Morgan Stanley is adjusting some of its pay policies to comply with a wage-and-hour lawsuit it settled last year.
Beginning this month, the New York firm is picking up some state registration fees, paying for trading errors and changing the pay-and-bonus system for sales assistants.
No changes in payout grids were made, said Jim Wiggins, a Morgan Stanley spokesman.
"These changes will add significantly" to broker and sales assistant pay, he said.
December is the beginning of Morgan Stanley's fiscal year.
Brokers have yet to see anything in print regarding the deal, but they have had meetings about it in recent weeks.
Several brokers welcomed the changes, noting that the firm isn't changing payouts.
"I was paying $1,400 in state fees; now they'll pay those," a representative in the Midwest said of Morgan Stanley.
Brokers need to do about $1,000 in revenue in a state for the company to pay registration fees, said the broker, who asked not to be identified.
If not, they can negotiate with their managers to get the company to cover part of it, he said.
Producers at Morgan Stanley are also getting an expense account called the Business Investment Threshold.
Mr. Wiggins said brokers could apply some of their gross revenue to technology assessments and sales assistant bonuses.
He said the firm will also contribute in the range of 2% to 5% of production to the expense accounts.
Additionally, the firm is instituting base salaries for assistants, with more for high-cost areas. Pay varies by experience and whether the assistant is registered.
Mr. Wiggins said that assistants, in some cases, will get an increase in current pay levels.
Furthermore, brokers will be paid a minimum monthly salary as determined by local wage laws, he said.
The firm will pick up any differences between a broker's net pay and the minimum monthly salary.
In most states, brokers must receive salaries of $2,000 to $3,000 a month to avoid being covered by overtime-pay laws.
Morgan Stanley is also phasing out "vertical teams," whereby brokers form a group in order to combine production and earn a higher payout and club benefits.
Beginning in December 2008, for the firm's 2009 fiscal year, each broker in a team will be paid on their percentage of a team's production, Mr. Wiggins said.
In fiscal 2010, club status will be based on individual percentages as well.
"If I've got two guys working for me and they work overtime, they can sue me," said a Morgan Stanley broker in the Southwest, who asked not to be identified. "That's why they're doing away with vertical partnerships."
Brokers say that temporary help will be affected as well.
"Brokers used to pay out of pocket" for part-time help, the Midwest rep said. "But this year, [the branch] has to pay the full expense."
Mr. Wiggins said that Morgan Stanley will pay a "market rate" for approved part-time positions.
He said one goal of the pay changes is to "avoid mistakes of competitors."
Mr. Wiggins declined to specify to which competitors he was referring.
In October, Smith Barney backtracked on some earlier compensation changes, including an un-popular flat 20% payout on the first $5,000 of monthly gross revenue.
The New York firm made the initial changes to comply with the settlement last year of a wage-and-hour claim.
Next year, Smith Barney reps will begin to pick up the cost of sales assistant bonuses either by sharing gross production with registered assistants or using a new company-funded expense account.
After stumbling, Smith Barney "really set the bar" with its revamped pay package, said the Morgan Stanley rep in the Southwest.
"If you compare their retirement program and death [benefit] program with the rest of industry, it's much better," the broker said.
In its latest changes, Smith Barney offers up to 200% of gross production for retiring reps who have been in registered teams for more than two years, and a separate death benefit equal to 75% of gross — up to $1 million — in addition to standard company-provided coverage.
Dan Jamieson can be reached at [email protected].
