Morgan Stanley Dangles 300%-Plus Bonuses Before Big Producers
Morgan Stanley recently offered a $4.2 million team in the Southwest 325% of that amount to join from a rival wirehouse, according to a proposal reviewed by AdvisorHub. The signing bonus, in the form of a $13.6 million loan that would be forgiven over nine years, included $6.93 million upfront, with the balance tied to meeting certain asset-growth goals.
The reversal highlights the need industry-wide to replace assets that clients or their children tend to pull when advisors retire or seek more autonomy by becoming investment advisers or independent contractors. The aging of the U.S. broker force, which averages in the late 50s, has been a long-recognized phenomenon, as has the allure of so-called independent channels.
“It shows you can’t run an organization where you are just locking people in and your advisor force is continuing to age,” said Mark Elzweig, an industry recruiter in New York who was not involved in the 325% offer. “At some point, like it or not, you have to step up to the plate and pay the big bucks to attract talent.”
A Morgan Stanley spokeswoman declined to comment on specific recruiting deals or broader strategy. But executives told investors last year that the firm considers its net brokerage force changes, which measures retention as well as recruiting, a more important metric than recruiting alone.
Some big firms such as Merrill Lynch have stuck with their decisions to refresh their forces primarily with trainees, but Morgan Stanley’s deal terms are generally on par with the top deal at other aggressive firms that are swallowing hard and pursuing experienced recruits from rivals.
Reasons for the re-emergence of recruiting wars range from opportunistic to near-existential.
Wells Fargo Advisors began lifting offers to advisors and payments to recruiters more than three years ago as brokers fled amid its parent bank’s fake account scandals. Its total broker count is off by around 2,000 since news of the scandal broke. At the highest end, it has been offering 340% deals, recruiters said.
St. Petersburg, Florida-based Raymond James Financial, which has long promoted a broker-centric culture but never a top-of-heap deal, recently raised recruiting offers in its employee channel because of what executives conceded was strong competition from rivals. Offers at Raymond James’ employee unit can be as much as 240% to 250% of trailing-12 for top teams, up from what recruiters said was closer to a high of 150%.
One of its rivals, Ameriprise Financial, has buffered its deals to as high as 320% of brokers’ trailing-12 annual revenue as it seeks to recruit advisors with wealthier clients than it typically serves.
Niche “boutique” firms also have raised the bidding war stakes. First Republic has been making 300%-plus offers to traditional brokers as it seeks to expand beyond its core private banking offering.
UBS Wealth Management USA withdrew from recruiting experienced advisors in late 2016, one year before Morgan Stanley, but has recently made selective high offers to private bankers and some wirehouse teams. It seeks to fill holes in a brokerage force that has dwindled by the hundreds since its pullback, according to insiders.
Evidence of the expensive hiring strategy shows up on publicly traded companies’ balance sheets. Advisor loan balances at Morgan Stanley edged over $3 billion as of Dec. 31, 2020 after eight years of declines.
UBS and Morgan Stanley’s hiring strategy shifts may reflect the challenges of success with their carrot-and-stick approaches of improving retention bonus and account-inheritance programs and escalating the threat of lawsuits against advisors who jump to other firms with customer contact data in tow.
The two wirehouses each exited the Protocol for Broker Recruiting three years ago, the pact that lets brokers who join other signatory firms to take a limited amount of client-contact information with them.
Its vulnerability showed up a week ago when a $4.6 million private wealth team in Los Angeles left to join Rockefeller Capital Management. And in a brutal reflection of elevated recruiting wars, a Houston team producing $5.9 million took an offer from UBS.