Morgan Stanley Relaxes Production Quotas

Facing the down market and the prospect of brokers fleeing the firm, Morgan Stanley has relaxed the higher production quotas it put in place late last year. In an April announcement via a conference call, the firm gave reps with eight or fewer years of service a lower hurdle. To avoid a punitive 25% payout for the 2001 production year, three- to five-year brokers had to have hit $150,000 in gross

Facing the down market and the prospect of brokers fleeing the firm, Morgan Stanley has relaxed the higher production quotas it put in place late last year.

In an April announcement via a conference call, the firm gave reps with eight or fewer years of service a lower hurdle. To avoid a punitive 25% payout for the 2001 production year, three- to five-year brokers had to have hit $150,000 in gross the year prior, six- to eight-year reps had to make $200,000, and those with nine or more years of service had to do $300,000. Reps receive the lower payout until they clear the hurdles in 2001.

Morgan Stanley enraged brokers in December when, on two weeks notice, the firm hiked its minimum gross production requirements. Brokers with 10 or more years in the industry were told that if they had not done $300,000 in 2000 production, they would start 2001 with a 25% payout. Five- to 10-year reps had to have made $250,000.

The previous quota had been $150,000 for reps with four or more years of experience.

“The firm was going to lose chunks of brokers,” says one Morgan Stanley broker. “It was relatively easy getting to the $300,000 level when the market was good,” but not now. “That, in part, is what forced their decision.”

The higher quotas instituted last year also risked discouraging fee-based business, the rep says, since brokers make more upfront with transactional business.

The change puts increased demands on those at the lower and higher ends of the experience scale. To escape the 25% payout, three-year reps had to gross $150,000, a figure they previously had until their fourth year to make. And by requiring $300,000 of nine-year veterans, more brokers are subject to the highest hurdle.

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