Deferred compensation plan is credited for retaining reps. Prudential Securities' broker attrition rate "is in the low single digits" because of MasterShare, the firm's deferred compensation plan, according to Mike Rice, vice president and chief administrative officer of the private client group.
"In this environment, where recruiting has become a focal point, MasterShare has had a phenomenal affect on us," Rice says.
Since Prudential is not a publicly traded company and doesn't have stock to offer brokers, "MasterShare is a way to `incentivize' brokers to stay," says a Prudential rep on the East Coast. "It's really a tremendous program."
MasterShare enables reps to set aside up to 25% of pretax earnings in a Prudential index fund that tracks the S&P 500. Participants get a 25% discount to market value (see January 2000 RR, Page 28).
"It's had an overwhelming impact on our attrition rate because 50% of FAs took advantage of it and got in [since the beginning of the year]," Rice says, "as well as over 80% of our council members."
If brokers committed to contributing at least 10% of their income this year, they got a deeper 35% discount to market value.
But one Prudential rep dubs the program "MasterScare," noting that the program has a three-year vesting schedule, including brokers' own contributions.
In September, a New Jersey state court certified a class-action suit alleging that Salomon Smith Barney's Capital Accumulation Plan (CAP) is an illegal confiscation of wages. The case covers former SSB brokers based in New Jersey who may have left part of their paychecks behind in the CAP. The CAP is similar to Prudential Securities' MasterShare program in that it may require employees to forfeit some of their own contributions.
SSB's plan faces a number of lawsuits in various states (see February 2000 RR, Page 28). The New Jersey case is the first one to be certified as a class action, says Bruce Nagel, the attorney handling the case at Nagel Rice Dreifuss & Mazie in Livingston, N.J.
An SSB spokesperson says the firm disagrees with the ruling "and will appeal at the appropriate time."