2021 COMP: Morgan Stanley Adds Team Bonus Hurdle, Lifts Private Wealth Minimum
Morgan Stanley Wealth Management is keeping its core compensation grid unchanged in 2021, but has added a hurdle to qualify for elevated team pay, more than doubled to $5 million the private wealth management household minimum and removed a lending bonus hurdle.
Advisors at large brokerage firms anxiously await compensation plans that change annually to induce behavioral changes through adoption of new tools and products aimed at increased productivity.
Compensation consultants had forecast that firms would be loathe to jolt brokers with significant changes amid the pandemic, particularly at firms like Morgan Stanley that made substantive lifts in pay hurdles in 2020 (though it delayed implementation as brokers adjusted to initial hits to pandemic-influenced markets).
“As you will see, there are very few changes for next year,” field management head Vincent Lumia wrote in introducing the plan. “[It] demonstrates our continued commitment to support the growth of your business as you deliver the highest standard of care to your clients, even in the most challenging of times.”
Among the most far-reaching changes is an additional criterion for advisors and other registered representatives who work on teams. Brokerage firms encourage teaming as a way to allow rainmakers to bring in new accounts while allocating day-to-day tasks and specialty skills to others or to automated processes. The new criterion promotes such segmentation.
To qualify for grid compensation at the payout level of the team’s biggest producer, the team must either have attracted more new assets than it lost over a trailing-12-month period as of July 2021, or each individual team advisor must have at least 10% of clients using a financial plan, or 75% of team clients must be enrolled in a Morgan Stanley Online program.
Like other big firms, Morgan Stanley has motivated advisors to broaden their sales beyond investments to loans and other bank products with lending growth bonuses. The 2021 plan makes it easier to qualify by removing a requirement for brokers to have generated six new loans annually as of December 31, 2020.
Brokers still must grow client loan balances by a minimum of $1 million and, in an era of rock-bottom rates, demonstrate positive gross revenue growth to qualify for awards that add 50 basis points to payout rates. The total loan growth award potential is capped at $250,000.
Morgan Stanley also continues the broad push at wirehouses and private wealth boutiques to steer advisors to the very wealthy. The bulk of its advisors will continue to receive penalty payouts on household accounts under $100,000. The fewer than 500 in its “private wealth management” unit, however, will get penalty payouts of 10% to 5% (down from a grid range of 28% to 55% of revenue) on new households with less than $5 million as of the beginning of April. The penalty in the current plan for PWM advisors applies only to accounts they service with less than $2 million.
The firm will continue to exempt new customer accounts from the minimum requirement for the first 12 months after being onboarded.
Advisors who use “client engagement” tools such as financial plans that are viewed as locking in customers also can avoid the small-account penalty. Assets and liabilities (such as Morgan Stanley Bank deposits) can be as low as $100,000 if the customer has a plan with a monitoring function.
Merrill Lynch Wealth Management’s 2021 compensation plan eliminates payout completely on household accounts under $250,000.
Morgan Stanley is also adjusting the “business development” expense and pretax income deduction perks it gives advisors. To qualify for the same travel-and-entertainment budgets they were awarded this year, brokers will have to meet new thresholds in 2021 that will be lifted by about 10%. The same criteria are being applied to determine if brokers qualify to give fee waivers to select clients, according to the new plan.
Brokers at Morgan Stanley and other firms whose monthly pay is debited pretax to fund the reimbursable expense accounts have struggled to spend the money amid the social constraints of the pandemic. Morgan Stanley told advisors last week that it is extending to March 15, 2021, expenses they can submit for 2020 reimbursement.
UBS Wealth Management told its approximately 6,000 U.S. brokers last week that their 2021 compensation plan will be essentially unchanged from this year.
Wells Fargo Advisors, in an exception to the broader trend of minor 2021 changes, told its private client group advisors last week that it is raising by $1,000 the monthly revenue hurdles they must hit before they can qualify for its standard 50% payout. They will receive 22% on the first $12,500 to $14,250 they produce each month, with lower hurdles for bigger producers.