Morgan Stanley is cutting recruitment spending on experienced financial advisors in favor of investing in associates and technology to improve the brokerage’s efficiency.
It is the latest brokerage to make such a change, after Merrill Lynch made the decision earlier this month and UBS said it was dialing back recruitment spending by 40 percent last summer.
Outsized recruitment bonuses paid to top-producing advisors are all but gone. A bonus more than 300 percent of an advisor’s trailing 12 months of production was not unheard of a year ago. But, they have been subject to downward pressure, especially over the last six months.
Some small and regional brokerages still willing to pay could sweep in and recruit top brokers looking for a payday, but Morgan Stanley is the latest to deviate from the costly strategy.
The change was announced in an internal memo sent May 23 from Shelley O’Connor and Andy Saperstein, the co-heads of the investment bank’s wealth management unit. WealthManagement.com reviewed the message, which was sent to the brokerage’s regional directors and branch managers.
The Wall Street Journal was the first to report on the memo.
The memo states Morgan Stanley is committed to “major investments” to help its advisors grow their businesses, broaden and deepen client relationships and deliver goals-based, holistic advice. Improving branch efficiency through technology and teaming advisors are some of the areas of focus, according to the letter to employees.
Like other wealth management firms, Morgan Stanley still plans to make a significant investment in personnel. The brokerage plans to hire “hundreds” of additional wealth advisor associates and digital advisor associates to help its current network.
Morgan Stanley will honor agreements with recruits that are either in the pipeline or approved before June 16 and plan to start with the brokerage before Sept. 1. New recruitment policies aligned with the shift in strategy are under development, according to the memo.
The memo did not include any details about Morgan Stanley’s pay grid. Merrill Lynch made no changes to its pay grid or other compensation structures when it announced changes in recruitment spending.
In its first quarter earnings for 2017, Morgan Stanley reported that its wealth management unit had 15,777 representatives across 599 retail locations. Annualized revenue per advisor eclipsed $1 million for the second consecutive quarter.