Morgan Stanley followed through Monday on earlier pronouncements to goose financial advisers to chase assets using new technology when it unveiled pieces of its 2019 compensation plan.
"We are executing on our commitment to deliver industry-leading technology," according to the memo from
Vince Lumia, head of field management. "Our goal now is to drive adoption of this technology, and our compensation plan provides incentives to do so."
The new plan stresses pay incentives at the individual client level, which is unusual in pay plans for Wall Street's retail brokers. Firms typically reward financial advisers for the total amount of revenue they produce each year.
In May, Andy Saperstein, the firm's co-head of wealth management,
stressed during a presentation a new financial planning program called the goals planning system as a way for the firm's
15,632 brokers and advisers to gain a bigger share of clients' assets.
Morgan Stanly is betting its brokers and financial advisers will use the new, integrated wealth management platform to grab some of the roughly $2 trillion in assets its clients currently hold outside the firm.
The changes to advisers' compensation plan, called a grid in the industry, are all "positive," according to the memo, meaning that advisers would not see compensation reduced for not hitting growth targets.
Advisers at the big four wirehouses, including Morgan Stanley, typically see annual payouts of between 30% to 45% of annual fees and commissions, although each firm can vary widely for both its highest and lowest producing advisers. Morgan Stanley's compensation plan for the past few years also involves a small percentage of deferred pay for its advisers, a thorn in the side of some at the firm.
Top among the potential rewards for advisers in the new compensation plan is an opportunity to boost payout by up to three percentage points through incentives at the client level for financial planning activity and net new assets, according to the memo. Payouts for lending and debt products have nearly doubled, and advisers also will receive a slight boost in pay for clients who are "engaged" in the use of cash management accounts, according to the memo.
Advisers also are rewarded for working with smaller households, or those with assets of $100,000 to $250,000, and earn a full payout plus an extra 1% if the clients get a goals-based financial plan, according to the memo.
That is unusual. For years, large Wall Street firms like Morgan Stanley have been pushing advisers to chase the richest clients and subtracting pay from those who work with more modest households.
The new compensation changes will take effect April 2019. Comp plans for advisers are usually rolled out in the fall, but Morgan Stanley wanted to give its advisers extra time to regard the changes.
"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," Mr. Lumia wrote.
