Daily Management Review

Morgan Stanley’s 2020 Compensation Plan To Affect 50% Advisers


Morgan Stanley’s altered payout grid pushes advisers in the lower rung to work harder in 2020 to earn the same amount as they did in 2019.

source: commons.wikimedia.org; (CC BY 2.0)
source: commons.wikimedia.org; (CC BY 2.0)
On Tuesday, November 19, 2019, Morgan Stanley pushed the financial advisers to either “generate more revenue or get customers to sign up for comprehensive financial plans next year”, while the consequence of their failure in achieving the same would reflect in their payment cut. The said information was given to Reuters by people who are familiar with Morgan Stanley’s “2020 compensation plan”.
The incentive plan of Morgan Stanley saw “several changes” while the “pay-out grid” of 16-tier which decides the percentage of commissions or fees for the brokers was also affected by the change. The brokers who contribute below “$5 million in annual revenue” will need to increase their output by ten percent to maintain the 2019 payout amount, stated Reuters.
The lowest rung of the fees and commissions are at twenty eight percent, while at the highest it touches “55.5%”. On the other hand, advisers above the “$5 million” threshold will not be affected by this change. Additionally, the incentive plan also encourages advisers to reach out to “wealthier customers”, expand their “asset books” and in turn “lend more”. And Reuters added:
“It will also pay them less for households that do not enroll in a comprehensive financial plan or have less than $100,000 in assets and liabilities with the bank”.
Morgan Stanley along with other big banks in the market had been pushing for years to decide on the clientele base and advisers to be associated with and the above mentioned changes seem to be mirroring the same ideas. The 2020 plan could affect fifty percent of the advisers in Morgan Stanley, thinks the Tasnady & Associates’ Compensation Consultant, Andy Tasnady.
Tasnady compared the tier or the payment grid to a “flight of stairs” which are under strict scrutiny. And he said:
“They basically raised the heights of all the stairs. If you do the same thing you did last year, there will be many people who get a payout that is one step lower.”