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Practice Management > Compensation and Fees

Morgan Stanley Adjusts Advisor Incentives for 2022 but Keeps Grid Intact

By Jeff Berman

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What You Need to Know

  • Morgan Stanley is making a few minimal adjustments to advisor incentives in 2022.
  • Starting in July, net acquired asset growth will be based on all client balances.
  • Starting in Q3, net acquired assets and AUM from Morgan Stanley clients who also have E-Trade accounts will be included.

Morgan Stanley is keeping the core payout grid for its 16,000 or so advisors and brokers intact for 2022 but making a few adjustments to incentives, according to the new plan that was disclosed internally by the company on Wednesday.

“Consistent with our strategic objectives, the plan is designed to support you as you continue to grow your practices and deepen client relationships,” Vince Lumia, head of field management, told the firm’s advisors and brokers in a memo.

“The minimal updates made to the plan are aligned with our modern wealth strategy and are intended to best position you as your businesses evolve to meet your clients’ unique needs,” he explained.

The firm reiterated that it’s “agnostic” about where assets are held. With that in mind, starting in July, net acquired asset growth will focus on all client balances (net acquired assets plus net new liability growth), it disclosed. Currently, it includes only new money (the equity side of the balance sheet).

In addition, starting in the third quarter, net acquired assets and AUM from Morgan Stanley clients who also have E-Trade accounts will be included as well. (This applies to self-directed accounts where the clients have granted advisor visibility to their E-Trade accounts.) Morgan Stanley acquired E-Trade in 2020.

Meanwhile, after introducing new client engagement criteria required for team compensation in 2021, the company is continuing to build on those client engagement metrics in 2022 by adding a fourth way to qualify, providing more qualification flexibility for teams who are consistently preserving or bringing in new assets and liabilities across their books.

Last year, Morgan Stanley started requiring 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.

For 2022, the team must overcome one of four hurdles. As in 2021, each member of the team must have 75% of their clients enrolled in Morgan Stanley Online, or each member must have completed a retirement financial plan with monitoring turned on for 10% of their clients, or, in aggregate, across all advisors on the team, the team must be positive in net acquired assets plus net new liabilities.

The fourth team option, new for 2022, is that each member of the team must have at least 50% of their clients that are flat, or dollar positive in T-12 net acquired assets plus net new liabilities.

Last, advisors will continue to receive gross revenue credit on average monthly client funds in brokerage accounts invested in the Bank Deposit Program, ticketed and sweep money market funds, and the Morgan Stanley Savings Program if the client has a CashPlus account meeting fee waiver requirements.

Morgan Stanley’s rival Merrill Lynch Wealth Management recently said it’s making no major changes to its pay grid for 2022 but decided to move to a trailing 12-month grid structure and away from its retroactive comp structure in which payout is determined based on the prior calendar year’s production.

(Pictured: Morgan Stanley headquarters in New York; Photo: Bloomberg)

Jeff Berman

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