Recruiting competition between the top brokerage firms is fiercer than ever, and Morgan Stanley is currently wielding one of the most powerful deals on Wall Street. Known as the “Rising Star” program, it offers young, successful brokers 100 percent cash upfront, plus generous production-based payout increases at 14, 24, 30 and 60 months. For those of you counting at home, those numbers add up to a payout of between 170 percent and 200 percent by the fifth year.
“It's unprecedented,” says one recruiter who did the math. “That's better than the payouts they give to a million-dollar producer.”
Morgan needs to be aggressive right now. The firm's brokerage force shrank by 5 percent during the first quarter ended February — a result of restructuring in its training program, Morgan says. In addition, it is starting to lose brokers to the turmoil surrounding CEO Philip Purcell's leadership, says Danny Sarch, a recruiter with Leitner Sarch in White Plains, N.Y.
“I'm seeing an awful lot of activity in terms of Morgan Stanley brokers wanting to move, at all levels,” he says. “Because of what's going on in the press it's seen as weak right now, so they have to be more aggressive to attract people.” Morgan Stanley executives were not available to comment.
It's clear that an industrywide tug-of-war for talent is under way. UBS is offering 100 percent upfront, plus payout increases at 14, 26 and 38 months for the top three quintiles of production. Both UBS and Merrill Lynch are willing to pay for lost deferred compensation, says one recruiter. In March, Wachovia created a unit entirely devoted to recruiting called the Individual Investor Group.
Merrill Lynch executives recently told analysts on a conference call that they were not sure they would be able to meet their target of growing their rep force by 5 percent in 2005.
Morgan Stanley's recruiting deal is exclusively available to brokers with two to four years at a wirehouse or regional broker/dealer and annual production of between $150,000 and $300,000. The offer is only available for a 90-day period starting April 1, 2005. But Sarch says he thinks Morgan Stanley may be flexible on that date for the right advisors.