasnady added.
“The 75% requirement for clients to be using Morgan Stanley online service seems like one that runs the risk of having team members just sign up accounts, but hopefully there is some type of control or client approved criteria in place,” the compensation consultant explained.