Morgan Stanley Fires Brokers over Inherited Account Credits
Morgan Stanley terminated around ten brokers this week following a nationwide probe of alleged abuses in its inherited account program, according to lawyers, firm sources and former managers.
The programs allow older brokers to receive a split of fees and commissions paid by former clients for several years if the brokers let their practices lapse after they leave.
A spokeswoman for Morgan Stanley confirmed the review of the FAP but declined to comment on the results and any specific terminations.
“We expect Advisors who enter into partnership agreements to abide by those agreements, and we are committed to ensuring that retiring Advisors receive what they are entitled to,” she wrote in an e-mail.
Advisors who inherited accounts in some cases recorded commission transactions under their individual production numbers rather than the joint production numbers required under the FAP agreements, said Marc Dobin, a lawyer in Jupiter, Florida.
He represents John P. Miller, a $1.5 million-dollar producer in Ponte Vedra Beach, Fla., who allegedly recorded some 2017 trades incorrectly at the request of a senior broker on his team. Morgan Stanley was aware of the practice, and Miller is weighing whether to bring a wrongful termination claim, Dobin said. Miller, who has been a broker for nine years, declined to comment.
A source close to a California advisor who lost her position last week said the broker was also acting at the direction of a senior producer on her team. The retired advisor did not complain nor ultimately lose any credits, the source said.
Miscoding trades could set off regulatory alarms and books-and-records violation charges for firms, said other lawyers and headhunters who claimed knowledge of the investigations.
AdvisorHub verified the names of two advisors who have been terminated in addition to Miller.
Blake Ridenour, a broker in Sarasota, Fla. who was producing around $1.5 million, was also found to have miscoded some revenue, said a person familiar with the charges.
Ridenour, who joined Morgan Stanley in 2010 after less than a year at UBS Wealth Management USA, could not immediately be reached for comment.
In Los Angeles, Morgan Stanley terminated Jazmin Gabriela Carpenter, who began her career in 2007 at its Smith Barney predecessor. Carpenter had inherited a $450 million book from a retired advisor, according to a person familiar with the issue.
Carpenter could not be reached for comment.
Sunsetting programs can be complex to manage and easy to game, but Morgan Stanley, Merrill Lynch, UBS and Wells Fargo Advisors have been enhancing them in an attempt to keep customer assets from leaving along with graying advisors.
Merrill Lynch last year said it plans to add up to 75 percentage points to the payouts of qualifying retiring brokers enrolling in its optimistically named “Client Transition Program.”
Morgan Stanley two years ago tweaked its FAP, in part to encourage younger advisors to participate by agreeing to subsidize more of the split they give up over the five-year program. It also aims to pre-enroll top-tier advisors well ahead of their retirements with a formula that gives them up to 80% of the payout on a former client’s account in the program’s first year.
In 2019, an arbitration panel found that Morgan Stanley breached its agreement to credit a retired broker with the full revenue she was allegedly entitled to under its FAP program, but denied the amount she sought in damages.
—Jed Horowitz contributed to this story.