Beginning this month, Prudential Securities will offer higher payouts on fee accounts and trim payouts on transaction business. The firm is also rolling out a new deferred compensation plan.
At press time in early December, no details had been released. However, a Prudential spokesperson confirms that the company will trim commission payouts by about a half point across the grid. The result will be a 1 percent to 2 percent pay cut on commission business for most reps. Brokers with more than 1.6 million dollars in production are not affected, the spokesperson says.
Prudential will increase its payouts on fee business by about five percentage points, covering all managed products such as Prudential Advisor, mutual fund wrap-fee accounts and other managed money business, according to the spokesperson.
"These changes are being made to reflect the growing strategic importance to the firm of advice-based programs that emphasize asset accumulation," the spokesperson says.
Pru's New Handcuff The firm's new deferred compensation plan, MasterShare, lets brokers invest up to 25 percent of their pretax earnings in a Prudential index fund that tracks the S&P 500. Reps receive a 25 percent discount to the market value, and as a bonus, received a 35 percent discount if they committed to contributing at least 10 percent of their income this year.
No one argues that the 25 percent discount is attractive. "But the problem the brokers have is that [the program] has a three-year vesting schedule on all contributions--including our own," one Prudential producer says. "Obviously, it's a golden handcuff kind of thing."
MasterShare is similar to Salomon Smith Barney's Cap Plan program, in which SSB brokers defer income to buy company stock at a discount, but forfeit those wages should they leave. The Cap Plan has provoked lawsuits from departing employees, and was found illegal under California law by a state court judge in July.
"We are confident that the program is not only in compliance with existing law, but provides an excellent opportunity for financial advisers to build significant wealth," a Prudential spokesperson says.
Brokers can remain in Prudential's existing WealthBuilder bonus plan, which is funded by company contributions. But WealthBuilder's benefits have been reduced and are now paid in the form of MasterShare awards. Brokers were given the option of converting all of their WealthBuilder benefits into MasterShare at a 25 percent to 50 percent discount, depending on production and length of service, according to the spokesperson.