In an early November broadcast to the firm's U.S. financial advisors, Morgan Stanley retail head James Gorman announced the rollout of a new compensation program for 2007 — one that will increase the firm's spending on compensation by millions of dollars. But the plan will also eliminate any compensation to reps on accounts below $50,000 (unless they are in certain favored fee accounts) in an effort to get reps to think big.
The “10-point plan for success,” as Gorman called it, is primarily a series of minor amendments to the current system rather than a wholesale overhaul. The new plan includes a 1 percentage point increase in payout across the board; it extends stock-option benefits and bonuses to financial advisors with rewards for loyalty and production; and it includes increased travel-and-entertainment budgets for producers with over $1 million in production. It also provides greater incentives for Morgan advisors to either use fee-based products and/or to work with clients who invest more than $75,000 with the firm.
All Morgan advisors with production of $300,000 or more will be able to commit up to 25 percent of their pretax income to a new deferred-compensation program, which includes stock options as well as bonuses based on length of service that start at 20 shares for every 100 purchased. Financial advisors producing $500,000 or more will also have access to the company's own alternative-investments program.
In addition, advisors will now get a reduced payout for households with between $50,000 to $75,000 (before this the threshold was $35,000 to $50,000) and will get no payout on households with less than $50,000-unless the client is doing fee-based business through the firm's “Fund Solution,” “Portfolio Architect” or “Personal Portfolio” accounts.
“We decided that the smartest investment we could make in this business is to invest in our financial advisors and the support staff in the field,” said Andy Saperstein, COO of national sales, on a follow-up conference call with press. “Our financial advisors are our most valuable assets. The whole program is the richest on the Street and will allow advisors to share in wealth creation as the company does better.”